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|
UK Interest Rate Decision
ECB rate decision
Southern Hemisphere concerns
UK interest rates kept on hold, again
The Bank of England has continued to hold UK interest rates at a record low of 0.5% and a little more surprisingly made no mention of extending its quantitative easing programme.
This led to Sterling strength against many major currencies following the lunchtime announcement, especially against the Euro where we quickly bounced back towards the record levels we have been experiencing lately; this trend was further enhanced following the ECB decision to keep their rates on hold as well.
I think the market had been expecting another extension to the Q.E. stimulus package (which already sits at a staggering £375bn), especially following the announcement earlier this year that the UK is officially back in recession and the disappointing GDP figures we saw last month, but it appears that MPC members may be more concerned about controlling UK inflation levels.
The Bank of England did say however that its QE programme would “take another three months to complete”, and that its scale would “be kept under review”.
Those who have recently taken out forward contracts during this purple patch for the Pound may well look back on that decision in a few months as a very wise one. I am convinced that more Q.E. is inevitable, probably as soon as September, and when the announcement does come I would anticipate exchange rates moving significantly away from highs we are currently witnessing.
No change of policy for ECB
European markets fell yesterday after the ECB president Mario Draghi said the bank would come up with ways to help struggling eurozone countries “over the coming weeks” – analysts had certainly been hoping for more details and immediate action and both the stock and currency markets reacted badly as a result.
Mr Draghi said that the high yields on some eurozone government bonds were unacceptable, adding that the ECB’s bond-buying process would resume, but that it would be different to the Securities Markets Programme (SMP), which had involved buying large quantities of government bonds from banks and other financial institutions on the open market.
He said that the new scheme would involve buying shorter-term bonds, which should allay some of the fears of the German government, worried about having to guarantee debts of weaker countries over the longer-term.
Everything I am hearing out of the Eurozone recently reminds me of the famous quote by Albert Einstein in that “the definition of insanity is doing the same thing over and over and expecting a different result” and I expect to see problems continuing to rise out of the single currency over the coming weeks and months.
If you want to discuss this hot topic or have concerns about how it will affect your own currency requirements call us on 01494 725353 or email me direct at firstname.lastname@example.org.
A busy end to the week for the Greenback
At lunchtime today we are set to hear the latest set on US non-farm payroll data, one of the most highly anticipated data releases for the US. The figures show the level of employment in the States excluding the seasonally effected agriculture industry. In the past this data set has caused some major Sterling Dollar exchange rate movement so if you need to buy dollars speak to us today on 01494 725353 so we can discuss your requirements and the options available to you.
Fragile China’s effect on the Aussie
Weakening demand from Europe and other trade partners has hit Chinas exports hard in recent months with recent data showing both this and its property market are at its lowest level in three years. Economists forecast that the economy may rebound in the second half of the year but the government will need to stick to its fiscal and monetary policies to achieve that.
This slowdown could have a dramatic weakening effect on both the AUD and NZD, giving those of you needing to buy these Southern Hemisphere currencies windows of opportunity to buy at levels we have not seen for some time, as the principal reason for their strength in recent months has been piggybacking on the Chinese economic powerhouse as primary suppliers of raw materials.
At times like this you may want to consider a “limit order” which allows you to set a level where our systems will automatically buy currency for you even if the price is only available for a few seconds. Call our dealing floor free on 0800 328 5884 to find out more about this contract type.
Remember, at Foreign Currency Direct, we are happy to assist you with the exchange and transfer of money for a huge variety of reasons such as property, emigration, investments, cars, weddings, hotel bills, imports and exports to name but a few. So, if you, a friend, relative, colleague or your business have currency exposure that you have not already discussed with your FCD account manager then make sure you do – alternatively if you haven’t already opened one of our free trading facilities email me directly at email@example.com