11th October 2010
Good morning. Today as usual on a Monday, we'll have a detailed look at how Sterling has performed against the Euro and US Dollar over the last week, in addition to the weeks data that we think will affect exchange rates.
Pound vs Euro
With Sterling hovering close to a 5 month low against the Euro on Friday we again had a fairly volatile week. Highs reached 1.1589 whilst Friday’s lows plummeted to 1.1354.
Last Monday’s publication of bullish, above estimate PMI Construction data caused a small jump in the value of sterling although this was short lived. The release of the EMU’s GDP data on Wednesday was positive for the Eurozone and reignited the Euros continued strengthening against the Pound.
The two major information releases for the week were the BoE and ECB interest rate decisions on Thursday. With both institutions choosing to remain dovish and not change rate levels of 0.5% and 1% respectively, this information actually had little effect on the GBP/EUR pairing.
Many analysts believe that the pounds weakness versus the Euro could be down to possible Quantitative Easing by the Bank of England.
Looking to the week ahead there are few major publications. Nationwide’s consumer confidence data is released on Tuesday and analysts predict that a bullish figure could aid the Pound. A low level of consumer confidence however could show an economic turn down and have a negative impact on the GBP.
The threat of a double-dip recession was voiced by Chancellor of the Exchequer George Osborne recently and analysts believe that this will have a negative effect on the Pound. This coupled with the looming announcement of further austerity measures by the government could cause new lows for the EUR/GBP pair. Anyone wishing to buy Euros in the near future should keep an eye on this and use the expert knowledge of FCG to keep informed of changes in the currency markets.
Pound vs US Dollar
An interesting and relatively negative past week for USD, with the low of the week against Sterling sitting at 1.5747 and the high just above $1.60.
Following a week of negative date releases and continued concern of further quantitative easing measures being taken by the FED, Sterling saw a brief 2 month high position against the Dollar, breaking the 1.60 mark. Timing on your dollar purchase this past week was of utmost Importance in order to maximise your buying potential.
The Dollar is in a similar state against most major currencies as the Pound is against the Euro in the current climate, with general sentiment amongst major investors that of a cautious nature, which certainly asks some questions of the dollar’s well known ‘safe haven’ status.
So, if you are looking to buy dollars in the near future it may well be in your best interest to lock in a rate now whilst Sterling is strong against it. Contact your account manager to discuss the option of using Stop and Limit Orders, which can specify a rate at which you wish to lock in and trade at should we see any spikes or lows in the market.
This week’s data
Below we list all the main economic data releases for the coming week. When data is different from forecast, it can affect exchange rates. Sometimes though, it’s what isn’t stated that can affect rates.
For example, the pound has fallen against the Euro in recent weeks due to speculation the BoE will resume Quantitative Easing. Despite the fact no announcement has been made, the currency markets move as much on rumour as on fact; sometimes more so.
For this reason, take advantage of the detailed knowledge of our expert currency brokers. A free consultation can help you understand what’s happening in the markets that may affect rates, and go some way to helping you decide when to fix your rate, and the contract types available.
It’s a US Holiday today for Columbus Day, so the only data of note is the UK BRC Retail Sales and UK RICS house prices. The retail sales show the performance of the retail sector, and is an indicator of consumer confidence. House prices are also seen as a leading economic indicator. Poor figures for both will push the pound lower.
For the UK, we have consumer prices, more retail sales, and Trade Balance data, all of which may affect the value of Sterling. Also of note for the UK, is the Nationwide Consumer confidence survey, which does exactly what it says on the tin. High consumer confidence will boost Sterling. EU data comprises of German CPI data. From the USA, the FOMC minutes will be closely watched by the market.
There are various measures of unemployment from the UK today. If the claimant count is high then the pound may come under pressure. From the EU, we have industrial production figures. Import Prices from the USA will be closely watched by those needing to buy or sell USD.
Jobless data today comes from the USA, along with producer prices. Not much from the EU or UK today other than a monthly report from the ECB. They’ve been bullish of late, which has helped strengthen the Euro. Further positive comments from the ECB could strengthen the Euro further, pushing GBP/EUR rates lower.
EU – Consumer prices and Trade balance data. As always, if the figures are better than expected the Euro may strengthen and vice versa. From the USA, consumer prices and Retail Sales round off the week.
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Labels: Fundamental Data, GBP/EUR Forecast, GBP/USD Forecast