Tuesday, 26 April 2011

Weekly GBP/EUR & GBP/USD forecast

In this week’s Report:
  • Round up of the week’s data that may affect rates
  • Pound vs Euro outlook for the week ahead
  • Stelring vs US Dollar close to 16 month high
(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

During a short week’s trading, the GBP/EUR cross only fluctuated 1.2% between the high and low of the week. Sterling rose vs. the Euro on Tuesday as the single currency weakened due to debt concerns. Portugal had begun talks with international authorities about the terms of a bail-out. Meanwhile Greece, which received a bail-out last year, denied reports that it would have to restructure its debts. The euro lost 1% of its value against Sterling, with market nervousness also spreading to Spain helping push GBP/EUR rates up from the near 1 year low.










Sterling had dropped back into the 1.12's on Wednesday, as the Euro regained some of its losses after the Bank of England (BoE) released the minutes to their decision to hold interest rates 2 weeks ago. The minutes showed Bank policymakers maintained a 6-3 split in favour of keeping rates on hold this month, leaving them no closer to a rate hike

Thursday Sterling again gained versus the euro after British retail sales rose unexpectedly and UK public finance data showed the government borrowed slightly less, but uncertainty remained about economic growth.

The overall picture for sterling hasn't changed in terms of uncertainty about the UK economy or in terms of interest rate hikes. The euro has been boosted in recent months as euro zone interest rates are widely expected to rise again after last month's 25 basis point increase. UK rates remain at record lows of 0.5 per cent, with markets pushing back the timing the first hike to November.

The week ahead however, is even shorter than the last and possibly more volatile. While the UK retail sales data for March was positive, uncertainty remains about the April 27 release of first-quarter gross domestic product (GDP) data, which analysts say would be more important in influencing the BoE's decision on rate hikes as another negative reading would plunge the UK into another technical recession. To gain a clearer picture of how this could affect your currency click below to open an account with us today.

Sterling vs. US Dollar;

The Pound spiked to a 16 month high against the Dollar following the relative shock of a much better than expected retail sales release. US corporate results continue to surprise on the positive side which in turn is fuelling increased risk appetite. For these reasons, the Dollar came under renewed pressure with investors again off-loading the Greenback to invest in equities and commodities as well as in the commodity based currencies.










UK March retail sales blew past expectations coming in at 0.2% month-on-month amid expectations of a 0.5% contraction, and 1.3% from a year earlier amid forecasts for a 1.0% increase. The Office for National Statistics (ONS) said that spending on food increased the most in 10-months along with rises in department store sales, fuel and non-retailing sectors. This helped offset declines in other sectors such as clothing and household goods.

Whilst US Dollar weakness is the driving force in moves, the GBP/USD rate may well manage to sustain its 1.65+ move. If renewed interest rate speculation gets a grip of this pair once again then it could be ‘hi-ho silver’ considering the current state of the struggling buck!

It’s worth bearing in mind however that despite rates at a 16 month high, Sterling is very weak and any positive news from the USA could quickly push rates back down again. If you need to buy US Dollars in the next 24 months, contact us to discuss our Forward contracts where you can fix the current rate with a 10% deposit, even if funds aren’t required for up to 2 years. Click below to register an account:

Weekly Economic Data that may affect exchange rates

Below we list the main data released for the week ahead. For a free consultation on how they could affect the cost of your currency requirement, open an account with us today. This is free to do, doesn’t obligate you in any way, and simply gives you access to our market knowledge and commercial exchange rates.

Monday
Yesterday was a holiday in both the UK and Eurozone. There were however some home sales data from the US but as other markets were closed it had little effect on exchange rates.

Tuesday
No data of note from the EU or UK so again today’s data is US based. We have Consumer Confidence and building permits, so we could see some GBP/USD volatility.

Wednesday
We have Q1 GDP for the UK today, which usually causes some changes for Sterling exchange rates. It’s a measure of economic output and very closely watched by the markets. We have some manufacturing data from the Eurozone, and an interest rate decision by the Fed, although we expect no change.

Thursday
A survey from GFK is the only UK data of note. There are some employment figures from Germany, but yet again most data today is from the USA. Jobless Claims, Home Sales, Personal Consumption and GDP will all likely affect the value of the US Dollar.

Friday
UK markets are closed for the Royal wedding. Other markets remain open however. From the Eurozone we have business climate and Consumer Sentiment an addition to some inflation data.

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