Weekly Currency Market Report

Review of last weeks exchange rate movements

Pound vs Euro

Last week opened with what proved to be the low point for the Sterling/Euro currency pairing at 1.1219 on Monday, however by Tuesday afternoon we saw the rate jump by over 2%, a significant amount on any size of transfer.

The spike came after the UK announced its GDP figures for the third quarter of 2010 and an actual figure 0.8% doubled the expected 0.4% leading to a Sterling rally against a number of currencies.

The good news continued into Friday with consumer confidence figures showing better than expected results and the Pound increased to a week high of 1.1521, almost 3% up on the start of the week.

The spike has represented excellent buying opportunities however for those selling Euros the movements have made a significant impact on the Sterling return. Although the Pound appears to be on the front foot there is still much that could suggest organising a transfer sooner rather than later would be the best option.

The reason for this is due to data released this week with the Bank of England interest rate decision on Thursday. If the Monetary Policy Committee decide to be led by member Andrew Sentence and hike interest rates by 0.25% the Sterling rally my well continue, however with the announcement also due regarding the Quantitative Easing policy any form of increase in the stimulus package could see a significant fall in GBP rates across the board.

Pound vs US Dollar

The Pound continued to gain in strength against the Dollar at the end of last week with lower than expected GDP data weakening the US currency. As of Friday we were seeing interbank highs of over 1.60 meaning that if you have a need to buy Dollars now could be the optimum time to take advantage of the rates with either a spot or forward contract.

Looking at the week to come there are several important announcements. On Monday we have manufacturing data coming out of the US, a result of over 50 will be seen as bullish and could indicate that the health of the US economy is good, a lower result and analysts believe the strength of the Greenback could be negatively affected.

The two big releases of the week are the Fed and BoE interest rate announcements on Wednesday and Thursday respectively. America’s central bank is expected to be dovish and keep its rates at 0.25% and, as always, what happens in the US will affect what happens here with the BOE expected to leave rates as they are. Analysts will be watching these two establishments closely and an unexpected announcement could cause waves in the currency markets.

Pound vs New Zealand Dollar

Sterling held firm against the New Zealand Dollar last week after the RBNZ left interest rates unchanged at 3 percent on Wednesday, despite speculation that they may be raised. This provided some much needed support for NZD purchasers as GBP/NZD levels sit at near record lows.

For a short while on Wednesday the Pound made limited gains against the Kiwi after positive UK GDP figures were released pushing the Pairing in Sterling’s favour by almost 3 points although these gains were short lived. A move such as this highlights how much the foreign exchange markets fluctuate and the difference this can have on the cost of your transfer. On a £200,000 transfer this represents a difference of NZ$6,000 between the high and the low.

This week’s data

Interest Rate decisions are the order of the week, with the Central Banks of the UK, EU, US and Australia all announcing their latest decision.

The Aussies will probably hike their rate; however the remaining major economies are expected to keep rate on hold at their current low level.

Watch for any announcement with regards to further Quantitative Easing from the BoE. If further stimulus is announced, expect the pound to fall sharply. If no QE is announced, the pound will probably strengthen. Either way we expect movement one way or the other today, so ensure you have discussed your options with us well in advance of this release. Contact us today for your free consultation.

Monday
The only UK data of note is PMI data that will show how inflation is faring in the UK. From the EU we also have PMI data. In the US, watch for Manufacturing and construction data. After last weeks poor US GDP, further bad figures could push GBP/USD rates through $1.60.

Tuesday
Australia is expected to hike their interest rate today to 4.75%. If you need to buy AUD, consider doing so before this decision as it may strengthen the Aussie making it more expensive to purchase.

Wednesday
Shop Price Index and Service PMI are the main UK releases. From the EU and Germany inflation data is released. In the US we have an interest rate decision, but unlike Australia the current climate means they will probably leave rates at 0.25%.

Thursday
Interest Rate decisions for both the EU and UK today. Rates are likely to be left on hold, but if the BoE opt for further stimulus in the form of Quantitative Easing, expect the pound to fall sharply. If no QE is announced, the pound will probably strengthen. Either way we expect movement one way or the other today, so ensure you have discussed your options with us well in advance of today’s release.

Friday
The UK and EU release more inflation data, so expect GBP/EUR to be choppy today. Retail Sales are also released from the EU along with German Factory orders. US unemployment and Non-Farm payrolls are the main release today however, and we expect volatility in GBP/USD.

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