What next for GBP/EUR rates as Christmas draws in - Sterling Forecast
Lsat week we have seen a relatively powerful Sterling exchange rate, by recent standards at least, fall from a height of just below 1.20 to 1.17 on the nose.
Thursday and Friday saw Euro-Zone Heads of State meet in Brussels, to discuss the Euro, the Euro-Zone support fund and financial-market stresses, and early week support for the single currency from Angela Merkel and Nicolas Sarkozy, may have been joint reasons for the boost in Euro strength against the Pound.
As ever, Quantitative Easing is a topic of choice for both the BoE and the FED, which will weaken their respective currencies, a prospect which could see Trichet smile, investor’s pull funds and all potential overseas property buyer’s panic, as taking advantage of a falling rate, whilst undesirable, is far more beneficial than holding fire and buying when it is lower.
This was emphasised in trading last week, as exchanging £100,000 to €’s Monday would have seen you almost €3000 richer than those exchanging the same amount just two days later. Relatively speaking, holding for 48 hours may have cost you a swimming pool.
Weekly Economic Data that may affect exchange rates
Below the main data releases that we think will have an impact on exchange rates are listed. As this is the last working week in the run up to Christmas, world trade on the currency markets is likely to be very thin indeed.
With thin trade comes more volatility; a data release different than forecast that would usually sometimes have a limited impact on the market can be exaggerated due to the reduced volumes being traded. It’s also important to note that many international investors will be winding up positions this week in advance of the Christmas market closure. So, even though things are slowing down, the markets are likely to be volatile and the cost for an overseas transfer could change significantly.
To find out the forecasted figures and the effect the below releases may have on the currency you need to buy or sell, open an account with us today. It’s free to register, doesn’t obligate you and simply provides access to our market knowledge and commercial exchange rates.
Monday
We start the week with UK Money Supply data and Mortgage approvals. Money supply basically measures the amount of money in circulation and is an inflation indicator. Inflation is high at the moment; however interest rates are not likely to go up so high figures could actually weaken the pound.
Tuesday
A very quiet day with no data of note from the UK, EU or US. We have the minutes to the recent Australian interest rate decision so there could be some GBP/AUD volatility. There are Canadian Retail Sales and Inflation figures at mid-day so GBP/CAD could also be choppy.
Wednesday
Now we get going for UK data. WE have the Bank of England minutes that will show how the MPC voted 2 weeks ago. Recently there has been a 3 way split highlighting indecision on rate movements and further QE. This is the most important release for the week and could cause Sterling volatility.
For both the UK an USA we also have Gross Domestic Product (GDP) figures. These show the rate the economy is growing or contracting and often has a big impact on exchange rates.
Thursday
Further GDP figures and Unemployment data from the USA are the main releases today. The only UK data of note is the Index of services, which measures movements in the Gross value added for service industries. It’s quite a minor release but given the thin trade in the run up to Christmas, it may have a bigger impact than usual.
Friday
Christmas Eve and no data released at all.
We wish all our regular readers a very merry Christmas and a Happy New Year.
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