Monday 22nd October 2012
Good morning. It was a torrid weak for Pound/Euro rates last week, with levels dropping to their lowest in 4 months. In this mornings report I'm going to have a look back at the reasons why rates have fallen, and what the rest of 2012 may have on store for exchange rates. If you need the best possible rates, click the link at the bottom to send me a free enquiry today.
In this week’s Report:
- Pound/Euro rates hit 4 month low
- More Quantitative Easing on the way?
- Better UK data pushes other crosses higher
- Round up of the week’s other data that may affect rates
Sterling vs. Euro;
The pound hit a four month low against the Euro last week dropping to the high 1.22 mark. Trading opened last Monday morning around at 1.2407 and steadily dropped throughout the week closing on Friday afternoon at around 1.2296 as the graph below shows. This report aims to analyse the reasons why the pound has stooped to a four month low against the Euro and what the coming weeks may have in store for the GBP/EUR rate.
So what has happened last week to drop the value of the pound? One large factor was the mid week announcement by the Bank of England, which hinted that there would be another round of quantitative easing. The minutes of the last policy meeting released on Wednesday showed the BoE's monetary policy committee agreed that no further stimulus was needed. However the BoE’s policy maker, David Miles, in a statement to the Guardian newspaper, revealed that the bank needed a more expansionary monetary policy to steady inflation and boost sub-par economic growth. More quantitative easing is considered bad for the currency as it increases the supply, thus decreasing its value.
Later in the week, the European Union Summit which convened in Brussels gave some confidence to the Euro zone when it was agreed by the European Union leaders' that they would introduce a single European banking supervisor giving the European Central Bank overall responsibility for banking supervision. This will help lend stronger unity to the Euro zone and give investors stronger confidence in the Euro, thus giving it strength and making it more expensive to buy.
In the UK this week’s GDP figures, if worse than expected could also have a negative effect on the pound and could see rates drop further.
There was some good news for the UK last Friday when figures regarding the borrowing levels of the UK public sector saw that the net borrowing was £12.8bn in September, down from £13.5bn in the same month last year. The figure is lower than analysts had been expecting, while previous months' figures for this financial year were revised down by a total of £6.7bn.
Alongside this, a strong jobs report which shows that UK unemployment figures have fallen by 50,000 to 2.53 million in the three months up to the end of August also offers some optimism for the British economy and Sterling. While this helped the pound against other currencies, it was not enough to halt the decline in GBP/EUR rates due to the renewed confidence in the Eurozone.
With the on-going volatility in the Europe and mixed feelings regarding the British economy, the market will likely remain volatile in the coming weeks. If you need to buy or sell Euros then send me a free enquiry today, in order to limit your exposure to fluctuating exchange rates and to ultimately make the most of your currency.
Weekly Economic Data that may affect exchange rates
Monday – A very quiet start to the week. In the UK we have the latest Nationwide Housing prices, which are a useful barometer for overall economic health. In the United States we see a FOMC member give a speech. There is no data from the Eurozone.
Tuesday – Nothing from the UK today. In Europe we will see a business climate assessment from France. IN the United States there is some Manufacturing data, and Canada releases its latest retail sales.
Wednesday – Again no data from the UK today. In Europe there is a raft of data releases from Germany: Manufacturing Data, Business Climate Assessment, and inflation data. The rest of today’s data is from the USA: New Home Sales, Mortgage Applications, Manufacturing Data and the latest Interest Rate decision from the Federal Reserve.
Thursday – Probably the most important day for Sterling, as we have the latest GDP figures which will show if the economy is growing or shrinking. Europe has Retail Sales from Germany. In the United States we see Jobless Claims, Home Sales & Durable Goods Orders.
Friday – We end the week with Confidence measures from Germany and France, along with unemployment from Germany. In the United States we have the latest Gross Domestic Product numbers along with a consumer sentiment survey.
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Labels: Bank of England, Best Exchange Rates, Forecast, Pound/Euro 4 month low, Quantitative Easing