Sterling shows weakness again

Sterling Weakness

Despite early morning gains yesterday Sterling retreated to overall losses against most major currencies by the close of business yesterday, most likely as the market begins to price in the expected outcomes of the MPC and ECB’s respective meetings on Thursday morning. Speculation that the MPC will cut rates is now massive and this expectation will almost certainly lead to a gradual decrease in the strength of Sterling over the next few days building to Thursdays decisions.

Considering this it would be very worthwhile speaking to your account manager on a regular basis as the current market conditions suggest that holding out for the market to move in your favour, particularly if you have a requirement to purchase Euros, is an increasingly risky strategy.

The graph below shows that the trend for Sterling to Euro over the last nine months has been extremely negative, while this will make for depressing reading for most of you, it is interesting to note that there is very little reason to expect the current negative trend to halt any time soon.
All things considered then, those of you with a Euro requirement would be well advised to find out more about the options available to you to protect you from any further negative market movements, such as a forward contract.

Dollar Strength

Overall yesterday showed some promise for the struggling greenback, with gains against most major currencies, including both Sterling and the Euro. Those of you who have been considering the option of pulling funds out of the US’s limping economy will want to keep a close eye on this as any strength the dollar shows in the present currency climate is unlikely to be lasting or significant. The extremely volatile relationship between Sterling and the USD at present means that regular contact with your account manager is vital to achieving the best available exchange rates, as is ensuring you are ready to move quickly with your funds, so that you can take advantage of any favourable rates as and when they become available.

Today’s data

Today is a relatively quiet day with regards to data out.
In the evening we do see the Nationwide Consumer Confidence figures, which capture the level of confidence consumers currently have in the UK economy. A high reading would be positive and a low reading negative.

However, the majority of the focus will be on Thursday’s interest rate decisions both in the UK and the Euro Zone. With speculation that the MPC are ‘60%’ likely to cut rates and rumours that it may be necessary for the ECB to actually increase rates to curb inflation in the Euro Zone, it could well be that Thursday turns out to be a very bleak day for Sterling trading levels.
To ensure this does not make your currency purchase unafforadable, keep in touch with your account manager, who will be able to explain the ways of protecting yourself from negative market fluctuations.