Monday, 13 December 2010

Pound vs Euro forecast December 2010

What next for GBP/EUR rates in December?

Last week proved to be a relatively quiet week for the GBP/EUR exchange rate with limited movements in an uncertain market. That being said Sterling still managed to reach a 10 week high against the single currency, but found high resistance at 1.20 with the Pound not yet strong enough to break through.

The limited data releases brought little change as manufacturing information was better than expected and The Bank of England held rates at the record low of 0.50% for the 21st month in a row. They also left the quantitative easing (QE) stimulus package at £200bn leaving investors wondering what to expect next from the UK in the coming months.

Investors seem to be confused as to which currency to back; the Euro or Sterling. The two economies are showing increased negativity with well documented problems from Eurozone members Greece, Ireland, Portugal and Spain, and for the UK we see an economy struggling to control inflation and refusing to distance themselves from the aforementioned QE package, leaving both in a very precarious position. Many analysts can’t help but feel that at some point in the near future one of the Powerhouse currencies could be set to drop heavily in the blink of an eye causing turmoil in the markets.

With such uncertainty it may be wise to secure a Euro requirement, either buying or selling, this week, as any information due could change things dramatically and make a transfer more expensive. Even if your currency need is not required for some time a Forward contract allows you lock a rate today with a 10% deposit and settlement is not due until a maximum of 2 years into the future taking the risk away from the markets and allowing clients to know how much a transfer will cost.

For those buying Euros, one thing to note this week will be the EU summit in Brussels on Thursday and Friday where the single currency could find some strength depending on the outcome. Ahead of the meeting both French President Nicolas Sarkozy and German Chancellor Angela Merkel have put on a united front stating that the two nations are firmly behind the Euro. Merkel said that the Euro would not be allowed to fail, because it had "a meaning that goes beyond a mere currency". Sarkozy added "We will defend the Euro, because the Euro is Europe."

As said this united front from the two largest economies in the Eurozone could force the single currency back this week so close contact with us here at FCG is imperative to maximize your transfer. If you have yet to open a trading facility with us you can do so, by clicking here and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.

Pound vs. US Dollar forecast, December 2010

The past week has been a pretty lacklustre one for the currency pairing with movements of only 1.25% between the High and low. Tit for tat seemed to be the game of choice so far as economic data releases were concerned and was mirrored in the exchange rate fluctuations throughout the week.

Ultimately the US dollar got the upper hand by end of play Friday boosted by the US trade balance which reduced more than expected as a weaker dollar and growing economies overseas propelled US exports to a two-year high. Sterling was not the only casualty of this economically and politically positive data release; the Euro was pushed down to fresh lows below 1.32 vs. USD.
The upcoming week again at face value seems to be pretty barren for major economic data releases from the US, however, a concise round up of all the potential market moving economic events can be found in our regular “Market Data” section below.

Despite the lack of economic direction next week the US Dollar could find itself being guided by external events occurring closer to us here in the UK in the shape of the Eurozone debt crisis. Being the global reserve currency the USD has benefited from the Europeans troubles as investors seek a safe haven to park their currency, the concerns in Europe have yet to be resolved and this could mean continued strength for the USD.

Other movements could stem from the FED, who have recently renewed talk of a further round of quantitative easing in the form of QE3, as we have seen last week QE2’s impact on the USD exchange rate has benefited US exports and a further round could be seen in the not too distant future. The short term implications may well be negative for the green back whilst longer term this could help the US towards growth.

Weekly Economic Data that may affect exchange rates

Below we list the main economic data releases for each day this coming week, focusing on the major economies; the UK, EU & USA.

Data releases can often affect exchange rates. Markets will have already seen the forecasted figures and exchange rates will have these priced in already. What can affect rates is if the actual data is significantly different from forecast. For example last week UK Manufacturing output was above analysts’ forecasts, and as a result the pound immediately strengthened and exchange rates rose.

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
Fairly quiet start to the week, with only Producer Prices from the UK being released. This is an inflationary measure and as such can have an impact on Sterling exchange rates if different than forecast.

Tuesday
Following yesterday evenings 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.

Wednesday
UK data is all out at 09:30am; Unemployment figures and Jobless claims. The figures measure unemployment and are an indicator how the economy is performing. We also have employment figures from the EU today. From the US we have inflation data and Industrial production figures.

Thursday
From the UK the main data is Retail Sales figures at 09:30am. The report is widely followed as an indicator of consumer spending, and therefore is seen as a reflection of the economy as a whole. From the EU we have inflation measures in the form of the Consumer Price Index. The US releases jobless data at lunchtime.

Friday
Nothing of note for the UK today. From Europe we see German Business climate and business assessment measures. Also from the EU we have Trade Balance figures. This is a balance between exports and imports and usually generates some volatility for GBP/EUR rates.


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