Wednesday 14th August 2013
Good afternoon everyone. Since my last post, Sterling has continued to make gains, helped by strong unemployment figures this morning. In today’s report I’ll have a look at this which has caused the gains for the Pound, the latest news that the EU has emerged from recession after 18 months, and what the latest Bank of England minutes mean for exchange rates in the short to medium term.
So in today’s report:
- Strong Unemployment figures cause Pound to rise
- Pound/Euro at 2 month high
- EU exits recession after 18 months, but Euro fails to strengthen
- Latest minutes from the Bank of England’s Monetary Policy Committee
- Data for the next 7 days that may affect exchange rates
Strong Unemployment figures cause Pound to rise
The latest UK unemployment figures were released this morning, they made good reading and the Pound has risen as a result. While unemployment held steady, which had been expected, the outlook was much brighter, as the number of people looking for work fell 4,000 to 2.51 million in the second quarter, according to figures from the Office for National Statistics.
Jobless claims declined for the ninth straight month by 29,200 to 1.44 million, taking the rate to 4.3pc, the lowest since February 2009 and the number of people in employment rose by 69,000 in the three months to June to 29.78 million, compared to the three months to March.
So what does it all mean for exchange rates? Well, today's unemployment figure has added significance after the Bank of England Governor Mark Carney last week announced that interest rates would not be raised from their record low of 0.5pc until the unemployment rate fell from its current level of 7.8pc to below 7pc. Mr Carney said it meant that more than 750,000 extra jobs would have to be created before the end of 2016 for rates to start rising again.
As the latest numbers are heading in the right direction, it gave Sterling a decent boost, and helped push exchange rates through the €1.17 level vs. the Euro, which is the highest in 2 months.
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EU exits recession after 18 months, but Euro fails to strengthen
The Eurozone has emerged from recession after a record 18 months of economic contraction.
Their GDP grew by 0.3% in the second quarter of 2013, slightly ahead of forecasts, the Eurostat agency said. However, the overall figure masks the mixed economic fortunes among the countries that make up the 17-country Eurozone area.
It didn’t have much impact on exchange rates though. To be honest they were expected to exit recession anyway, and while it’s good news, it was already priced in to the market. This meant the Euro did not strengthen any further, and the markets brushed off the data. There was no impact on Pound/Euro rates.
Should the EU continue to post robust figures however, we could see the single currency start to gain strength. This may cause GBP/EUR rates to drop back away.
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Latest minutes from the Bank of England’s Monetary Policy Committee
Bank of England governor Mark Carney received almost complete support for his new forward guidance policy from his colleagues on the Bank's Monetary Policy Committee (MPC). The latest MPC minutes show eight out of nine of the MPC's members voted for the strategy at its August meeting.
Meanwhile, all nine MPC members agreed that the £375bn asset purchasing programme, known as quantitative easing (QE), should remain in place and that interest rates should hold steady at 0.5%.
Again mostly this was expected, but the unanimous support did give the Pound a boost, compounding the unemployment numbers – the net result was a good rise in Pound/Euro rates today.
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Pound/Euro is now at a 2 month high. There is still much uncertainty, so if I needed to buy Euros I would strongly consider fixing a rate now to take advantage of the gains, and protect against a possible downturn in rates. With the EU exiting recession, more good news could make the Euro expensive again.
For those selling Euros back to Pounds, in recent weeks it was a 2 year high. We’re drifting away from that now, with the Pound gaining lots of strength in the last few weeks, and rates are now moving against you.
To get the best exchange rates, timing is very important. IN order to get the timing right, you need a good currency broker on your side to explain what is moving the market, your options, and different ways to approach getting the best exchange rate.
If you need the best rates of exchange, send me a free enquiry now by clicking here. I can discuss your requirements and help you get rates that are up to 5% better than banks offer.
Are you looking for the best exchange rates? Send me a free enquiry now.
Data for the next 7 days that may affect exchange rates
Below I list the main data releases for the next 7 days which I think could have an effect on exchange rates. If you would like to know the specific data releases that might affect the currency you need to buy or sell, send me a free enquiry now.
Thursday 15th – Quite quiet today as EU markets are closed for Assumption day. In the UK we have some Retail Sales figures which are a pretty good barometer of overall economic activity. Other than that all data is stateside: inflation data, Jobless Claims and Industrial Production.
Friday 16th – Nothing of note from the UK today. We do have Trade Balance numbers and CPI data from the Eurozone, so we may see some movement in GBP/EUR rates despite no UK data. In the USA we have Building permits and a consumer sentiment survey.
Monday 19th – Unusually there is no data of note today. At all.
Tuesday 20th – Again quiet in the UK, in fact the only interesting data is Import and Export numbers from Germany along with some minor German inflation data.
Wednesday 21st – UK Public sector borrowing figures are released today. Also we have the FOMC minutes that could affect GBP/USD exchange rates.
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Labels: Bank of England minutes, Best Exchange Rates, Economic Data, EU exits recession, Pound/Euro at 2 month high, Pound/Euro rate, UK unemployment