Monday 10th September 2012
Good morning everybody. I'm back from sunny Kos in Greece, so let's get cracking and see what's been happening with exchange rates. In a nutshell, the Euro has been gaining strength and as a result Sterling/Euro exchange rates have fallen further from their recent highs. Today I'll take a look at what's been happening in Europe, why the Pound/Euro rate has fallen, and what the coming weeks may hold. If you need to buy or sell Euros at the best exchange rate, read on....
In this week’s Report:
Sterling vs. Euro;
- Euro gains strength pulling GBP/EUR rates down
- Is a solution to the debt crisis imminent?
- Pound/Dollar rates climb steadily to $1.60
- Round up of the week’s other data that may affect rates
Speculators waited in anticipation last week as a relatively stable few days led up to Mario Draghi’s long awaited ECB press conference. Today I will consider the major announcements from both the UK and Euro-zone that drove the sterling-euro cross price since I've been away.
Last week began with a UK Manufacturing data report that was greater than predicted; lifting the pound as speculators concluded that the announcement would reduce the chance of more Bank of England stimulus. Sterling gains were offset, however, as on that day Angela Merkel stood before Bavarian beer drinkers to announce her support for a unified euro.
The inference of her speech appeared to be that the hard line taken with troubled Euro-nations, such as Greece, was ultimately to bring about an end to the crisis, rather than to simply protect German interests. The markets took the signal as an affirmation that a plan was on its way and this, coupled with a buoyed sterling, kept the markets relatively constant around the €1.26 level.
Just as the steam from Chancellor Merkel’s comments began to wane, and European stocks slipped again, Mario Draghi set the cat amongst the pigeons when he explained to lawmakers that if the ECB were to purchase two to three year sovereign debt from troubled nations, this was not tantamount to outright quantitative easing; a breach of their mandate.
All eyes fell on Draghi and Thursday’s announcement; the euro had tentatively held its ground, never quite weakening back to the four year high levels, but not quite strong enough to warrant the sterling-euro cross to fall below the 1.26 mark. Speculators were divided as to the fate of the euro; the broad strokes of the ECB plan were relatively well known by this point, what was not, were the details. Draghi could announce an insubstantial plan, such as capped bond purchases, that would disillusion markets in a similar vein to his prior press conference. A stronger message however, would settle investors, buoy the euro and reduce the dreaded bond yields of nations such as Spain.
Although the ECB President delivered with respect to content, Draghi’s speech was perhaps not the vitriolic call to arms many expected, or hoped, it would be. The markets did respond, albeit eventually, as an initial weakening of the Euro during the speech ultimately saw the single currency close in on two-month highs against the US dollar stealing momentum from the yen.
Friday delivered weaker than forecast Non-Farm payroll data from the US which will have driven speculators from the dollar to the euro as the ECB’s recent actions, and the risk of Fed stimulus, has seen more traders drop their risk-adverse positions on Europe. The news also caused GBP/USD rates to rise above the $1.60 level for the first time in quite a while.
With the euro increasingly gaining on its counterparts we have seen the Pound/Euro rate start to drop further away from the recent highs, on Friday falling over a point down towards €1.25. As such it has never been a better time to consider your currency options if you need to buy or sell Euros. We have a range of contracts to cater to many Forex requirements. Whether you are buying or selling Euros, we can provide you will all the information to help you make an informed decision and make the very most of your currency.
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Weekly Economic Data that may affect exchange rates
Monday – Today is all about the EU. We have various releases including Italian GDP data, Greek Inflation numbers, EU investor confidence, French Industrial Output and Portuguese Trade Balance. Elsewhere there are some House Price figures for the UK, and GDP figures for New Zealand.
Tuesday – Today we have some Trade Balance figures from the UK showing imports and exports. A little quieter in the Eurozone with German wholesale prices the only data of note. In the USA we have Trade Balance figures.
Wednesday – An important day for GBP/EUR. Starting at home we have a host of earnings and unemployment data at 09:30am. In the Eurozone we have Inflation data from Germany, Spain and France. There are also some industrial production figures for the EU. Over in the USA there are several Import and Export numbers being released at 13:30pm.
Thursday – The only UK data of note is the BoE Quarterly Bulletin. It’s relatively quiet in Europe also with only Greek unemployment and Italian inflation data. Most figures today are from the USA: Jobless Claims, Interest Rate decision, FOMC minutes & a monthly budget statement.
Friday – The G20 meeting starts today, which is a gathering of finance ministers and central bank governors and thus could add a new dimension to the currency markets. Scheduled releases today include EU inflation and unemployment numbers, US inflation and Retail Sales figures.
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Labels: EU Debt Crisis, Exchange Rate Forecast, Pound/Euro, Weekly Market Data