20th September 2010
Good morning. Today we have a detailed look at Pound vs Euro, and as usual for a Monday, a list of the fundamental economic data that may affect exchange rates this week.
Pound vs Euro
Sterling exchange rates declined to a six week low against the Euro last week and Sterling also lost ground against the majority of currencies, after Retails sales data in the UK unexpectedly declined for last month.
In the past week we saw GBP/EUR rates as low as 1.1956 and as high as 1.2080 a difference of 1%. On a €250,000 is a difference of over £2000.
We have seen a range between the 1.19 and 1.22 mark over the last six weeks which is very stable considering we saw huge volatility this time last year over the same time period as rates got as high as 1.1865 and as low as 1.10.
Looking at all the above it seems a good time to buy or sell your currency as we are starting to see more consistency within the currency pairing making your purchase a lot more secure over the coming months.
Looking to the week ahead only the BOE (Bank of England) minutes could throw a curve ball into the mix potentially upsetting the cross. However in recent months we have seen voting at 8-1, which means one member of the MPC (Monetary Policy committee) has voted for an interest rate hike. If we see something slightly different such as a 9-0 we may see Sterling lose ground against the single currency. If we were to see a 7-2 we may see Sterling gain against the Euro.
Pound vs US Dollar
Last week saw the GBP/USD currency pair in volatile movement, rising from a mid-market low of 1.5383 on Monday morning, to a peak of 1.5720, not reached for 5 weeks. This movement demonstrates a difference of 2.2%; meaning a transfer of £100,000 will see you $3370 better off at the high.
Thursday saw the release of data regarding inflation in the US at 0.4%, a figure higher than last year’s 0.2%. With higher inflation figures, the suggestion is that the power of the dollar is decreasing, made evident by the increase in Cable throughout the week.
However, the Dollar may regain some support due to the better than expected Retail Sales data which, compared to last year, increased from 0.3% to 0.4%. This means consumer spending has increased in the US, which may stimulate economic growth, so taking advantage of the current rates when buying Dollars is important.
Data to be released this Tuesday, regarding interest rates in the US, forecast a decision to remain at 0.25%, a figure which has remained consistent since December 2008. However, with the Dollar boasting its safe haven attributes, a choice to remain at 0.25%, could well help to further increase their economy and maintain the Dollars new found strength, which has grown with its reputation as a low risk currency.
However, with such a low figure, the implication is that worldwide investors may begin to pull their funds and speculate in riskier currency. This emphasises the opportunity for those looking to sell Dollars, as the current exchange rates may well decrease once the data is released.
It is important to note that the smallest change in exchange rates can lead to huge differences in transactions, so exploiting the knowledge and understanding held at FCG can help to save you thousands of pounds.
This Weeks Data
This week is quieter than usual for UK releases, with the BoE minutes the main data of note. There is however significant data from the EU and US, so we expect a volatile week for Sterling exchange rates.
Below we list the main data releases, but as ever do get in touch for a free personal consultation on the currency you need to buy or sell. In reading this report you’re taking the first step to understanding what moves rates, and how to achieve the best possible exchange rate within your time frame. Take the second step to commercial rates, and contact us today.
Whilst the natural inclination when needing to make an international transfer is to use your bank, it’s usually a fairly expensive way of doing so. Our rates are up to 6% better than achievable at the bank, and so the savings can be considerable.
Mortgage approvals from the UK kick off the day at 09:30am. It is considered as a leading indicator of the UK Housing Market, and therefore the economy as a whole. We expected 48.72k new approvals. Higher than this and expect the pound to rise, and vice versa. We also have some housing data from the US later in the afternoon.
Those needing to buy or sell AUD should pay attention to the RBA minutes. Any comments on further interest rate hikes may knock GBP/AUD rates down. From the USA, we have Building Permits, Housing Starts, and also the interest rate decision from the FED. We expect a hold in rates, but any positive or negative comments may affect GBP/USD.
The Bank of England minutes are the most important release of the day. The minutes give a full account of the policy discussion, including differences of view. It’s usually a big mover for the pound, so stay in touch with your FX trader to ensure you don’t get caught out. From the EU, industrial orders will show how that sector is performing. Retail Sales from Canada and GDP from New Zealand round off the day.
Most key data today is from the USA. We have Jobless Claims and Home Sales. High jobless claims indicates weakness in this market which influences the strength and direction of the US economy
Germany, the largest economy in the EU, releases various measures of confidence in the economic climate. We expect this to cause some volatility in the value of the Euro today. From the US, Durable goods orders and home sales may affect GBP/USD.
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Labels: Fundamental Data, GBP/EUR