Wednesday, 1 December 2010

Sterling hits new high vs Euro, what will December hold?

1st December 2010
Good morning. The pound rose again to a new 2 month high vs the Euro yesterday, after a rescue package for Ireland failed to dampen speculation other bailouts would be needed in the euro zone. Rates at 08:30am are as follows:

  • GBP/EUR 1.1924
  • GBP/USD 1.5587
  • GBP/AUD 1.6167
  • GBP/NZD 2.0852
  • GBP/CAD 1.5912
  • GBP/CHF 1.5659
  • GBP/ZAR 10.974
  • GBP/NOK 9.6032
  • GBP/JPY 130.45
  • GBP/DKK 8.883
  • EUR/USD 1.3070

Weak Euro pushes GBP/EUR to new 2 month high

The worries over sovereign debt continue to weigh on the Euro, weakening it again against other currencies. This has helped push rates through the €1.19 barrier yesterday. "The market is still extremely nervous about sovereign risk, with Italy now being drawn into the firing line," said Gavin Friend, currency analyst at nabCapital.

"But in the near-term I think we might be getting over-extended here. A strong set of euro zone PMIs this week would go a long way to helping the euro find a base," he said. Manufacturing PMI surveys for the euro zone are released today.

The agreement of a €85bn emergency aid package for Ireland, felled by the costs of bailing out its banks, has failed to allay market fears over the health of the eurozone. It won't last forever though. Given the continued weakness of the Euro over the last few weeks, some analysts think we could now be coming to the end of the weak run.

Analysts said the market was looking for more pre-emptive action by policy-makers in the region after a rescue package for Ireland at the weekend, as pressure in the euro zone bond market was widening to more countries including Belgium. If the EU policy makers can calm the markets, and there were more positive economic figures from the Eurozone, then we could see the Euro gather strength again.


When should you buy your Euros?

Of course in a rising market, nobody want to fix a rate just to see things improve. However it's also important to note it was only a matter of weeks ago that rates were languishing in the €1.11's. If you want to hope rates improve but don't want to be caught out should rates drop, then a Stop Loss order is very useful.

This allows you to set a level where your currency is bought should rates fall; €1.17 for example. In this way you can continue to take advantage of any gains in the exchange rate, but at the same time have a safety net should rates drop back. Stop Loss orders are available for any client wishing to purchase £10k+ of foreign currency. To discuss your requirement and see how much you could save with our commercial exchange rates, contact us today.

Today's Data

From the UK, inflation data will be closely watched as an indicator of what the Bank of England may do at their next interest rate meeting. We also have inflation data for the EU so expect GBP/EUR volatility today. Should the numbers from the EU be better than expected, we could see rates start to fall for the Euro after weeks of gains. From the US, the main release is Construction and manufacturing data.