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 7 days.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/USD | 1.83% | $4754.81 |
| GBP/EUR | 1.25% | €674.48 |
| GBP/AUD | 1.54% | AUD 3862.76 |
Sterling strength set to continue
Sterling has moved from strength to strength over the past week, despite some mid-week volatility against Euro and is set to gain even further on the back of Credit rating agency Standard and Poor’s annual report of Britain’s credit worthiness.
The report said that S and P “expect the British economy to pick up in the second half of the year, despite a slip into recession earlier in 2012”. In my opinion this news will boost sterling with some short term gains, potentially through 1.285 against Euro and with US Growth rate slowing and after GBPUSD performance last week; I feel gains will be limited to the 1.58 area in the short term.One facility to help you take advantage of any gains is a stop loss or limit order. A limit facility automatically purchases currency once the market moves to a specified rate and a stop loss order can protect you against the market moving through your worst case scenario, speak to one of our consultants to find out more by calling 0800 328 5884.
Slowing US growth sparks Monetary Stimulus rumour
The USD struggled to perform this week with losses of over two cent versus Sterling and nearly four cents versus Euro. I fear these losses are going to continue over the course of the week following a report from the US commerce department indicating a slowdown in growth to just 1.5% in the second quarter, compared with 2.4% growth seen in the first quarter.
Peter Cardillo, Chief market economist for Rockwell Global Capital said that “if data continues to be weak over the course of the next few weeks then the Federal reserve will look towards more monetary stimulus”.
Looking at a longer term perspective I feel the Dollar will continue to weaken, even breaking through 1.60 against Sterling in late Q3. If you have exposure to dollar, speak to one of our Dollar specialists to help manage your risk by setting up an account with us.
Who will buy Spain’s Bonds?
German Chancellor Angela Merkel and Italian Prime Minister Mario Monti have said in a joint statement this weekend, they will do “everything possible to protect the Eurozone”, fuelling speculation that the ECB (European Central Bank) will continue to buy up Spanish Bonds.
This speculation arose after Euro zone leaders agreed in a summit at the end of June, that they would allow their rescue fund to intervene on bond markets.
If the ECB decide to keep buying Spain’s Bonds, it should allow Spain some breathing room with their finances and therefore strengthen their overall economy long term. Short term however, I would anticipate the news of the ECB buying Spanish bonds would put pressure on Euro and lose ground to around the 1.285 level mentioned earlier, heading to around 1.30 against sterling later in Q3.
Monday will also see the release of the first estimate as to whether Spain’s economy grew or contracted over the 3 month period between April to June, it is however expected to show contraction.
Draghi sparks Aussie Dollar strength
The Australian dollar has performed well this week, recovering from its early week GBPAUD highs of 1.52 on the back of Euro zone worries, before closing just over 1.50 against Sterling, bolstered by positive comments over the weekend from President of the ECB, Mario Draghi.
In the short term, I feel the Australian Dollar will gain strength on the back of this and make its move back down to the 1.49 area against Sterling.
If you have an upcoming GBPAUD transfer, speak to one of our specialists to find out more about the best contract option to suit your needs, by calling 01494 725 353.
Key data:
August 1st 19:15 US Fed’s monetary policy statement
August 1st 19:50 US Fed’s interest rate decision
August 2nd 10:00 European Producer Price Index
August 2nd 12:00 UK BOE Asset purchase facility
August 2nd 12:00 UK BoE Interest rate decision
August 2nd 12:45 ECB Interest Rate Decision
