Tuesday, 3 May 2011

Weekly GBP/EUR & GBP/USD forecast

In this week’s Report:

• Pound vs. US Dollar hits 17 month high
• Investors cool to dismal UK consumer confidence data

• Sterling remains near 1 year low vs. Euro

• Round up of the week’s data that may affect rates


(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro; Positive GDP figures brighten outlook for shaky UK economic recovery

The eagerly awaited UK GDP first quarterly figures for 2011 were released on Wednesday and showed the economy expanding in line with general expectation at 0.5%. Given the previous quarter’s negative 0.5% contraction this week’s positive figures depict an economy returning to growth, quelling any fears of a double dip recession.











A closer look at the figures highlights the positive impact of the manufacturing and service sectors.

Currency analysts suggest that UK GDP data was possibly too weak to prompt a Bank of England (BoE) rate rise as soon as next month, although it has still left open the possibility of a rate hike in the summer.

Indeed, should UK figures show consistent improvement throughout the month of May, then a summer BoE rate rise is still a possibility. As it stands however, the positive figures are too often coupled with negatives ones, leaving the UK recovery in a fragile state. Concerns over the underlying strength of the economy and its ability to withstand the fiscal squeeze remain firmly intact.

In summary, Sterling-Euro rates remain low and may well do so for some time. Therefore if you have a requirement to buy Euros click the link below to open an account with us today - free of charge and without any obligation.

Sterling vs. US Dollar; Pound hits 17-month high of 1.6747

Sterling was firm near a 17-month high against a struggling U.S. dollar on Thursday last week as investors placed more bearish bets on the greenback after the Federal Reserve signalled it was in no hurry to reverse policy:










Sterling's rise came even after dismal data showed British consumer morale unexpectedly deteriorated in April to a two-year low as people braced to take a hit from public spending cuts. Analysts said this showed how entrenched dollar bearishness was in the market, with many expecting sterling to rise past its 17-month high of 1.6747 struck earlier on Thursday and test its November 2009 peak of 1.6879 in the next few days.

"British consumer confidence data fell again," said Kit Juckes, currency strategist at Societe Generale. "However, sterling/dollar held support and is heading higher again. Dollar bearishness is consensual, but remorseless."

The dollar sank to a three-year low against a basket of currencies with many predicting more losses after Ben Bernanke of the Federal Reserve said it was in no hurry to tighten monetary policy soon and appeared relaxed on inflationary pressures.

Commerzbank said in a note that should sterling rise past its November 2009 peak of 1.6879, it could advance to test the 1.7025/50 area. This is where the 200-week moving average, 2009 high and 2005 low could all come together.

If you are looking to buy USD over the next month, it is currently in the most favourable position it has been for a long time, contact us by clicking the banner below to send us an enquiry.

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
Bank Holiday in UK and EU. Some Manufacturing and Construction data is released from the USA however.

Tuesday
The working week starts for the UK with Inflation data and Shop prices. If PMI is above 57.1 then Sterling may strengthen as it would increase the case for a rate hike. The EU also releases some inflation data today, and Australia has home sales figures.

Wednesday
UK data today comprises of mortgage approvals, Inflation data and lending info. From the Eurozone we see Retail Sales which are a barometer of consumer confidence. The US has inflation figures also in addition to employment figures. New Zealand has unemployment info in the evening and Australian Retail sales are released towards the end of the day.

Thursday
The EU and UK both release interest rate decisions today. It’s expected both will leave rates on hold, but there’s an outside chance of another EU hike which would push GBP/EUR down. Elsewhere the USA has some employment figures and the Reserve Bank of Australia gives a statement at 09:30pm.

Friday
We end the week with PPI for the UK which can often cause volatility for Sterling. US and Canadian unemployment figures are released today also. The only EU data of note is French Trade balance figures and German industrial production.

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