UK

Sterling strengthened across the board yesterday, after news that Royal Bank of Scotland (RBS), the UK's second-biggest banking group, is asking shareholders for an extra £12bn to shore up its finances.The rights issue is one of the largest seen in UK corporate history.

The news comes a day after the Bank of England said it would make £50bn available to banks, to help them tackle the credit crisis by allowing banks to exchange their mortgage-backed assets with government bonds. This positive data (rare in recent times) helped bolster the pound. However, today’s data could easily wipe out these gains, and see rates continue the downward trend.

Bank of England Minutes

As mentioned in yesterdays report, today at 09:30am the Bank of England’s’ (BoE) Monetary Policy Committee (MPC) will release the minutes to their Interest Rate decision 2 weeks ago.
This will give a good insight as to future interest rate movements by the Central Bank. Should it transpire that a clear majority voted for a cut, or if any members voted for a 50 basis point cut, this could mean there is a good chance we will see another cut in Mays meeting, which could weaken the pound further still.

Remember, many analysts are forecasting 4 to 5 more cuts this year, so you may wish to consider securing your Euros before today’s decision, and protect yourself from a possible drop in trading levels.

Eurozone

Two European Central Bank (ECB) governors indicated yesterday that the ECB might raise rates if inflation didn't subside, clashing with the prevailing market expectations of rate cuts later this year.

The warnings came after consumer prices in the 15-nation area rose 3.6% on the year in March - the highest rate since the series began in 1997 and well above the ECB's 2% target ceiling.
The question of a rate hike is "fully justified", ECB Governing Council member Yves Mersch told Financial Times Deutschland. He raised doubts about whether the ECB will reach its inflation goal next year.

This is an important signal, as if the ECB do indeed raise rates, a likely outcome is a strenghtening of the Euro, and this could well mean it continues to become more and more expensive. Coupled with the expected cuts the BOE may make this year, means all the ingredients are in place for the GBPEUR rate to continue dropping. To protect yourself from a decline, talk to us about Forward Contracts; a way of fixing todays rates for the future.

Rest of World

The majority of you will be purchasing your currency with Sterling, and therefore the weak pound is what is driving the decline of most exchange rates presently, hence the focus on this above. However there is other data from further afield that may affect some of the other currencies we trade.

The Canadian dollar weakened (became cheaper) yesterday after the Bank of Canada gave a dovish statement to accompany its widely expected half-point cut in interest rates. This is what improved the rate by so much yesterday, making it one if the biggest movers of the day. A good time to take advantage of the spike?

Australian CPI data released this morning – came out much higher than expected, leading analysts to believe the results to increase the likelihood of rate hikes down under. If you have AUD to purchase, bear in mind higher rates could result in a stronger (more expensive) Aussie Dollar.

Today’s Data

02:30 Australian Consumer Price Index 08:30 German Purchasing Managers Index09:00 EU Purchasing Mangers index09:30 Bank of England Minutes13:30 Canadian Retail Sales22:00 New Zealand Interest Rate Decision.
Some important data from all corners of the globe today, so for detailed information regarding what it all means, and an explanation on how it can affect exchange rates, please get in touch with us today.

And Finally

Don’t forget today is St. George’s day, as one in five people don’t know that St George’s day falls on the 23rd April. Perhaps even more worrying, is that a quarter of all people living in England don’t even know who their patron saint is!
In fact, you are more likely to see big St Patrick parades in England celebrating Ireland's National Day, more than you would see any sign of St George’s Day being celebrated. This was certainly true in Manchester last year, when St George's Day was virtually ignored soon after the biggest St Patrick's Day Celebrations in the city's history?!
However St George’s Day is not ignored everywhere , as it is also celebrated in Catalonia (Spain), Portugal, Bulgaria, Macedonia and Canada.
So, if you would prefer to live in one of these countries that has a firm grasp on its heritage, why not visit www.propertyline.co.uk were you can find a dream home abroad, safe in the knowledge that next year, St George’s day wont be ignored!

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