Market Summary

This report will take a look at the cost of sending money overseas this week and factors that could affect your currency transfer, focusing on:

  • A Brief History of 2013 for Sterling
  • US Economy Growing
  • Data this Week
  • Australian Dollar News

A Brief History of 2013 for Sterling

With only two days till Christmas and with many of you still thinking about what presents you still have to buy make sure you don’t forget about buying your currency. With a year full of global interest rate cuts, Quantitative Easing and talks of recession the currency markets have been rather volatile.

The UK came out of recession earlier this year following a huge loss for Sterling during the first quarter of 2013. With exchange rates as high a 1.27 for GBP/EUR in January it could be argued that the rates fell in order to help British exports and many including myself believe it was an export led recovery.

With GBP/EUR exchange rates now close to a ten-month high could the same thing happen again going into the start of next year?

For me I think the UK has had its best year in terms of a general positive feel since 2007. With Mark Carney joining the Bank of England in May this has helped to settle the UK economy. Unemployment was recently measured at its best level since April, inflation appears under control and consumer confidence is high particularly good in the run up to Christmas which should give UK retail sales a boost this month.

UK house prices are also strong at the moment so I think we could see Sterling continue to remain strong going into the New Year so if you’re considering selling Sterling for another currency make sure you let your account manager know to keep you informed.

US Economy Growing

With US growth figures strong President Obama has said 2014 will be a breakthrough for the US economy. The recent data release was the best since 2011 and showed that GDP is currently 4.1% during July and September compared to an estimate of 3.6%. This good news is important for the global economy and has vindicated the Federal Reserve’s decision to begin tapering their QE programme last week. The recent change by the Fed means that there will be US $10bn less spent per month.

This positive data has not yet been seen for the Dollar exchange rates, which remains rather weak against the Pound signaling that the UK is also in a strong position. Until the tapering is finally complete, or we see a dramatic change in the amounts, I think we could see Sterling remain strong against the Greenback for a while. Speak with your knowledgeable currency broker on 0800-328-5884 to find out more.

Data this Week

  • Canadian GDP is released at 130pm today so if you have a current requirement with Canadian Dollars please speak with your account manager prior to the release if you’re worried about market movement.
  • French GDP Q3 is released tomorrow with a fall of 0.1% expected anything worse could lead to Euro weakness.

Australian Dollar News

With the US economy now improving this has had a huge knock on effect on more risky currencies including the AUD, NZD & ZAR. Focusing on the Australian Dollar this year we have seen a 45 cent movement or the staggering difference of AUD $90,000 on a £200,000 currency transfer. Prior to 2013 global investors had been looking to purchase the Aussie Dollar using the principle of carry trading (borrowing in a low yield currency for a higher interest rate return). In the last two years the Reserve Bank of Australia has cut interest rates 8 times with more possible going into 2014.

I think we’ll see a weakening of the Aussie Dollar going into the first quarter of next year owing to the Chinese economy also slowing. The imbalance between the mining industry down under and the rest of the economy, means that the RBA may have to intervene to artificially weaken the currency.

It is important that if you have a currency requirement to stay in contact with your account manager. If you have any questions on how these or any other release may affect your transfers, feel free to call on FREEPHONE 0800 328 5884 or send me an email to teh@currencies.co.uk.