This currency report will examine the factors that could impact on Sterling exchange rates. The report includes:
- Bleak UK picture continues – US Dollar rate caution
- Euro crisis lingers – Aussie Dollar update
The table below shows the difference in currency you could have achieved trading at the high compared to the low yesterday on a £200,000 currency transfer.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/USD | 0.44% | $1,440 |
| GBP/EUR | 0.49% | €1,240 |
| GBP/AUD | 0.39% | AUD 1,240 |
Bleak UK picture continues
The British government’s spending cuts and tax increases may have hurt economic growth more than originally assumed, the country’s forecasting body OBR (Office for Budget Responsibility) said yesterday.
The International Monetary Fund said recently that more Bank of England stimulus and possibly higher public spending or tax cuts may be needed if the outlook darkens.
All this comes as yesterday the UK inflation rate slowed to 2.2% in September.
The lack of growth in the UK has piled pressure on the government to ease austerity, aimed at erasing a huge budget deficit.
Claimant Change data often has a tendency to influence GBP volatility and at 9.30 am today this information will be released. This release is one to watch as the market has a tendency of reacting the opposite to what is expected.
Also at 9.30am, the Bank of England (BoE) will release data on the minutes which should give a full account of the policy discussion, including differences of view. This could potentially create some currency movement, so I would advocate contacting your personal broker at FCD plc whether you have a corporate or private requirement. Register here http://www.currencies.co.uk/sign-up/personal/
Portugal reveals tough 2013 budget
The Portuguese government has recently revealed details of its budget for 2013. The budget is harsh and one that includes an income tax rise of 3.8% next year.
If adhered too, the budget would allow Portugal to reduce its budget deficit to 4.5% in 2013. It must eventually get its deficit below the European Union target of 3% of GDP.
While Portugal is important, its neighbour, Spain, is the main thorn in Europe’s side as a bailout looms ever closer.
GBPEUR exchange rates have been range bound between 1.2300 and 1.2700 for some time now, and I feel this trend is likely to continue in the coming sessions. Depending on your companies costing level, I would advocate a degree of patience, with Euro sellers looking to take advantage of any dips around 1.2300, and Euro buyers hedging requirements in tranches should we see moves through 1.2500 and above. That being said however, I do feel that as we move throughout the 4th quarter of the year, GBPEUR will slowly start ticking into the buyers favour as Eurozone problems continue.
If you normally use a bank for your currency for either your business or personal requirements, call us today on 01494 725 353, for a rate comparison. If you’re abroad, we can even call you back!
USD
Yesterday saw the Pound weaken slightly against the USD as the pairing pushed towards the mid 1.6100 levels late afternoon. GBPUSD seems to be jostling for position between 1.6000 and 1.6300 as a recent trading range. This final quarter of the year is likely to see similar trading parameters with the likely hood of a push into the 1.5000’s growing increasingly likely. The retraction into the 1.5000’s when it occurs could potentially be fast as the currency pairing has a history of sharp retractions. It is for this reason, US sellers should be patient, and USD buyers should look into over hedging if you have not already done so, in anticipation of this move lower.
With the presidential contest gaining momentum in the US, it looks as if Mit Romney and Mr Obama are neck and neck with the election under 3 weeks away.
Call FCD corporate desk to find out more on 01494 725 353.
Aussie Update
Earlier this month, the RBA (Reserve Bank of Australia) cut interest rate 25 points to 3.25%, taking the rate to its lowest level since 2009. Concerns about the impact of the slowdown in China on Australia’s economy are rising. Officials in Australia have estimated that a rate cut to 2.5% could potentially occur to try and encourage spending.
Thursday is important for AUD buyers and sellers as China releases GDP data. This release will not only influence the value of the Aussie Dollar but will give an indication of global confidence.
Contact 01494 725 353 to discuss why we have award winning rates of exchange and how to take advantage of them and also for information on Stops and Limits to help manage volatility.
