This report will address the factors that are likely to affect exchange rates today if you are buying abroad or making a currency transfer. The table below shows the difference you would have received when buying £200,000 at the high compared to the low over the last month.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/EUR | 2.76% | €6,960 |
| GBP/USD | 1.52% | $4,940 |
| GBP/CAD | 2.25% | CAD 7,200 |
GBP/EUR stoops to 4 month low
Yesterday we saw Sterling/Euro slip to a 4month low of 1.2243, following news on Friday that Eurozone leaders have agreed on creating a single Eurozone banking supervisor. The aim of the union is to assist struggling banks by offering access to loans.
However, this Euro strength could be short lived, following news in Germany yesterday, highlighting that their economy could be set to shrink in Quarter 4 (Q4).
The European power house has seen growth in the first and second quarters, and is expected to see growth in the third, but the Bundesbank, Germany’s central bank, are predicting a slump in the final quarter.
As the largest economy in Europe, Germany has established itself as the backbone of the Eurozone, providing the majority of funds in both the EFSF (European Financial Stability Facility) and the ESM (European Stability Mechanism). They will contribute 27% of the total capital in order to bailout struggling economies, as they have done previously with Greece and Portugal, and with Spain most likely to be next as their crisis unfolds over the coming months.
Any weakness in its own economy is likely to result in a lack of confidence in the Eurozone and could see Sterling making gains back towards the 1.25 mark. Despite this, I wouldn’t expect to see the Pound bounce back too heavily, as UK dependence on a strong Eurozone would act as a barrier to its long-term strength.
This evening at 17:00 Mervyn King, Chairman of the BoE (Bank of England), will hold a press conference where he will outline how he observes the current state of the UK economy and the value of Sterling.
If you have an upcoming Euro transfer, speak to your account manager today on 01494 725 353 to ensure you have the most comprehensive risk management strategy in place in order to protect yourself against any adverse currency movements.
Sterling holds firm against the Dollar
Despite losing ground against the Euro, Sterling has rallied slightly against the Dollar, reaching a high of 1.6052 during yesterday’s trading.
This could be due to investors looking ahead to Thursday as British GDP (Gross Domestic Product) figures for Q3 are released which are expected to be up on Q2’s figures. A figure of 0.6% has been forecast, but if this figure isn’t met, it could initiate volatility in the market. If you have an upcoming transfer and are worried about the market moving against you, speak to your account manager today.
Thursday also sees important data released for the dollar, with the Federal Reserve Interest Rate decision at 18:15. The Board of Governors are expected to announce no changes to the current interest rate of 0.25%. Following the rate decision, there will be a press conference regarding monetary policy hosted by Ben Bernanke, Chairman of The Federal Reserve. With no changes to the interest rate expected, I would anticipate any comments made to be already priced into the market.
With increasing pressure on Sterling, I would advocate USD buyers to look at buying now as the UK braces itself for an important month which could see cable drop under the 1.60 level of support.
If you are unsure about an upcoming USD transfer, speak to one of our experienced and knowledgeable brokers today. Call Foreign Currency Direct now on 0800 328 5884 to find the best contract option best suited to you.
Canadian Dollar (CAD) Interest Rate Decision
Today at 13:00 there will be an announcement from the Bank of Canada (BoC) concerning interest rates. Currently the rate is at 1% and this is widely anticipated to stay the same.
Due to sterling’s recent rally against CAD, now represents a good time for CAD buyers as we have seen the rate rise from a low of 1.5609 to 1.5895 in recent weeks.
Whether you are buying or selling speak with your account manager today on 01494 725 353 to protect yourself should there be any negative currency movements.
