Weekly Currency News
Last week’s most anticipated event, the Bank of England’s Quantitative Easing decision, went the right way – in theory – for those of you sending money abroad, with the committee voting to keep the current asset purchase scheme unchanged. Unfortunately the boost this gave to the Pound was short lived, and we soon saw the familiar theme of a weakening Pound continuing. We will find out next week how close the vote was, and whether more QE is expected in the coming months.
The US Dollar continued its resurgence through the week, with Friday in particular seeing gains for the greenback, when the main monthly employment figures came out much better than expected. The increasing value of USD has now given us the worst rates for buying dollars in nearly 3 years, with no sign of any imminent improvement.
Similarly the Canadian Dollar became more expensive as their unemployment figures were also better than expected, giving us the lowest GBP-CAD rates since 2010.
Against the Euro we saw more rangebound trading last week, with the trend for lower rates continuing showing a drop of 1.5c through the week. Eurozone retail sales came in better than expected, and GDP was on forecast, allowing the cost of a Euro to creep up through the week.
With data around the world showing improvement in other major economies, the Pound is struggling to find any momentum at all, with the budget coming up and continued fears over a third period of recession. The first estimate of Q1 GDP is announced on April 25th.
This week we have figures released through the week, including the NIESR GDP estimate for the UK tomorrow, and the European Central Bank monthly report on Thursday. The US monthly budget statement is tomorrow, with US inflation and retail sales also released this week, could we see continued increases in the cost of the greenback and the Euro?
Australian unemployment is released in the early hours of Thursday; with the Australian Dollar currently close to its all-time most expensive level against the Pound. Don’t forget that currency markets are trading 24 hours a day through the week, with Asian and American markets open when Europe is closed. As such it can be common to see significant movement overnight.
Weekly Update
March is now upon us, and already in the currency markets 2012 seems a long time ago. Last week saw fresh new lows for the Pound against the Euro (lowest since October 2011), US Dollar (June 2010), Canadian Dollar (July 2011) and Australian Dollar (February 2012).
Friday’s poor UK manufacturing figures were the latest in a long line of negative news releases for the UK and therefore sterling. This week, the Bank of England faces a dilemma in whether to increase Quantitative Easing, after 3 of the 9 committee members, including Sir Mervyn King, voted for an increase in February. If more funds are announced on Thursday, we could see the Pound fall further, which has happened at every previous QE extension. Sir Mervyn is also giving a speech on Wednesday morning, and has not been worried about talking the Pound down in any of his previous speeches either.
This morning’s UK construction industry figures were also worse than expected.
Abroad, we have the monthly Eurozone interest rate decision and accompanying press conference on Thursday too. The Eurozone, fresh from the shock Italian election result, will be hoping for some better news when Mario Draghi gives the monthly statement – but it is still unclear what the effects of a hung Italian parliament might be. The Italian election was one positive note last week, in that for those of you buying Euros, who had a brief improvement in rates.
In the USA, the main monthly labour market figures, known as non-farm payrolls, are released on Friday afternoon. The estimates can be wildly different to the final figures, and can drive volatility in the US currency. Canadian unemployment numbers are announced at the same time.
Looking further ahead, the UK budget on March 20th looks to be an awkward one for George Osborne, and continuing anxiety is likely to keep the Pound weak for now. With new Bank of England Governor Mark Carney not due to take office until July, and Mervyn King pushing for more QE, the next 3 months do not look rosy for sterling.
Moody’s Downgrading Sets The Tone
The big news over the weekend has of course been Moody’s downgrade of the UK’s credit rating from its prestigious AAA status – the first such move since 1978.
The Pound suffered immediately on Friday evening, losing over a cent against both the Euro and US Dollar, reaching 16-month lows against the single currency and the worst against the US dollar since summer 2010.
Will sterling fall further? Nobody knows of course, but Jim Rogers, a long-time investment partner of George Soros, told the BBC that he expected sterling “to continue to go down further in real terms”. With rates now nearly 8% lower than at the beginning of the year, it seems there are very few bets on a recovery in the short term.
Last week’s other news bringing exchange rates down, was the news that the Bank of England were closer to increasing their Quantitative Easing program in February, with outgoing Governor Mervyn King unexpectedly pushing for an increase in asset purchases. QE has always been detrimental to the Pound in the past, so if we see the policy being used again, it would be likely to hurt exchange rates further.
George Osborne will now be working on next month’s budget, which will not be an easy one for the coalition government.
This week is not busy in terms of news due out in the UK, except a few property market releases which can affect exchange rates. We also have the revision to Q4 GDP on Thursday; which should move the Pound if there is any significant revision to the initial -0.3% figure. Further drops in GDP would make a third period of recession in the UK more likely.
