Thursday 13th October 2011
Good morning. Sterling has risen to a 4 week high against the US Dollar, as investors move away from the safe haven currency, weakening USD and making it cheaper to purchase. Against the Euro however, the Pound has fallen to the €1.14 level, as changes to the EU bailout fund look set to go through, strengthening the Euro and pushing rates lower. At 08:30am this morning rates are as follows:
• GBP/EUR 1.1400
• GBP/USD 1.5733
• GBP/AUD 1.5395
• GBP/NZD 1.9764
• GBP/CHF 1.4069
• GBP/CAD 1.5998
• GBP/ZAR 12.2767
• GBP/JPY 121.19
• GBP/DKK 8.4769
• GBP/NOK 8.8355
• EUR/USD 1.3818
Sterling rises to 4 week high vs US Dollar
Sterling has risen to it's highest in a month against the US Dollar. Exchange rates for USD are now well above the 14 month low of $1.52 we saw recently. There has not been any particularly poor data from the USA, it's simply the fact that with the uncertainty surround Greece and financial markets, investors had been moving to the safe haven USD, strengthening the Dollar.
With markets becoming calmer ahead of an EU vote on the bailout plan, investors returned to risk and moved out of the USD, weakening the currency and pushing exchange rates up.
Euro gaining strength ahead of bailout plan
Political rivals in Slovakia have agreed to support a crucial bill ratifying changes to the EU bailout fund in exchange for early elections. It is proposed to expand the effective lending capacity of the European Financial Stability Facility to €440bn euros.
The fund would also be empowered to buy eurozone government debt and offer credit lines to member states and to banks. Top EU officials urged the country on Wednesday to ratify the bill swiftly. The news has given renewed confidence to the markets, and the result is a stronger Euro and lower GBP/EUR exchange rates.
Given we expect further poor data from the UK, it's likely rates could fall further in the coming weeks
UK Economic figures likely to weaken the Pound
Figures yesterday showed that UK unemployment rose by 114,000 between June and August to 2.57 million, a 17-year high, according to official figures. This is bad news for Sterling exchange rates, as poor data weakens Sterling giving it less buying power in the markets.
Analysts think that the UK economy is likely to get steadily weaker through the rest of this year, and the Bank of England's future decisions on asset purchases will be largely driven by overseas developments, BoE chief economist Spencer Dale said yesterday.
Fellow BoE policymaker Adam Posen said he was also pleased that the BoE had decided to further ease monetary policy last week.
With further weakness expected, it's likely rates could drop further, therefore if you need to buy Euros in the next 3 months, contact us today to discuss how to get the best possible exchange rates for Euros.
Today is quite a busy data for fundamental data releases. Starting in the EU, we have German inflation figures and a report from the European Central Bank. In the UK we have Trade balance figures which often have an impact on exchange rates. In the USA there are Jobless figures and a monthly budget statement.
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