The pound climbs against all odds

Market Report
Tuesday 29th April 2008
The Pound Climbs Against The Odds

The week started off with the pound slightly down on the days open across the board following a report on house prices in England and Wales. Figures from research group Hometrack showed year on year like for like house prices were down across the UK. Last month there was a 0.4 percent increase compared to a drop of 0.9 percent for April, further indication that the housing market is cooling.

Interest rates in the UK are set to come down with most analysts expecting a cut in June but following this report if we see further weak data releases over the next week leading up to the Bank of England’s MPC meet next Thursday we could see that cut occur earlier than expected.
If data releases do veer on the soft side the gains made towards the end of last week after better than feared GDP data could be written off as a May rate cut is priced in swiftly before the announcement next Thursday.

The outlook for the pound looks pretty gloomy certainly in eyes of one FX strategist quoted yesterday.

"The domestic news remains relatively weak ... Our own view is that the UK economy does have problems, and we expect growth to decelerate markedly in the second half of the year and that buy itself is likely to ay on sterling over the remainder of 2008," said Robert Minikin, senior FX Strategist at Standard Chartered.

The day for sterling took a upturn as in a day of thin trade investors took note of brighter stock market sentiment giving a boost to higher yielding currencies like the pound, aussie and kiwi dollars. "Risk appetite is looking a little bit more favourable. Even with the rate cuts that we've seen, the yield attractiveness of sterling is reasonable," Rabobank market strategist Jeremy Stretch said.

The pound in afternoons trade strengthened against most currencies most notably up 0.4 percent against the greenback, up 0.3 percent against the euro and 0.7 percent against the loonie (Canadian dollar). The AUD and NZD both were up against the pound slightly t 0.2 percent and 0.1 percent respectively.

The graph above shows the slight spike in sterling seen over the past couple of days is yielding the best GBP-EUR exchange rates since the beginning of the month. In the recent downward trend possibly a perfect opportunity to take advantage should you have a euro purchase coming up.

As anyone who has been following the markets will be aware, also illustrated by the graph, these spikes in sterling strength can be short lived so if its a euro or any other major currency you need coming up speak to one of the dedicated dealers at Foreign Currency Direct today to discuss ways of fixing a rate today.

Oil Hits All Time High

Following supply fears from Nigeria and the North Sea oil per barrel hit just short of $120. A strike at Scotland's biggest oil refinery, Grangemouth, entered a second day yesterday closing down the Forties pipeline operated by BP which carries more than 700,000 barrels of oil a day from the North Sea equating to a third of the UK's daily oil output. In repsonse several North Sea fields have begun to cut production.

In Nigeria tension remains high after gunmen killed at least five policemen in Bonny Island, which is home to one of Nigeria's largest oil and gas export terminals. Shell has 170,000 barrels sidelined due to the rebel action and Exon Mobil have had to shut down production of 200,000 barrels following a workers strike.

Prices are set to remain fairly unchanged in the run up to US inventory data (EIA Energy Stocks) and the FED interest rate meeting later this week in the US as these could affect the dollar. Dollar priced commodities like oil and gold are often affected by a weaker dollar as other currency funded countires find those commodities cheaper to buy.
The greenback did climb slightly against the pound and euro in afternoons trading as the markets looked toward the meet on Wednesday. It is widely expected that the base rate will be cut a further 25 basis points to 2 percent. But that this could be the last cut in the recent aggrssive run. Following Wednesdays meeting at 7.30pm BST we could see further dollar gains so it may be wise to speak with your FCD account manager before Thursday to secure any upcoming requirements.

And finally:

A survey yesterday showed Britons are becoming ruder than they were a decade ago. This comes as a debate into whether manners should be taught at school was started, with a third of those polled by ITV stating bad manners are the main cause of anti social behaviour that is rife in the county.

More than 90 percent of respondents believe parents are failing to ensure their children learn proper manners and that bad behaviour of celebrities and footballers are setting a poor example for impressionable youngsters. Spitting and swearing were the most offensive behaviours, it found, while queue jumping and not saying "please" or "thank you" were other main gripes.

If you like many are fed up of the rudeness, the lack of manners and the flurry of spit and swear words we must contend with on a daily basis then maybe a move abroad is in order. If so check out www.propertyline.co.uk where thousands of properties abroad are located for your viewing pleasure and be sure to call us at Foreign Currency Direct to help save you on your currency exchange.

If you have any questions regarding this report, or wish to discuss an upcoming requirement with an experienced broker that will talk on your level, please email me at djw@currencies.co.uk providing a telephone number and i will get in touch straight away.

Have a great day and thanks for reading!

Daniel Wright