This report focuses on data that may have affected foreign currency exchange rates and how data today may influence the cost of sending money overseas as detailed below:
- BoE Mervyn King’s Comments
- USD News
- EUR News
- NZD News
Market Snapshot
The table below shows the difference between where the respective pairs of currencies peaked and troughed yesterday on a £200K purchase and highlights how important the timing of your currency exchange can be.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBPUSD | 0.64% | $2,020 |
| GBPEUR | 0.61% | €1,500 |
| GBPCAD | 1% | CAD3,260 |
| GBPAUD | 1.3% | AUD4,700 |
Yesterday’s Pound overview
The pound made some excellent gains yesterday against the majority of most major currencies. With no economic data out for the UK yesterday, all eyes were on Bank of England’s Mervyn King. He went up in front of a treasury select committee suggesting there may be a “considerable” way to go before UK interest rates return to “normal”
If methodology was anything to go by we may have thought that the pound would have weakened over the course of the day on the back of the comments. Normally when comments are made from a member of the MPC about interest rates staying low the pound suffers. There was a brief dip in sterling initially but this proved to be short lived as investors continue too show confidence in the UK on the back of positive retail sales on Tuesday and the GDP figures that came out the week before.
Now all eyes will be on next weeks interest rate decision which It seems will be kept on hold. We could see a continue gain for the pound up until this meeting but then I expect sterling exchange rates to weaken by a cent or so hovering below the 1.20 against the Euro and early 1.50’s against the USD.
Now would seem an excellent time to capitalise on the pounds strength as spikes like this are normally short lived. If you have a currency requirement coming up over the next two years inform your account manager so we can explain all the options that are open to you.
Nationwide’s housing prices have already come out this morning showing a 0.5% fall. With mortgage approvals out for the UK this morning too plus consumer confidence out late at midnight don’t get caught out by any lower than anticipated figures to hit sterling exchange rates
USD News
The US Dollar has been weakening on fears of a double dip recession hitting the world’s largest economy.
The FED said yesterday that during the past two months, growth slowed in some areas as commercial real estate remained weak and home sales dropped after the expiration of a tax credit. The central bank’s Beige Book business survey also indicated that while retail sales were “generally positive,” the gains were “modest.” This is what mainly contributed to the pound rising to a 5 month high against the greenback.
Today we have initial and continual jobless claims out at 13:30. A dip to 429K two weeks ago didn’t impress the markets, as it was disregarded as an error. Jobless claims have proved to be the best indicator towards the Non-Farm Payrolls. The expectation is for a drop in claims but should the figures differ then we could see significant movements on USD rates.
EUR News
The recent euro rally for the pound may now be approaching an end following the acceptance of the recent stress tests. German CPI data came out lower than expected which signalled that there will be no movement on Euro interest rates when the ECB meet next week. This helped the pound gain against the Euro yesterday but with unemployment data out for Germany and consumer confidence out for the whole Euro Zone all expected to show positive movements we may see yesterdays gains eradicated after the data releases.
NZD News
The central bank of New Zealand raised their interest rates last night by 0.25% to 3%. After the rate rise they signalled it plans to slow the pace of future increases, sending the nation’s currency to its lowest level in a week against most major currencies.
This is the second rate rise in succession after being at levels of 2.5% for 3 years. Inflation in New Zealand had started to rise recently and the central bank was keen to keep the levels between 1 & 3%. With the economy still growing analysts are still predicting that interest rates will be at 4% in a year’s time which could send GBP-NZD exchange rates to all time lows.
If you have any questions on how these or any other data releases may affect your transfers, we are always just a free phone call away on 0800 328 5884 or if you would prefer you can email me directly on bma@currencies.co.uk
