13th September 2010
Good morning. Today we'll look at Pound vs Euro, Pound vs US Dollar and Pound vs Aussie Dollar. In addition we'll look at the weeks fundamental data that may affect exchange rates.
Pound vs Euro
Another volatile week saw Sterling decline dropping to an interbank low of 1.1920, before recovering as high as 1.2192 later in the week. This means a 2.3% increase between high and low and effectively gave an extra €2,720 on a transfer of £100,000.
Looking to the week ahead, the first key event for the UK will be the CPI inflation figures, which forecasts suggest will show annual inflation of 2.9%. This means the cost of goods and services will be 2.9% higher than August of last year. This figure is closer in line with the government’s target of 2%, than July’s figure, which means inflation is occurring at a decreased rate.
In order to curve inflation, the Bank of England could look to increase interest rates which would strengthen the GBP and increase its exchange rate against other currencies. Also, on Tuesday, German ZEW Index is published. If this shows positive economic sentiment, then the EUR shall strengthen and its paired exchange rate with GBP will decline.
On Wednesday, the UK Unemployment rates will be published and when compared to rates released over previous months, a decrease in unemployment is likely. This supports arguments that the economic growth of the UK is increasing, with the GBP regaining some of its strength, and, therefore, any of its exchange rates may increase should rates indeed rise.
Pound vs Australian Dollar
Last week saw the pound fall further against the Australian Dollar from a high of 1.6913 down to 1.6593 by close of business on Friday. This fall of just over 1.85% came after further positive news from Australia surrounding Unemployment levels and showed the lowest exchange rate for the currency pairing since May of this year.
The unemployment figures for August fell to 5.1% from 5.3% in July. That coupled with the RBA's decision to hold interest rates at 4.5% for the fourth month in a row continued to raise the Australian Dollars stock, as investors placed there money into the Currency with the interest return being the greatest of the five most commonly traded currencies in the world.
For those looking to purchase Dollars it could be wise to consider your requirement sooner rather than later as it is hard to see the Pound gaining significantly over a currency who's economy was one of the few to dodge the global recession which hurt so many.
It is worth noting that on this days trading in 2009 the rate was positioned at 1.9308, a staggering 14% difference between the two.
Pound vs US Dollar
Last week was a relatively quiet week for cable with Monday being a US market holiday and only 3 points between the high and low of the week although Sterling did slip briefly to a 6 week low on Tuesday to 1.5296 before quickly recovering.
Most of the key data released last week came from the UK, with the Bank of England’s monetary policy committee’s interest rate meeting heading the bill. As expected, interest rates were kept on hold at 1% for the 18th month in a row. In the UK also, producer price inflation slowed more than expected to a six-month low in August, helped by a surprise fall in input prices on the month driven in a large part by oil.
"The Bank of England will probably be pretty happy with the August producer price data and the figures reinforce belief that the Monetary Policy Committee will hold off from raising interest rates for some considerable time to come," said Howard Archer, chief UK economist at IHS Global Insight.
Important Yankee releases this past week have included Trade balance and Jobless Claims. Both data releases were better than forecast and added strength to the U.S. economy. This was evidenced by a fall in Sterling/Dollar exchange rates.
For those with a need to sell Sterling and buy Dollars, the problem remains that the US is still being used as a safe haven currency and therefore the Dollar stays unnaturally strong. Until the investment market loosens and globally investors pull their funds from Dollars and invest in riskier assets it is unlikely that the Pound will make any substantial gains. Stops and Limits offer currency purchasers the opportunity to target levels of exchange that are currently not achievable whilst protecting their funds should the market fall away.
This Weeks Data
Each week we list the main economic data releases. This will already have been forecast for the most part, and priced into exchange rates well in advance. It’s only if the figures are different than forecast can it have an immediate impact on exchange rates.
For example, if UK unemployment this week is 7%, this is a high figure. However, it’s forecast to be 7.9% so any less than this could actually strengthen sterling. So, any figures that do not match forecasts can have an impact on the cost of your currency purchase.
With numerous data releases being made public every day, there’s a lot that can affect your currency transaction. Contact us today for a free consultation, and we can help you understand what moves exchange rates, so you can make an informed decision on when to purchase.
A free consultation let’s you take control of your currency requirement. Don’t just hope rates will move your way; hope is an unreliable economic tool!
Monday
A fairy quiet day today, with the only release of note from the UK being House Price data at midnight tonight. It shows the strength of the UK housing market, which can be considered as the economy as a whole, as the housing market is sensitive to the business cycle. Those needing to buy or sell NZD should watch for the Retail Sales data this evening. If better than expected, expect GBP/NZD rates to fall.
Tuesday
In contrast to Monday, there are various important releases today. For the UK, Retail Prices and Inflation data is released, as outlined in our Euro report. For the EU, Industrial production figures are releases, along with various confidence and sentiment measures from Germany. If sentiment is higher than forecast, the pound may drop against the Euro. From the US later in the day, Retail Sales and confidence measures will likely move GBP/USD.
Wednesday
Again a busy day for the EU and UK. There are various unemployment and jobless measures this morning. We expect the claimant count to be 4.5% and the ILO unemployment rate at 7.8%. The market has already priced in these forecasts, so if the figures are worse than these, expect Sterling to fall.
From the EU, various inflationary measures may impact on the future movement of interest rates, and could therefore push GBP/EUR down if the numbers are higher than forecast. At 10pm, there is an interest rate decision from New Zealand, where rates are expected to be left on hold at 3%.
Thursday
Retail Sales from the UK will show how confidence consumers are about the economy. Sales are used as a measure of the economy as a whole. Year on Year, we expect a 2% gain, and a 0.3% gain month on month. As usual, if the figures don’t match the forecast, expect the pound to be affected.
From the US Jobless claims and inflation data is released at lunchtime. Usually, if figures are worse than expected it weakens the currency. Currently though, if we get bad numbers from the US it actually drives investment into USD due to its safe haven status in the current economic uncertainty.
Friday
Today we have inflationary measures from the United States and Germany. As outlined in our main currency report, higher than expected inflation increases the chance of higher interest rates. This in turn strengthens the currency due to the higher return, making it more expensive to purchase. So, higher Consumer Prices than expected from an economic zone, expect their currency to become more expensive to buy.
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Labels: Fundamental Data, GBP/AUD Forecast, GBP/EUR, GBP/USD