Will GBP Exchange Rates Go Up After GDP Data?

The pound has rallied a little of late against most currencies, despite the UK unemployment rate rising on Wednesday so how is this possible?

My view is that despite the general feeling that we have never really left recession, there may have been a few glimmers of light that suggest we may narrowly avoid heading back into a technical recession. Services data last month was a lot better than expected, and despite headlines that the high street is dead, retail figures have also crept into positive territory (albeit marginally).

Should next week show the UK posted even just fractional or zero growth for the first quarter of this year then a technical recession will be avoided and with it all the negative headlines associated with a “triple dip”. If the news were to be surprisingly positive then it is actually likely the pound will pick up quite significantly as some of the pressure weighing it down is released. If you are selling any currency to buy sterling then be careful that you do not miss the boat on a sterling rebound- recently we have seen a 1 ½ year high for the Euro, a 2 year high for the USD, a 30+ year high for the Aussie, and an “all time” high for the Kiwi so you may wish to cash in prior to the GDP release. Speak to one of our dealers on 0800 328 5884 about your own individual requirements to get a more detailed overview, or email me on cmg@currencies.co.uk

As with every market there is always a risk that the news is not what you hoped for as hope does not move markets contrary to what some people would seem to believe. If you are looking at selling sterling and next week’s GDP is negative then the pound will likely crash significantly and could take some months to recover so if you wish to avoid the gamble speak to us today.

Can The USD Recover From It’s Recent Wobble?

The Greenback did weaken last week after dissapointing jobs data and the battle over the budget and national debt reared up again. The Federal Reserve had indicated that they would be prepared to start reversing the QE program if the economy and employment rates kept improving. The poor jobs data suggested they may not be able to reverse quite as quickly as markets had priced in, but I still think the pace of recovery in the US will far outstrip the UK and Europe. To this end I envisage the Dollar will ultimately recover most of the ground it has lost recently but this may be preceeded by initial Dollar weakness until the budget is approved Stateside.

Aussie Dollar To Slump Further

The Aussie Dollar has slumped approximatelly 2.5% against the pound over the last week and a half following a slow down in Chinese growth which is expected to lessen demand for Australian raw materials.

Whilst a huge fall in value for the Aussie seems highly unlikely, there are many who are concerned that the strength of the Aussie will ultimately damage it’s GDP figures as exports become increasingly expensive to overseas markets. Some economists are predicting the RBA willl cut interest rates in June in an effort to weaken the Aussie, however the next meeting is actually on May 7th. For more information about transferring money to or from Australia click here but if you are selling AUD then it may be prudent to do so sooner rather than later given it reached a record high against sterling only a few days ago.

Euro Exchange Rate Forecast

As mentioned earlier, GBP EUR rates short term future are likely to be determined by next week’s GDP data, however the longer term is likely to see the Euro continually dogged by the issues of recession and austerity. Whilst the UK’s economy is expected to grow at a pitiful rate according to the IMF and others, the pace of growth is expected to be greater than that of France or Germany and will be levels that Greece and Spain can only dream of.

The combination of lower inflation recently, and weak growth, has already resulted in ECB member Weidmann saying the ECB would be prepared to consider cutting interest rates if the situation neccessitated it. Whilst this is only one member and doesn’t mean they are definitely cutting rates, it is likely to increasingly see the Euro under pressure as the year passes by. If you are thinking of selling in Europe a quick sale may be advisable to take advantage of the current exchange rates.

To find out more anything contained in this report then feel free to ring 0800 328 5884 or email cmg@currencies.co.uk


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