This report will address the factors that are likely to affect exchange rates today if you are buying abroad or making a currency transfer. The table below shows the difference you would have received when buying £200,000 at the high compared to the low over the last month.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBPEUR | 3.21% | €7,316 |
| GBPUSD | 2.22% | $8,280 |
| GBPAUD | 0.88% | AUD 1,700 |
GBP makes strong gains against EUR
Sterling made strong gains against the Euro on Monday as it rose to reach a fresh 3-1/2 year high. Investors increasingly concerned with the mounting risks to both Spain and Italy’s current financial positions have increased sales of the single currency and sought refuge within the relative safety of UK assets. Continued uncertainty surrounding the Spanish bailout fund and expectations of further interest rate cuts by the ECB has put increased pressure on the Euro. Germany has also confirmed that a decision will be made by a September 12th deadline as to whether they will block the latest version of the fund, adding to uncertainty and volatility.
Today we will see the release of UK data, with CPI (the consumer price index) attracting the most attention, followed by a speech from Mervyn King, the BoE chairman. CPI is a key indicator to measure inflation and changes in purchasing trend. A strong result could well instil further GBP gains against the Euro.
It is my view that GBP will continue to make gains against the single currency through the coming weeks, and continue to do so until the end of the year. Sterling is currently seen as a sound investment away from the turmoils of the Eurozone, and as a cheaper alternative than the likes of the Swedish or Danish Kroner, this view is further enhanced.
To determine the best way to approach your trade, call your account manager today on Freephone 0800 328 5884 or if you have not been allocated one register via this link.
*Key Data Watch* 09:30 – UK Consumer Price Index (YoY)
US suffers retail blow
US retail sales fell by 0.5% last month, according to data released on Monday. Retail sales have now fallen for 3 consecutive months and with two-thirds of US GDP made up of household spending, there are yet more concerns over a recovery.
Looking forward today we are expecting the release of US CPI data at 13:30 and Ben Bernanke is also due to make a speech concerning how the Fed observes the current US economy and the value of USD at 15:00.
As a result of this speech there is likely to be increased volatility, so to protect yourself against any adverse currency movements, it may be worth speaking to your account manager today on Freephone 0800 328 5884 to discuss how best to utilise a stop loss/limit order to maximise any potential gains in the market while limiting your exposure to losses.
I would expect to see increased pressure on sterling over the coming months as we move through the summer, with the multi-year low of 1.52 possibly set to be tested. This is supported by the IMF who yesterday released revised figures for annual growth forecasts. The UK received one of the biggest downward revisions, now expected to grow 0.2% in 2012 compared to the initial 0.8% predicted in April. In terms of the US, estimates were only revised downwards by 0.1%.
*Key Data Watch* 13:30 – US Consumer Price Index (YoY)
China hands Australia golden opportunity
The head of a $7 billion Chinese mining project has today stated that he would prefer to invest in Agriculture rather than iron-ore, given the risk of falling prices of the key ingredient for steel-making. Speaking with Perth business leaders yesterday, the Citic Pacific Mining executive chairman stated that there is a soaring demand for Australian food amongst China’s 100 million wealthy people.
This news will be welcomed with open arms by the Australian economy as it could well act as insurance should the mining boom start to cool off. It is because of this that Australia has been largely unaffected by the current global crisis, so the promise of another opportunity such as this should keep the AUD well supported.
Whether you are buying or selling speak with your account manager today on 01494 725 353 to ensure you have the most comprehensive risk management strategy in place for your upcoming transfer.
