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 |
|---|---|---|
| GBP/EUR | 3.80% | €10,160 |
| GBP/USD | 2.21% | $6960 |
| GBP/AUD | 3.09% | AUD 9480 |
All Attention To The ECB Meeting
Sterling lost a bit of ground against the Euro yesterday hitting a low of 1.2734 before closing at 1.2745 as investors wait for Thursday to see whether or not the ECB (European Central Bank) will take decisive action to tackle the Eurozone debt crisis. Last week the ECB president Mario Draghi promised to do “whatever it takes” to ensure the survival of the single currency. This did lend some support to the Euro and should the ECB implement a rigorous and credible measure to solve the debt crisis, we could see further Euro gains with Sterling also making gains against the USD as investors’ appetite for risk improves.
Saying this, we have heard many promises to ensure the survival of the Euro before, almost all of which have failed and ultimately led to further Euro losses. The expectation is for the ECB to revisit their bond buying programme to try and curb the spiralling Spanish and Italian yields. I feel the chances of the ECB doing this are highly likely. However I do not think this alone will solve the underlying needs for political and monetary union.
Looking forward I would expect further GBP assaults on the 1.30 region as the Eurozone crisis continues, with no full proof plan being implemented in the short term. Equally any dips should be contained by the key 1.25 area unless any unexpected data hits the markets. 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* 08:58 – Eurozone Market Manufacturing PMI – Manufacturing PMI is a key indicator of the health of the Eurozone economy
Thursday 12:45 – ECB Interest Rate Decision
GBP/USD Poised For Interest Rate Decision
On Tuesday GBP/USD rates dipped to a low of 1.5624 following better than expected US consumer confidence and PMI data. Over the course of the week we are expecting a number of data releases all of which will need your attention should you have an upcoming USD need. Today the Federal Reserve will release their interest rate decision which will be followed by the Feds Monetary Policy Statement. Both of these are key indicators into how the Fed views the US economy. Following this, on Thursday and Friday, we have a string of data releases relating to unemployment, jobless claims and nonfarm payroll.
Over today I would expect GBP/USD rates to be fairly contained as investors wait for the FED interst rate decision and Thursdays ECB decision. Any spikes following this are likely to be contained by the 1.60 area. Equally, any dips are likely to struggle below 1.53. With so many releases on the horizon and the fate of investors’ risk appetite well and truly in the hands of the ECB, you may do well to consider a stop loss and limit order. This type of order will help you budget and limit any risk you face to a major market movement. To discuss how best to utilise a stop loss/limit order call your account manager today on Freephone 0800 328 5884
*Key Data Watch* 19:15 – FED Interest Rate Decision and FED Monetary Policy Statement
Moodys Cut UK Growth Forecast
Sterling lost ground against all except 1 of its 16 major pairings after Moodys Investors Service lowered its growth forecast for UK economic growth. The pound has lost 0.2% in July according to Bloombergs Correlation-Weighted Indexes, which really highlights how our close ties to the Eurozone have continued to put pressure on the pound. There is also a fear that a government policy of austerity measures and printing money is not pulling the UK out of this period of stagnation and the longer it continues, the more pressure there will be to change its fiscal policy.
Bearing in mind though that on average, we have lost 0.2% against major currencies, the high/low parameters for the month on GBP/EUR for example have been as much as 3.8%. This really highlights that there are great buying and selling opportunities to be taken advantage of out there; it is just a case of being prepared and in close contact with your allocated account manager. If you have not been given an account manager you can register for one here or call us today on 01494 725 353 to discuss a facility with us.
Further AUD Gains
The Aussie Dollar hit a 4 month high yesterday following a report that showed building permit approvals declined by only 2.5% compared with the expected 14.2% contraction. Asian stocks also rose, which lent further support for the AUD. On Thursday we are expecting further releases for Australian Trade Balance and Retail Sales, however, I really feel any further gains will be contained by 1.4650 and any losses are likely to be as a direct result of negative growth news emerging from China.
To be kept up to date with breaking news that could affect the cost of your currency transfer speak to us today on 01494 725 353.
