Today's market reports

The latest market report is shown below. There may be some supplementary information and links towards the end of the report.

If you have any questions on the content of this or any other report, you are welcome to email the author directly or contact your FCD account manager to discuss the implications for your own transactions.

Sterling Exchange Rate Outlook Today

 

Pound against:    Yesterday’s movement

US Dollar                     -0.54%
Euro                            -0.21%
Canadian Dollar            -0.70%
Japanese Yen              -1.31%

What could move GBP exchange rates today?

Following on from yesterday’s trading I believe the key issues for sterling exchange rates today, will be the UK’s banking sector and fiscal health, particularly against the euro and US Dollar.

Yesterday, rating agency Moody’s warned that UK banks could have their financial-strength ratings cut as state support is withdrawn.  This is bad news for the UK Banking sector and looking ahead, is likely to have a negative effect on the pound over the coming weeks.

Another key concern surrounding sterling is the huge national debt in the UK.  Trade deficit figures showed an unexpected widening in January to the largest in 17 months, despite the recent weakness in the pound.  While this is also an issue for some countries in the Eurozone, like Greece and Portugal, in terms of exchange rates, I think it is more relevant to the UK because our Government is allowing the pound to weaken, to help tackle the situation.

Looking ahead, I belive it is inevitable that the pound will remain weak, in hope of exports aiding economic growth.  This will make foreign currency more expensive to purchase for anyone holding sterling.

If you are worried about the pound weakening further against the Euro, USD or any other currency, speak to your account manager today to discuss the options available to reduce your exposure.

Other factors that could affect sterling looking ahead

I believe there will be continued concerns over the prospect of a hung parliament this week.  A new poll by The Times has indicated Labour and the Conservatives are close in the marginal seats.  As previous market reports have discussed, this is a key issue because it leads to uncertainty regarding how the UK will deal with national debt and the budget deficit.

Market Data will Continue to be Overshadowed

Yesterday was a prime example of how some data releases have been overshadowed by economic concerns and political uncertainty.  UK retail sales bounced back well from last month but there was no repreive at all for the pound as the market focussed on the more negative issues discussed.  I believe this will be the case today when the UK GDP estimate is released by the NIESR.  In the past this has caused some notable market movement, but I would be surprised to see any significant effect, even if we do see a positive figure.

At 9:30 this morning we also have industrial production figures out for the UK.  Predictions are for a positive reading but much like the GDP estimates, unless there is dramatic deviation from predictions, I expect other factors to be the main focus for sterling exchange rates today.

Potential EUR exchange rate movement today

Markets may focus more on Jean Claude Trichet’s speech today, as the head of the ECB may discuss the situation in Greece.  The Euro has weakened dramatically against the US and Canadian Dollars, Swiss Franc and a number of other currencies as a result of the debt problems in Greece.  The markets remain uncertain about how the EU will deal with the situation.

In the past Trichet has always been very positive about the EU economy and the Euro (the opposite to Mervyn King at the Bank of England).  This upbeat oulook has often led to Euro strength against the pound.  I would not be at all surprised if we hear a similarly optimistic speech and subsequently see positive movement for the Euro today.

What USD information should I look out for?

The US currency has benefitted from the flight to safety as investors have left sterling and the Euro because of huge debt burdens.   The Monthly Budget Statement released at 19:00 sumarises the financial activities of federal entities. I think the report will take on more significance than in the past because government spending is under such scrutiny across the world at the moment. I believe a positive statement will lend further strength to the US currency and we could see some volatility as a result.

Kiwi Dollar Interest Rate Decision

Expectations are for rates to be kept on hold.  Any unexpected movement will undoubtedly cause volatility, keep an eye on the release at 20:00 today.

***Breaking News***

Today The Chancellor is expected to announce when his final budget will be, paving the way for a May 6th election according to reports.