Monday, 13 January 2014

Pound falls further. What might affect exchange rates this week?

Monday 13th January 2013 
The Pound has fallen further today against other currencies and currently sits at €1.20 vs the Euro. This is in addition to the falls in the rate we saw on Friday, due to poor manufacturing figures, as I outlined in my last post.

So what has caused the drop today? To be honest it’s been quite hard to pin a reason on the decline today, as there have been no significant data releases that would have caused the volatility. 

After some further research, it appears that the fall in the value of the Pound today was due to a measure of whether U.K. economic data has been beating analysts’ expectations, and this has damped investor demand for the currency, and as a result it has weakened and exchange rates have fallen. You can read more about this on the Bloomberg site here.  I can find no other explanation for the drop in rates. 

This has meant the Pound has dropped to the lowest level in a month against the Euro down to €1.20, and down to $1.6380 vs the US Dollar. We could see rates rise again, and much will depend on how economic data releases this week fit in with expectations. 

So as usual for a Monday, below I will list the remaining data releases that are due this week, and give my thought on how they could affect exchange rates. Remember that if you have a currency requirement, you can contact me for a free quote by clicking here. Even if you currently use a broker, even a small difference in the rate can represent a big saving. It doesn’t cost anything to send me an enquiry, so do so now by clicking here

What could affect exchange rates in the coming week? 

Monday 13th January 2014 

As explained above, today was very light with no significant data releases, however this hasn’t stopped Sterling falling by around 0.6%. 

Tuesday 14th January 2014 

A little bit more to digest today – at 09:30am we will see the latest inflation numbers. These are important as they are linked to interest rates, and it’s speculation of higher rates that has been the main cause of Sterling’s strength recently. The 2 annual figures are expected at 2.1% and 1.8% respectively. Higher and the Pound will gain, lower and the Pound will fall. 

Elsewhere, we have EU Industrial Production numbers, but I don’t think they will have much impact. WE will also see UK Retail Sales today. They are a good barometer of overall economic activity, and so if the numbers disappoint, we could see GBP/USD rates rise. 

Wednesday 15th January 2014 

Very quiet again today with nothing on the calender that should affect GBP/EUR rates. GBP/USD could be affected however by US Mortgage numbers and a FED report on the current economic situation in the United States. 

Thursday 16th January 2014 

A very busy day for EU and US Data today. Starting in Europe, we have various measures of inflation, and these will be key to whether the ECB cuts rates any further. Lower than expected numbers would increase the chance of rates being cut, and would cause GBP/EUR to rise further. 

Over in the states, we also have a raft of inflation numbers, along with Jobless Claims and a speech by the outgoing FED chairman. 

There is nothing of note being released from the UK today. 

Friday 17th January 2014  

We end the week with UK Retail Sales, and Housing data from the US. 

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Alastair Archbold