Overseas, we have a usual week of data releases due out, including Eurozone inflation on Thursday, and figures from Germany (Consumer confidence, inflation and unemployment) which could influence the Euro. In the States, GDP is on Thursday, and the same news from Canada on Friday.
At Currency Index we always try to remain optimistic but at the moment there seems to be nothing except doom and gloom for the Pound. If you are lucky enough to be bringing money back to the UK from a foreign currency this is obviously good news, but for those of you sending money abroad it is not an easy situation.
George Soros Down On Sterling
Moody’s downgrade included a warning that growth would “remain sluggish” over the next few years. The agency said the government’s debt reduction program faced significant “challenges”.
Jim Rogers, a long-time investment partner with George Soros, told the BBC that he expected sterling “to continue to go down further in real terms”.
He said he was “not optimistic” about the UK economy, but added that several economies, including Japan and the US, were also in “serious trouble”.
Currency News
Another volatile week for sterling finished on a negative footing, when retail sales figures came out on Friday. Official figures showed a fall in monthly high street activity in January, compared to analysts’ expectations of an increase. The data was far worse than expected and sent the Pound lower against a basket of currencies on Friday.
Rates for buying Euros are now at their lowest since mid-2011, and for buying US Dollars at their lowest for 9 months.
There could be worse to come however. Fears of a ‘triple dip’ recession are now very real, if recent figures are anything to go by, and if this quarter looks like showing a contraction then surely sterling could have further to fall. This is more true than last year, when the Euro and US Dollar were kept at cheaper levels by problems of their own which are now largely seen as over their worst stages.
Today we have a bank holiday in the USA but some figures out later in the week will be likely to influence the USD’s direction (and those of pegged currencies such as the UAE Dirham). Most of these are due out on Thursday afternoon, including unemployment claims and consumer inflation.
In the Eurozone, there is not much due out except German inflation (Wednesday) and GDP (Friday) so we could see the Pound dominating movements, with UK unemployment and the Bank of England Minutes both released on Wednesday. Any downturn in employment could be disastrous for sterling, given that one of the only lights at the end of the tunnel in the UK in recent months has been labour market figures.
We also have announcements or data in Australia, Canada and Switzerland, if you are buying or selling these currencies do let us know if you would like to be kept informed of any movements through the week.
Currency News
The Pound has been seeing some major volatility recently, particularly against the Euro where we saw a spread of over 3c between the highs and lows last week.
The Euro itself has been causing many of these waves, with ECB President Mario Draghi hinting on Thursday that the Euro was too strong, which reversed recent trends and saw the single currency become significantly cheaper, only to come back on Friday and this morning with rates back on the decline after the EU budget for the next 7 years was agreed by leaders in Brussels.
The EU budget has been reduced in real terms for the first time in the history of the Union, and markets seem to approve, with the single currency creeping back up in price again this morning. The main European data out this week comes on Thursday, when GDP figures and the ECB monthly report will be published.
Closer to home this week we have inflation figures tomorrow morning and the Bank of England quarterly report on Wednesday. Neither are rumoured to be sterling positive, and the Bank of England report in particular will contain all sorts of official forecasts for the economy, so can have an impact against sterling if it is downbeat.
In the USA we have retail sales (Tuesday) and industrial production (Friday) and more importantly the US monthly budget statement tomorrow evening. With central bank reports in the USA, UK and Eurozone this week we could be in for another volatile few days, with opportunities available to buy or sell your currency at preferential rates. Don’t miss out, and let us help you by discussing your requirements with your account manager at Currency Index.
Further afield we have rates for sending Japanese Yen continuing to improve, with the Yen currently at its cheapest against the Pound for over 3 years.
And finally, this week will be rounded off by UK retail sales on Friday morning, yet another measure of whether the UK economy is on the mend or heading for a triple dip recession – with the Pound sensitive to both.
Currency News
There has been no respite for sterling, after another poor week sent exchange rates lower again. The Euro, in particular, gained strength last week giving us the worst rates for buying the single currency since summer 2011. The GBP-EUR rate has now dropped over 6% since the start of the year, meaning €100,000 now costs around £5,000 more. Last week’s movement was largely attributed to better than expected PMI data, which showed more activity in the Eurozone economy than expected. This week for the Euro we have the monthly interest rate decision and press conference from the ECB on Thursday afternoon, and with the phrase ‘sovereign debt’ seemingly a thing of the past, we could see some more upbeat sentiment for the Euro.
For the US Dollar, and pegged currencies such as the UAE Dirham, last week was a little steadier, despite Friday’s slightly worse than expected US employment figures. This week is quiet for US data, with only Friday’s trade balance likely to cause any waves.
