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 | 2.35% | €6069 |
| GBP/USD | 2.20% | $6940 |
| GBP/AUD | 3.36% | AUD 10,260 |
EUR rallies against GBP as GDP estimates are announced
At the close of play last week we saw sterling drop to a 3 week low against a stronger Euro as a result of renewed confidence of potential future intervention from the ECB (European Central Bank) to lower sky-high Spanish and Italian borrowing costs. This was in stark contrast to the initial Euro weakness that was seen on Thursday after what was seen to be a lack of decisiveness and action from the ECB. It appears that this was an overreaction as many believe there are increasing measures to come, and this was demonstrated on Friday as the Euro fought back.
GBP/EUR ended the week at 1.2603, the strongest the Euro has been since July 13th, and this week we will see 2 very key data releases from the UK that could both have a substantial effect on Sterling strength.
On Tuesday afternoon at 15:00, the NIESR (National Institute of Economic and Social Research) are set to release the GDP estimate of growth over the last 3 months. This data is key for the UK as any further negative data will prolong the recession into the 3rd quarter, and questions will continue to be asked concerning matters such as Quantitative Easing and whether they have had the desired effect. Should the data be negative, I would expect to see increased pressure on Sterling, pushing the rate down to around 1.25.
On Wednesday morning at 10:30, The Bank of England will release the quarterly inflation report which sets out the detailed economic analysis and inflation projections on which the BoE bases its interest rate decisions.
If you have an upcoming Euro transfer, speak to your account manager today on 01494 725 353 to protect yourself against any adverse currency movements, whether you are buying or selling.
*Key Data Watch* Tuesday 15:00 – NIESR GDP Estimate (3m)
US data release points to further Monetary Easing
Last Friday’s highly anticipated release of US non-farm payroll data saw the number of jobs (outside of the agricultural sector) increase by 163,000. Despite this positive figure, unemployment actually fell from 8.2% to 8.3%. This shows that the economy is growing, but not at a fast enough pace to bring down unemployment.
According to the Federal Reserve, the US economy has to generate 100,000 new jobs a month just to stand still. As a result of this, I would expect to see further monetary easing from the Federal Reserve, as although this is a positive figure, there needs to be a sharp increase to make a notable change to the unemployment figures.
So far, the Fed has pumped $2.3 billion into the economy, and with elections drawing increasingly closer, this could prove to be pivotal for the US.
If you are unsure about an upcoming USD transfer, your account manager will be able to assist you in ensuring you have the most comprehensive risk management strategy in place. Call today on 0800 328 5884 to find the best contract option best suited to you.
*Key Data Watch* Tuesday – 20:00 – US Consumer Credit Change
Australia waits for Chinese CPI data
In my last report I spoke of the influence China has on AUD, especially of the effect the mining boom has had. Last Friday’s report stated that Chinese exports have been hit hard by the European crisis, and on Thursday of this week the National Bureau of Statistics of China will release CPI data. Australian officials will be keeping a close eye on this as a negative figure could well decrease Chinese activity in a heavily reliant Australia, in turn increasing pressure on AUD. There has also been evidence that China are starting to look elsewhere for mining projects, such as Africa and Canada that are proving more ‘attractive’ cash destinations.
Whether you are buying or selling speak with your account manager today on 01494 725 353 to protect yourself should there be any negative currency movements.
*Key Data Watch* Thursday – Chinese Consumer Price Index
