Market Snapshot
The table below shows the percentage movement of exchange rates yesterday, along with the extra currency you could have bought if buying with £200,000.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/EUR | 0.47% | €1180 |
| GBP/USD | 0.71% | $2300 |
Sterling exchange rates overview
Sterling exchange rates had a torrid day on the markets yesterday weakening against all of the majors bar the South African Rand. The losses seemed to have continued from last week where theUK had nothing but a run of bad data out. Over the last week the pound has dropped from 1.2530 down to 1.2328 against the Euro and from 1.63 down to 1.60 against the USD.
Breaking News
The IMF has this morning reported that the global economic recovery is weakening but it has stated that the UK economy could be in for the biggest decline with our GDP expected to shrink by 0.4% this year. Sterling in general has not been affected first thing but Today’s data may now have a greater effect on the pound.
Today’s Data to watch out for
After last week’s batch of negative data we will be hoping for some positive news to come out over the course of this week to potentially give sterling a slight boost. Starting at 9.30 this morning we have industrial and manufacturing data along with our Trade balance figures. Looking closely at the figures we are expecting a decline over all sectors. However if the figures come out better than what is expected we may see a boost for sterling exchange rates.
Following these reports we then have a GDP estimate for the last three months by the NIESR (NationalinstituteofEconomic& Social research) which will be released in the afternoon. This report is different to the official ONS (Office for National Statistics) GDP figures but can still cause the pound to significantly strengthen or weaken. I would be very wary around the decision and if you have a currency requirement to carry out you may be wise to look at securing your currency in between the morning and afternoons data.
World Bank cuts Asia’s growth forecast
The World Bank has caused global stock markets to fall while assisting the USD to significantly strengthen yesterday as they lowered their 2012 growth forecast for the world’s second largest economy China. The international lender estimates that economic activity inChinawill expand by 7.7%, as opposed to its previous estimate that GDP would grow by 8.2% this year.
In a statement they said there was a risk that the slowdown inChinacould worsen and last longer than many analysts have forecast. The slowdown is driven by weaker exports and domestic demand.
On the back of the comments we saw the pound continue to dip against the USD, now reaching a one month low. As global confidence dips we will more than likely see the USD continue to strengthen as investors continue to turn to the USD as a safe haven. The rise in the Dollar has continued from last week after they posted their best employment figures in over 3 years.
Yesterday was a bank holiday in the states and today there is no data to note. However tomorrow could be key for those with a Dollar requirement. After trading closes in theUKtheir will be a release of the Fed’s Beige book. This is a report on the currentUSeconomic climate. Recently the data to come out of theUShas been very positive with growth in many sectors.
A limit or maybe more importantly a stop loss order may be wise as our lines will be closed during this release. I personally feel that over the course of this month the pound will be trading in the late 1.50’s against the USD and if this is a concern for you then you may just want to trade before tomorrow nights release. Call your account manager on 0800 328 5884 to find out more about these contract types.
Euro zone launches ESM
In Europe, finance ministers from the 17 countries that use the euro started a two-day meeting in Luxemburg yesterday. The officials are expected to discussGreece,Spainand other matters related toEurope’s debt crisis.
This came on a day as the euro zone launched its 500 billion euro debt rescue fund in what Euro Group leader and Luxemburg’s Prime Minister Jean-Claude Juncker hailed as an historic milestone. The fund is known as the European stability mechanism (ESM)
It will hold a first chest of 200 billion Euros when the first instalments of government capital are paid in by the end of the month.
So this fund is on top of the around 150 billion Euros still available in a temporary fund, the European Financial Stability Facility (EFSF) should countries likeSpainneed a bailout.
Yesterday the Euro gained against the pound possibly on the back of the fund or more so because Euro zone finance ministers also delivered a united defence of Spain, saying the country is taking steps to overhaul its economy, funding itself successfully in the financial markets and does not need a bailout, at least for now.
My view is that over the coming days the Euros gains will start to level off as it weakened against the USD for the first time in 5 days yesterday. I feel the pound will slightly rebound against the Euro and many limit orders will fill.
However shouldSpainrequest that formal bailout then the potential 500 billion Euros that could be available by the ESM could be wiped away very quickly? As we will be in unprecedented territory it is very difficult to predict long term but I feel the story of the debt crisis inEuropehas a long way to go.
