27th September 2010
Good morning. Today we'll have a look at how the pound fared against the Euro and US Dollar last week, where rates may move this week, and as usual for a Monday a look at what data released this week that may move rates.
Pound vs Euro
Last week saw the GBP/EUR currency pair plummet from a height of 1.2001 on Monday, to as low as 1.1658 on Wednesday. This change in rate equates to almost 3%, a difference of €3430, between the two rates, when you exchange £100,000. The pair increased slightly as we came to the end of the week, jumping as high as 1.1792 Friday afternoon. This week emphasises the volatility of the market, highlighting its daily unpredictability and how difficult it is to judge where it will lie as little as a 2 hours in the future.
Data released Monday morning underlined an unfortunate start for the UK economy, with lower than expected Mortgage Approvals. At 45,000; this figure is 2,000 less than its equivalent month last year, which may be a reason for the immediate decline in Sterling’s strength from the get-go.
Midweek saw a brighter horizon for the UK, with the Wednesday morning release of the minutes of the BoE MPC meetings, which showed that the nominal GDP had increased by 1.7% on the previous quarter. This may explain the increase in rates throughout the end of the week, as growth in the economy boosts the value of the GBP.
The week to come has important data to be released on Tuesday with the UK’s GDP Q2 figures to be made public. The recent trend has been on the increase, with expectations to be around 1.2%, however if statistics are lower than anticipated or even negative, this corresponds to a negative effect on the GBP, therefore, leading to drops in Sterling’s currency pairings.
Evidently, there is data to support an increase or decrease in the GBP/EUR rate this week, so if you need to buy or sell the Euro, contact us today about Stop Loss and Limit Orders.
Pound vs US Dollar
Last week saw further volatility for the Dollar against both The Euro and Sterling following negative economic news from the US. The UK also posted negative data meaning the biggest beneficiary was the Eurozone as it rallied to a five month high against the Dollar reaching 1.3497. From a UK perspective the Pound managed a small gain from an opening figure of 1.5653 to a week high on Friday of 1.5846.
The downturn for the US came following the Federal Reserves decision to hold interest rates at the record low of 0.25%, a level now seen in place for 21 months. While this decision was widely expected, and on its own may have done little to scare investors away form the safe haven currency, it was the announcement that the door was still open for further additions to their quantitative easing program that caused uncertainty for the greenback.
As we have seen in the past any mention of QE has caused an economies currency to drop representing attractive buying levels. We expect the USD to remain weak, which is currently presenting better buying opportunities than of late.
This week’s data
Below we list the main data releases that may have an impact on exchange rates. The currency market has been very volatile in recent weeks, as figures suggest the global recession is not over, and many economies face real fears of dipping back into recession.
In these volatile times, data becomes even more important than usual, as markets react to signs of economic contraction or expansion. It’s impossible to predict how these will affect rates, but be sure that they will have an impact if the data releases below are different from forecast.
Remember, you now can have a free consultation with one of our currency experts. This can help you understand what effect these data releases can have, and help you make an informed decision on when to trade, and which type of contract is best for you.
Contact us today to discuss your requirements, and make the first step to taking advantage of our commercial exchange rates that are up to 6% better than available at banks or other financial institutions.
Monday
Markets will be reacting to yesterday evenings Hometrack Housing prices, which showed that house prices fell by 0.4% month on month, the biggest fall in 18 months.. Apart from that the only data of note is money supply data from the EU. This is an inflation indicator, so higher than expected figures may strengthen the Euro and push GBP/EUR rates down.
Tuesday
Germany today releases Retail Sales and Consumer Prices. Both of these will give an indication of the economy, and as Germany is the largest economy in the EU, it can affect the value of the Euro.
From the UK, GDP data will likely have an impact on Sterling. We expect a 1.2% figure – less than this expect exchange rates to fall, more than this expect them to climb.
Consumer Confidence and House price data from the US comes out at 3pm.
Wednesday
For the UK, Mortgage approvals and money supply is the main data of note. It may affect the pound, but the GDP figures from Tuesday will still likely be having the biggest impact on rates.
In the EU, Industrial and Economic confidence measures are released. The EU economy has been performing better than expected recently, and further good numbers may push GBP/EUR lower.
Thursday
Markets will be reacting to the UK consumer confidence figures released overnight. German and US Unemployment will also impact on Euro and Dollar rates.
Canada and the USA both release GDP figures today. GDP is considered a broad measure of economic health. If different from forecast, GBP/CAD and GBP/USD may face volatility. Jobless claims in the US are also released today.
Friday
Inflation measures are the order of the day today. UK, EU and Germany all release data that will show how inflation is faring in the relative economies. High inflation means a chance of higher interest rates, which can strengthen the currency concerned and make it more expensive to purchase. Unemployment from the EU may also have an effect on GBP/EUR rates today.
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Labels: Fundamental Data, GBP/EUR, GBP/USD