- Greece forming a coalition Government
- Sterling Forecasts improve
- Spanish banking bailout confirmed
- USD Volatility continues
- ZAR, AUD, NZD start to rally?
The table below shows the percentage movement of exchange rates over the last 30 days along with the extra currency when buying with £200,000.
|Currency Pair||% Change||Difference on £200,000|
Sterling Forecasts improve – Banks Downgraded
Since Quantitative Easing (QE) was discussed last week, sterling forecasts have fallen. Yesterday however Sterling gained in the morning session following the release of UK retail figures which showed a 1.4% improvement; this was put down to the number of sales on the high street.
This week’s QE has however also created some risk for Banks as it confirms their exposure to Europe. As a result 3 UK banks have been downgraded by the credit rating agency Moody yesterday along with another 12 across Europe. This could easily add to their borrowing costs, undoing the intention of QE in the first place. Next week I would expect GBPEUR to fall to a range between 1.21-1.23.
Greece forming a coalition Government
The worry about Greece subsided this week following the elections that took place on Sunday. Antonis Samaras has now formed a Government but the former economist will get little opportunity to savour the victory, he now has the task of pulling Greece out of a five-year recession and renegotiating a bailout deal with unwilling creditors across Europe.
This is a task that will almost certainly affect exchange rates in the coming weeks. When reviewing the situation I’m sure winning the election will be seen as the easy bit. I suggest all clients with any currency exposure over the coming weeks to watch out for this story.
Euro crisis– Spanish banking bailout confirmed
Yesterday the euro gained almost 0.5% against sterling following the proposal to use their new rescue funds to buy sovereign debt, (review yesterday’s report for more info.) This news also improved the costs of borrowing for key members on the bond markets. Spain’s 10-year government bond yield fell back under the 7% to 6.93% and the equivalent Italian bonds fell to 5.77%. (A rate above 7% is considered to be unsustainable, however these levels are still too high)
Spanish banking auditors confirmed yesterday that their banking systems would need between €55-€62 billion in extra capital to weather a serious downturn of the economy and the losses in their books. Ministers have also promised to hammer out a plan next week integrating the region’s banks. Depending on what is confirmed, whether the markets see it as another short term fix or a long term solution, could change currency rates around the globe. To review the recent euro forecast click here.
USD Volatility continues
GBPUSD has had a volatile week with swings of over 1% most days. This, I believe, is mainly down to the uncertainty about further monetary easing “Operation Twist,” confirmed last night. (For more information re-visit yesterdays report.) I would expect the volatility to remain as speculation in Europe continues with GBPUSD rates between 1.55-1.56.
Clients with a dollar transfer should notify their account brokers here at Foreign Currency Direct, we can be your eyes and ears in the market allowing you to make an educated decision on when to action your transfer that could save you thousands.
Other News – NatWest customers at a loss
NatWest have confirmed they are experiencing a technical problem which is delaying payments, affecting balances and online services. If you are a NatWest client looking at completing a transfer make your broker aware to avoid a delay.
ZAR, AUD, NZD start to rally?
As the probability of the Euro crises having a boost increases, concerns subside and investors risk appitete increase. This has resulted in the prices for AUD, NZD and ZAR to start increasing recently. I would suggest to Clients with an interest in these currencies to buy soon as rates will probably continue to fall as steps contine to be made to resolve the Eurozone crises continues.
Financial Releases affect currency
Key date releases that you should be discussing with your personal broker now include:
MON – German Retail Figures 7:00
MON – US New House Sales 15:00
TUE – UK Public Net Borrowing 9:30
TUE – US Consumer Figures 15:00