Tuesday, 14 December 2010

Pound falls against Euro; poor house prices to blame

14th December 2010
Good morning. Sterling fell quite sharply vs the Euro yesterday, as weak housing data and comments from the Bank of England suggest more Quantitative Easing could be on the way. Against the US Dollar rates actually rose, due to a weakening USD as a result of fears the country's credit rating is at risk. We'll look at all of this in detail after the usual snapshot of rates as at 08:30am:
  • GBP/EUR 1.1795
  • GBP/USD 1.5885
  • GBP/AUD 1.5912
  • GBP/NZD 2.1062
  • GBP/CAD 1.5973
  • GBP/CHF 1.5325
  • GBP/ZAR 10.801
  • GBP/HKD 12.350
  • GBP/JPY 132.31
  • GBP/ZAR 10.799
  • EUR/USD 1.3460

Pound falls on Housing Data

Property website Rightmove said house prices fell 3 % in the past month, citing economic uncertainty and low mortgage approvals and forecasting bigger falls in 2011. The poor figures pushed the pound down fairly sharply. Today we have the RICS survey, and if this replicates the results then we expect the pound to fall further.

More Quantitative Easing?

Bank of England Deputy Governor Charles Bean said the bank may restart its programme to pump money into the economy if growth slows or the euro zone debt crisis has a big impact on Britain's economy. The comments pushed the pound lower following the poor housing data earlier in the day. More Quantitative Easing in the US severely weakened the US Dollar, and a similar move in the UK would push Sterling exchange rates lower too.

Summary

We have recently seen 2 month highs for GBP/EUR rates. This has been due to all the problems in the EU. Now however these problems may mean the UK is affected, and more QE will certainly push the pound much lower.

Last week we said that the spike was likely to be short lived and this does now seem to be the case. With huge uncertainty in both the UK and EU, we could see either currency weaken further. If you need to buy or sell Euros, contact us today to discuss the options we have to ensure you don't lose out if rates move against you.

Today's Economic Data

Following yesterdays house price data, we have a host of inflation figures for the UK today. Consumer Price Index and Retail Price Index are released at 09:30am. They are taken as an indicator of inflation and UK economic growth, and so often affects the pound.

From the Eurozone we have industrial production figures. From the USA we have retail sales and the FED interest rate decision.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what's happening in the currency markets.