Global events are presenting some excellent buying opportunities on many sterling exchange rates. You can see below movements in the last month affecting Pound Sterling rates when buying £200,000 of three majorly traded currencies buying at highs and lows:
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBPEUR | 1.84% | €4,640 |
| GBPUSD | 2.19% | $6,820 |
| GBPAUD | 5.62% | AUD 16,540 |
| GBPCAD | 1.83% | CAD 5,600 |
What Olympic Effect?
The British Retail Consortium stated yesterday August Retail Sales were disappointing dropping 0.4% month on month. It was not as low as expected however and did not cause major affect. It does raise wider questions about the impact of the Olympics on UK plc however.
The start of each month sees a snapshot of economic activity with the PMI (Purchasing Managers Index Surveys). Monday’s Manufacturing data was an improvement on July but still showed for August according to the survey, the sector shrunk. Yesterday we had Construction post an alarming 3 year low, although an administration error meant this morning’s Services data was published ahead of schedule yesterday afternoon. The increase in activity in the Services sector provided some light relief and helped the pound make some small gains in afternoon trading.
So what next for the pound? Well these mixed signals continue to point to the zig zag economy Mervyn King referred to earlier this year. The economy is literally going backwards and with dark debt clouds whipping up more and more of a storm in Europe, it is difficult at present to see the light at the end of the tunnel.
Will the ECB’s word be as good as its bonds?
After weakening to 1.2860 against sterling over 6 weeks ago, the Euro has found support against a weak pound and aQE (Quantitative Easing) tainted Dollar off the back of improved confidence in the single currency. This has stemmed from Mario Draghi, President of the ECB stating the ECB will do ‘whatever it takes’ to save the Euro. There has been lots of speculation in the last few weeks as to what this will take and the feeling is the ECB will announce some new form of bond buying. Spanish and Italian borrowing costs rose to dangerous levels earlier this year which spooked investors.
DATAWATCH – Today – Eurozone Bond Auctions we have 10 year German Bund Auctions, 10 year Italian Auctions and 5 year Spanish Auctions. To finance day to day spending, governments around the world borrow money on a promise to pay back the money at a certain rate over a period of time. This impacts currency (particularly the Euro at present) because it shows investor appetite for investing in the region. If the bond auctions go badly the rate could fall, if it goes well, the Euro may find favour.
With all eyes on Mario’s actions and announcements Thursday, today could be a very good day to make preparations. I would not be surprised to see movement of at least a cent in either direction on GBPEUR, and personally feel it would be in favour of the Euro. Attitudes to risk will also be affected so look out for movement on all the currencies mentioned in this report and more.
Will GBPUSD hit 1.60?
Hints of further QE by the Federal Reserve are keeping the USD weak. Attitudes to risk will also be shaped on tomorrows comments by the ECB. Risk sentiment will for me be the driver on this so if you are looking to trade at 1.60 on GBPUSD why not make an enquiry here or call 0800 328 5884. We are very close and the mood on the markets can quickly change.
NZD, AUD & ZAR Buying Opportunity
In South Africa political tensions surrounding the mining death fiasco has catapulted the GBPZAR rate to a 3 year high. China buys up raw materials from South Africa and Australia and fears over decreasing demand have caused the sell off. The Kiwi loosely tracks the Aussie and this too has suffered in the last couple of weeks.
BREAKING NEWS – Overnight Australian GDP showed a decrease in economic activity down under which has so far caused GBPAUD to gain by half a cent. Call us on 0800 328 5884 to trade at this 12 week high as it may not last.
GBPCAD
Today we have the Canadian Interest Rate Decision from the Bank of Canada. The rate is expected to be kept on hold but we could see movement around this time as an interest rate affects the strength of a currency. Speak to one of currency specialists on 0800 328 5884 to find out more.
Dealing with us is completely free and at no obligation. Our contracts options allow you to forward book rates for up to two years, and insert stops and limits into the market to ensure your exchange doesn’t become too expensive. Call now on 0800 328 5884 or click here to open a free no obligation trading facility in minutes
