Tuesday 2nd August 2011
Good morning. Sterling fell yesterday after poor manufacturing data, however as we'll see in a moment the US debt problems have resulted in GBP/EUR rates surging, nearly at €1.15 this morning. We'll look at the reasons for this after the usual rate snapshot as at 08:30am:
• GBP/EUR 1.1488
• GBP/USD 1.6276
• GBP/AUD 1.4968
• GBP/NZD 1.8640
• GBP/CAD 1.5577
• GBP/ZAR 10.958
• GBP/JPY 125.71
• GBP/DKK 8.5558
• GBP/NOK 8.7917
• EUR/USD 1.4169
US debt agreement and the effect on currency exchange rates
The agreement to congress raising the US debt ceiling has had some interesting effects on the currency markets. As there have been problems in the US, the Dollar had weakened significantly. As it was perceived as a risky investment, other currencies such as the Euro and Sterling benefited.
Now that there is an agreement, investors have been buying dollars again, mostly with Euros. The net effect of this Euro sell off is a severe weakening of the single currency, making it much cheaper to purchase.
Pound vs Euro rates surge up August 2011
The weakening of the Euro has helped push GBP/EUR rates up to nearly €1.15 this morning, creating the best exchange rates for Euros for some time. It's very important to note however that this is purely due to movements with the debt crisis in the US. Fundamental UK data is still very poor, and Sterling is down.
Sterling still weak due to poor data
Further poor data from the UK yesterday highlighted the fragile recovery. Manufacturing activity shrank for the first time in 2 years, and the fact interest rates in the UK will remain low for many months is weighing on the Pound.
As a result Sterling has actually dropped against most currencies, however this has been masked by the upwards movement in GBP/EUR following the developments in the USA.
Summary; what you should do if you need Euros.
If you need to buy Euros, you should seriously consider fixing the rate with a Forward contract, where you can lock in today's rates for up to 2 years, and only pay 10% now, the remainder when you need the currency.
With poor UK data continuing to weigh on Sterling, most analysts think exchange rates are going to fall back away. Buying €200,000 today compared to a few weeks ago is an astonishing £7500.00 cheaper, clearly illustrating the huge spike we have seen.
Do you need to buy Euros? Send as an enquiry now to find out more about our rates.
Today's Data - After the holiday in Australia yesterday, today we have House prices, building permits, commodity Index and an interest rate decision, all of which could strengthen the Aussie. Closer to home, we have Inflation data for both the UK and Eurozone. Also from the UK there are shop price index figures from the BRC.
If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.
Labels: Forward Contracts, GBP/EUR rates surge, Poor UK data, US debt crisis