Closer to home the Bank of England will announce any changes to quantitative easing and interest rates on Thursday at midday. After recent comments it is thought unlikely that QE will be increased, which should be sterling positive although largely priced in to the market already.
We also have industrial and manufacturing figures on Thursday, as well as the independent GDP estimate. Will there be a change in fortunes for the Pound or will more bad news send it lower still? Thursday could give us some answers.
Looking further afield we have important figures out for the Australian Dollar this week, with interest rate statement, unemployment, and retail sales all due out.
Clearly the start of 2013 has been more volatile, and more negative for the Pound, than most people had anticipated. Don’t forget that rates are just as likely to fall further than improve – if you are waiting for an improvement in rates but also have a ‘worst case’ in mind, do let us know so we can tell you about Stop Loss orders. For the latest quotes and options for fixing your exchange rate now or in advance, do contact us for a chat.
The Pound Slides On Weak Growth
As we reach the end of January, the Pound seems to have gone out of fashion and be facing a slide in value. Last week’s disastrous GDP figures, showing a 0.3% contraction for October to December, came on top of awful retail sales for December and a general feeling that the UK economy is falling behind.
Of course, the Euro and US Dollar have seen quite the opposite effect, with the sovereign debt bailouts and ‘fiscal cliff’ crises now seemingly staying out of the headlines. This has given us the lowest rates for buying Euros since December 2011 and for buying Dollars since August 2012.
Rates have also fallen against other major currencies such as the Australian, New Zealand, and Canadian dollars, demonstrating that the Pound is weakening across the board.
This week there is little due out likely to improve sterling’s fortunes. The housing market will be in focus as we have mortgage approvals and house prices due out, but only the most optimistic analysts will be holding out for news to celebrate.
In the USA we have a week full of important data releases, including GDP, key monthly labour market figures, and consumer confidence, so the US Dollar could be one of the more volatile currencies this week, along with pegged rates such as the UAE Dirham.
Late in the week we also have Eurozone unemployment and German inflation which could influence the Euro.
With a poor outlook for rates on the horizon, for the latest quotes and options for fixing your exchange rate now or in advance, do contact us for a chat.
Contraction Causes Negativity, Sterling Stands It’s Ground
Bad news for sterling yesterday, as figures showed that the UK economy contracted by 0.7 percent during the second quarter, its sharpest decline for three years, and more than three times the 0.2% fall anticipated by many economists – with most of the fall being attributed to a slowdown in the construction sector. However, the Office of National Statistics was quick to note that the contraction may have been exacerbated by the poor weather of the previous few months, as well as the extra bank holidays in June. This had led some to believe that the fall does not signal as much disaster for the UK economy as the figures state. Nonetheless, it has displayed the weakness in the economy, increasing the predictions for further QE, causing the rate for exchanging sterling to euros to fall away slightly from the 3 1/2 year highs we’ve been seeing.
However, the weakness in the Eurozone causes sterling rates against the European currency to remain strong, with many now looking closer at Spain’s worries. Many analysts now fear that Spain may require a full bailout in the near future, especially since the austerity measures introduced by the Spanish government have been incredibly unpopular with Spanish citizens. Both Spain and other EU countries realise something must be done about these concerns before the situation can get any worse, with both the French Finance Minister Pierre Moscovici and the Spanish Economy Minister Luis de Guindo saying in a joint statement – “The swift implementation of the financial assistance programme is essential to restore confidence and recreate conditions for growth”. However, Germany, seen over the entire crisis as being the economic powerhouse of Europe, seems to be having its own concerns, with ratings agency Moodys threatening to downgrade Germany’s credit rating. The problems in Greece seem to have taken a back seat, as German Economic Minister Philipp Roesler, saying: “If Greece no longer meets its requirements there can be no further payments…a Greek exit has long since lost its horror.”
The Euro did see a small increase against the US dollar on Wednesday, which, in turn, gave sterling a small boost against the American currency. However, these small gains were in turn reduced on the announcement of negative UK data.
Anyone concerned about the weakness of sterling caused by the latest releases, and how it may affect any currency requirements in the future, should call Currency Index for advice, and to ensure they get the best rate when the time comes to make a transfer.
Further Euro Chaos
| Yesterday’s news was dominated by further developments in the Eurozone, with various releases showing that any hopes of a recovery in the short term are very farfetched.
