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|
Revised GDP data does little to boost Sterling
Sterling dropped to a two week low against the Euro on Friday as we saw an upward revision of UK GDP (Gross Domestic Product) data that was in line with expectations. The upward revision to a figure of 0.5% contraction, although better than originally forecasted at 0.7%, was already priced into the market therefore having little effect on GBP, and even wrong-footing some who had expected a shallower recession.
This data does not bode well for the UK economy as a further breakdown pointed to weakening exports and sluggish consumer spending. As a result of this, I would not be surprised to hear talk of whether more QE (quantitative easing) may be necessary, although I would not expect any further monetary easing until at least the end of the year.
Greek exit more cause for concern
There was further controversy surrounding the Greek exit of the Eurozone on Monday as a leading German politician stated that he saw “no way round” a Greek exit. Francois Hollande, the French president has also piled pressure on Greece to prove it can pass reforms necessary to continue to receive instalments of its 130bn Euro bailout fund. Eurozone leaders are awaiting a major report concerning Greece’s finances in late September, that Hollande says is crucial in any future decision making.
As a result of continued uncertainty surrounding the Eurozone, I still expect Sterling to strengthen against the Euro in the short-term, possibly pushing to around the 1.28 level.
If you have an upcoming Euro transfer and you are unsure about any issues that may affect you, speak to your account manager today on 01494 725 353 to protect yourself against any adverse currency movements, whether you are buying or selling.
Sterling slips against Dollar but for how long?
As a result of the UK GDP revision we saw Sterling slip to $1.5826 from a previous 3 month high of $1.5912. As already stated, the revision of data was already priced into the market, and as some investors anticipated a further retraction, Sterling weakened against USD.
Despite what may look like doom and gloom for GBP, the minutes released from the Fed’s latest meeting could well lead to strong Sterling gains, possibly even the highest gains we’ve seen since mid-June, as expectations have been raised of another round of quantitative easing. Quantitative easing is normally bad for a currency as it increases the supply of the currency, therefore de-valuing it. As a result of this latest development, I would expect to see Sterling test the $1.60 level of resistance over the coming weeks.
On Wednesday we will also see the figures for US Consumer Confidence. This figure captures the level of confidence that individuals have in economic activity.
To ensure that you have the most comprehensive risk-management strategy in place, and to protect yourself against any adverse currency movements call today on 0800 328 5884 to find the best contract option tailored to your needs.
*Key Data Watch* Wednesday – 15:00 – US Consumer Confidence (August)
AUD falls to new lows
Last Fridays Currency Report stated that the Australian Dollar is becoming increasingly affected by the Eurozone crisis, and Australia could even find itself in recession in 2013. AUD weakened slightly against all currencies last week as it awaits clues on further US and European stimulus.
Australian leaders will not have welcomed the news that China’s industrial firms saw profits dip for the fourth successive month on Monday. Earnings fell by 5.4% in July from a year earlier, compared with a 1.7% annual drop in June. As I have stated in my previous reports, the Australian economy is heavily reliant on Chinese business, especially mining, and any contraction in profits could spell potential AUD weakness as China look for cheaper alternatives.
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.