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:
- 6 German Banks Downgraded
- ECB Hold Interest Rates
- Spanish Bailout?
- UK Construction & UK Interest Rates
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBPEUR | 1.6% | €3,800 |
| GBPUSD | 1.2% | $3,750 |
| GBPAUD | ||
6 German Banks Downgraded?
Yesterday, credit ratings agency Moody’s downgraded 6 German banks with the most noticeable inclusion of Commerzbank, Germany’s second biggest lender. The downgrading occurred as the markets continue to worry about the uncertainty across Europe.
Commerzbank has also been put on negative outlook which means it could have its rating cut further. With chances that Ireland and Spain could need further support we could see the Euro weaken as confidence drops in the Eurozone’s leading economy so if you have an upcoming transfer to make, speak with your currency broker
ECB Hold Interest Rates
The ECB announced that it would keep interest rates on hold at its June meeting which managed to keep the Euro stable against the Pound and a small lift against the US Dollar. ECB President Mario Draghi said he was satisfied with recent EU fiscal policies aimed at stabilizing the region but that risks to the Eurozone economy have increased. Indeed, he went on to announce an extension to banks’ unlimited access to ECB loans until the end of 2012. This could be a good thing for the single currency and stop its recent fall against Sterling.
Spanish Bailout?
With individuals and investors having taken out €66bn from Spanish banks last month Spain’s economy is in a state of uncertainty. Finance Minister Luis de Guindos has denied that the country needs a bailout but with Spain now needing to recapitalize its banks by at least €80bn I think it could be inevitable that the country will need more money from either the EU bailout fund or the IMF.
With the credit market effectively shut this has caused alarm that will see Spain follow Greece, Portugal and Ireland in getting a bailout. An IMF audit on Spain’s banking system due next week, which could be negative could provide some excellent opportunities to buy Euros, which are currently the highest level seen in over 3 years
UK Construction & UK Interest Rates
Sterling saw a small drop against the Euro after the UK Construction sector announced growth has hit a three month low. The figures fell to 54.4 from 55.8 in April. However, although the figures dropped anything above 50 represents growth so we are still expanding.
The Bank of England meets at 12pm to discuss interest rates and any further Quantitative Easing could see the Pound weaken in the short term so if you need to convert buy Euros it may be worth organizing the currency transfer prior to the meeting.
Beige Book show US Economy Improving
The US Federal Reserve confirmed that the US economy has grown over the last 2 months and suggested growth remained positive. This has been one of the key reasons as to why the US Dollar has strengthened against both Sterling and Euro recently and if this continues we could see the Dollar strengthen against the Pound towards the lower 1.50s. This has also seen a return of confidence to the Australian and New Zealand Dollar which have been less attractive recently. GBPAUD is at the lowest level for 2 months so if you need to convert Australian Dollars do not hesitate to get in touch.
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