The Spanish were forced to pay the second highest yield on short term debt since the Euro was established, which is just a continuation of the rising rates of the last few weeks, but critically they are now having to accept 7%+ repayment terms. They did manage to sell all the bonds they intended to, but at these rates the market’s are very uncertain as to the sustainability of this level of borrowing. Further fears were also cast on Greece’s future in the Eurozone, with inspectors due to visit Athens from the EU, ECB and IMF. EU officials have said that the inspection is likely to conclude that Greece cannot keep to the terms of its bailout, with fears that if Greece did have to exit the Euro then the hit of almost €200 billion that the Eurozone would have to take, would almost certainly push Spain over the edge, and possibly Italy too. On top of this, the ratings agency Moody’s decided to lower its outlook for Germany, Holland and Luxembourg from stable to negative, and warned that the ratings of the triple-A European countries could come under threat if Greece were to leave the Euro, and that support for Spain and Italy needs to be increased. So all in all a very gloomy outlook for the Euro, but is the UK in a much better position? We are still in the grip of recession and cannot ignore the ramifications of the Eurozone crisis on our own economy. While Ed Balls often points the finger at the government, accusing them of causing the recession, the effect on our imports and exports and overall economy from the Eurozone problems cannot be ignored. This morning’s GDP data release will provide a clue as to whether growth is starting to improve, but with the consensus amongst investors being a minor improvement from -0.3% to -0.2%, the markets are unlikely to be overwhelmed with excitement. In these unprecedented times, make sure you stay in close contact with your CI account manager, to keep abreast of what is happening and to discuss options such as forward contracts and limit orders, which in a volatile market can save a fortune on an upcoming currency requirement. |
Sterling Holds Levels Despite Mixed Data
Last week saw the Pound hit a new post-2008 high against the Euro, amid Spanish bond auction prices rising again and the lack of any coherent plan to solve the Eurozone debt crisis. Sterling also had a reasonable week against the US dollar (up 1c) and South African Rand (up R0.2), but fell against the Australian and New Zealand dollars. With mixed data in the UK (unemployment fell, but the Bank of England minutes, inflation figures and retail sales were sterling-negative), perhaps a mixed behaviour for exchange rates was to be expected.
This week, the most significant UK data is Wednesday’s GDP revision. The ongoing Libor scandal may also be in the headlines, but as Britain gets ready for the Olympics, there is little else due out that is likely to directly affect the Pound. Could this be the peak for some exchange rate pairs? Much will depend on sentiment around the world and particularly in Europe, where events are really driving foreign exchange markets everywhere.
Eurozone consumer confidence is published at 3pm today, and could provide further opportunities to buy your Euros at unexpectedly good rates. For the latest views and news, whichever currency you are buying or selling, contact your currency broker here for a quote at any time.
Central Bankers Moving Markets
| Yesterday saw some very volatile moves on the currency markets brought about by the chairman of the Federal Reserve Ben Bernanke’s testimony in front of a Senate committee, during which he was asked some deep and probing questions about the US’s overall economic policy and more specifically the weapons they have left to combat their lowering growth, raising unemployment and lack of overall liquidity. His answers were obviously well received by the markets, as the Dollar strengthened significantly, causing Euro weakness as well and the Sterling rates against both moved by more than half a percent in less than half an hour. After the testimony had concluded things settled down a bit, and some of the gains/losses were pulled back, but not entirely. Today sees the release of the Bank of England’s monthly policy statement minutes and also the UK’s unemployment figure. Could another central bank cause significant movements? It seems quite likely as we will get an indication of the bank’s policy towards further Quantitative Easing together with any indication as to whether they have considered following the Europeans in cutting interest rates – both of which would be weakening for the Pound. Unemployment has slightly improved in the last couple of months, so this could cause a bit of Sterling strength if the trend continues, but certainly don’t count on that given the recessionary UK economy. Have you considered a forward contract for your upcoming currency requirement? We are just off 4.5 year highs against the Euro, with a very uncertain outlook – perfect for booking forward to protect yourself against adverse market movement. Give your Currency Index broker a call to discuss your options. |
The Pound ended June at reasonable levels against the Euro and US Dollar, despite the European summit providing a surprise deal for Eurozone bonds which had strengthened the Euro overnight on Thursday. Rates recovered somewhat on Friday, even though Bank of England governor Mervyn King gave a speech on Friday, which often softens sterling.
With a newly found confidence in the prospects for the global economy, commodity currencies have also performed well against the pound over the last week with the Australian and New Zealand Dollars, and South African Rand, strengthening 2.09%, 1.7% and 3.48% respectively (giving lower rates for sending money to Australia etc).
Today as we enter the new month we have UK manufacturing at 9.30 and also Eurozone unemployment, Swiss retail sales and US construction figures all due out. Later in the week, the key day will be Thursday, when most analysts believe that Quantitative Easing will be extended by the Bank of England – which usually leads to sterling weakness (lower exchange rates), although this may have been factored in to exchange rates to some extent already.
We also have the usual round of monthly data releases, which are detailed on our blog. Check back for our daily market outlook and call us at Currency Index for a quote on your transaction.
