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:
- Spanish Bond Issues
- UK Retail Sales Rising
- IMF Warning to the UK
- Merkel Wins Spanish Aid Vote
- Australian Dollar News
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP EUR | 1.6 | €3800 |
| GBP USD | 1.2% | $3750 |
| GBP AUD | 2% | AUD 7480 |
Spanish Bond Issues
Spain has again had problems as investors have seen 5 year bonds touch 6.46% compared to just 5.54% just two weeks ago. 10 year bonds have hit 7% which could lead to a bailout. The current loan of €100bn which was used specifically for the banking sector has clearly not helped confidence in the country and this in turn has led to the Sterling Euro exchange rates hitting the highest level since October 2008.
Treasury Minister Cristobal Montoro recently claimed that Spain could simply not go into deeper debt. If the interest rates keep rising Spain will be left with no option but to receive a bailout which could cause a huge problem for the single currency. Later today we have a conference call of Eurozone finance ministers which will discuss the Spanish issue. If you have an upcoming transfer to make, speak with your currency broker who will keep you up to date with emerging news.
UK Retail Sales Rising
Official figures released yesterday have shown that UK Retail Sales have increased by 0.1% in June compared to the previous month. This surprised some analyst who though owing to the Jubilee that the economy would have struggled. Sales also increased by 1.9% on the year which could lead to an improvement for UK GDP which currently is showing the UK as in recession.
The positive news helped Sterling to increase across the board against all major currencies apart from the Australian Dollar.
IMF Warning to the UK
In the latest annual report by the IMF it has warned that the UK must slow the pace of its budget cuts if UK growth does not improve. It also mentioned that the UK requires further stimulus. Currently QE stands at £375bn and with a 7-2 vote by the MPC announced yesterday we could see further QE by the end of the year. Interestingly, QE has given Sterling a welcome boost on a number of occasions when it has been announced so this could be another reason why Sterling has improved.
If QE fails to help the UK over the months ahead there is always the chance we could see a UK interest rate cut later in the year which could be detrimental to Sterling but personally I think the BoE will continue with its current plan of Quantitative Easing.
Merkel Wins Spanish Aid Vote
In a parliamentary vote held in Germany yesterday Angela Merkel managed to pass through a rescue package for Spanish banks despite the growing tensions of German taxpayers. Any problems in the Spanish banking sector could have far reaching consequences for the Eurozone economy so it was seen as positive for the single currency in late trading yesterday afternoon.
Australian Dollar News
The Australian Dollar has hit an all time high against the Euro and has also reached its strongest point against Sterling since January. With strong commodity prices and China’s growth still at 7.6% it is difficult to see and end to the Australian Dollar’s strength. The 75 basis point cuts earlier this year have done little to stop the run so if you need to convert Australian Dollars then do not hesitate to contact your broker.
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
