- UK and US GDP
- Draghi meets Merkel
- AUD, ZAR, NZD
The below table shows the market movements for a number of currency pairings in the last 30 days:
|Currency Pair||% Change||Difference on £200,000|
Sterling exchange rates rallied back to a two week high against the Euro creeping back just shy of 1.26 a move of 2% in a little under one week, however market conditions continue to be very volatile and with revised UK GDP data tomorrow at 09:30 Euro buyers may wish to speak with their broker to discuss their transfer prior to this.
Revised GDP UK and US
I feel anyone with an interest in the pound or the US dollar should be focused on tomorrow’s GDP data at 09:30 and 13:30 respectively. Figures from the UK are expected to stay at -0.5% confirming the UK is still officially in recession and the US is forecast to show a small contraction from 2% to 1.7%, something that may create some good opportunities to buy the US dollar – however with GBP/USD rates at close to a 52 week high I believe they currently represent a good buy opportunity as they stand.
GDP data releases are notorious for creating unexpected market swings. Should figures not be as expected then tomorrow could be a very busy day and those that are in a position to take advantage can often benefit from opportunities that otherwise may not arise. To discuss your options and the many different contracts we can offer, including the use of a forward contract – where for a nominal deposit your rate can be fixed and guaranteed for up to one year in advance, call free phone 0800 328 5884.
Mario meets Merkel
Yesterday Mario Draghi (head of the ECB) and Angela Merkel (German Chancellor) held talks to discuss the state of the Euro as rumours circulated that Bundesbank lawyers were checking the legality of the ECB’s bond-buying plan amid concerns about Greece’s potential failure to hit the targets under its own international rescue, arguing these concerns were limiting the euro’s recovery. At the meeting Draghi acknowledged concerns from Germany, however was quick to re-iterate that protecting the Eurozone is in Germany’s interest just as much as Spain or Italy and that a stable and secure euro is in everyone’s interests.
The meeting lead to positive moves for the Euro gaining nearly 0.5% in the afternoon session as Draghi confirmed the plans to continue with the bond buying plan. However he was clear to state that he would need commitment, particularly from Spain and Italy, that economic reform was needed in return, urging euro area governments to make deep structural reforms to boost competitiveness.
Personally I feel the Euro will find support in the short term, and can see a move back towards 1.24 territory, however what can Spain, Italy and much of the Eurozone do to boost their competiveness? Yes the initial influx from the bond buying plan will give a much needed cash injection but the ECB cannot continue to throw money at the problem and to me it is only a matter of time before problems resurface and the Euro falls as a result. Euro sellers therefore may do well to take stock of their positions in the current market.
AUD, ZAR and NZD
Recently trends for these three currencies have been very much in Sterling’s favour. We hit a 3 month high against the AUD and NZD earlier in the month with both showing gains in the regions of 6% since the lows of August. Substantial gains have also been seen against the ZAR with rates at a two year high in mid-September, rates have fallen nearly 2% since, however are still some 5.5% better than early August.
All three are heavily influenced by commodity prices as they are major exporters of raw materials. In particular Australia has been hit with a fall in iron ore prices and also a fall in output and demand in China, this has subsequently lead to concerns over future growth prospects for Australia and hence the currency has devalued. The Kiwi tends to loosely track the Aussie (being a major trading partner with Australia) hence the loss in value for the kiwi, and South Africa, also a heavily commodity based currency, has been rocked in recent weeks with a number of scandals culminating in a number of mining strikes.
Personally I think this trend may continue, and in particular I think the AUD will head towards 1.60 as rumours increase that the RBA will be cutting interest rates at its meeting next week, with analysts citing a strong dollar as a cause for reduced competitiveness in areas such as manufacturing and tourism.
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