Last weeks movement:
GBP vs EUR = +2.02%
GBP vs USD = +0.38%
Sterling reaches 3-week high vs Euro
Sterling experienced a very similar week to the previous, starting the week with the continuing downward trend that has been so prominent in recent months, but again rallying to a 3-week high against the Euro by the end of the period. In the same fashion as the previous week, Sterling gained over 2% on Thursday and Friday, recovering comfortably from the losses suffered early on. Surprisingly, Thursday's gains followed some contrasting data which gave mixed signals on prospects for further interest rate cuts in the UK. The Office of National Statistics said retail sales volumes dipped 0.4 % in March but upward revisions to back months lifted the annual rate to an above expected 4.6%.
Sterling has been suffering greatly over current expectations surrounding future interest cuts within the UK. It is almost certain that there will be further cuts form the BoE, it is more a case of how and when. There seems to be a great deal of uncertainty surrounding the health of the UK economy, and this seems to be reflected by the extreme volatility of the currency market.
Again on Friday, Sterling continued to gain further ground against the Euro following the official GDP (Gross domestic product) figures for the UK which showed GDP grew by only 0.4% in the first quarter, a three-year low and down from 0.6% in the previous quarter. The majority of analysts were forecasting a 0.5% rate. Normally speaking, negative data of this sort would cause Sterling to weaken, however its gains were fueled by investors who took comfort that the growth did not post a nastier surprise.
"The market was very heavily positioned for sterling weakness and was expecting weak data. They got the weak data, but sterling failed to go down" said Ian Stannard, senior foreign exchange strategist at BNP Paribas.
Traders have commented that thin liquidity was accentuating the moves in currency markets, and it seems to be increasingly difficult to predict the short term direction for Sterling with such mixed data to hand. Many analysts had predicted 4 or more interest cuts by the end of the year, however a most recent Reuters poll this week pointed to just 2 interest cuts, taking the base rate to 4.5% by the start of 2009. Following upbeat retail sales and the surprise split decision from the Bank of England minutes last week, a rate cut next month seems less likely and suggests the monetary policy may loosen more gradually.
Sterling has experienced a great deal of unexpected strength over the last couple of weeks, however this strength has not come from positive data that could indicate the start of something more refreshing. In reality it has just bounced back following more negative data that simply wasn’t quite as bad as some were expecting. This means that the worse is surely still to come, though answering the question of when seems now a tougher task than first thought. Spikes of this nature have been very rare and very short lived over the past few months and so anyone considering a Euro purchase in the near future may look to do so while the market is in your favour. Contact your FCD account manger today to discuss your requirement even if it is not coming up for a few months, as your currency can still be bought today with a small deposit.
The busy week ahead of us
This week’s economic calender is fairly full, with a number of significant data releases ahead for the major currencies. Sterling's gains against the US dollar and the Euro last week could be under threat should the forthcoming information not go as we may hope.
Monday 28th
8:00am – The ECB's president Jean Claude Trichet will be giving a press conference as to how the ECB observes the current European economy and the value of Euro. Depending on his view, his comments may determine a short-term positive or negative trend for the Euro, potentially making your Euro purchase cheaper or more expensive.
Tuesday 29th
9:30am - The Mortgage Approval figures are released by the Building Societies Association. This is considered as a leading indicator of the UK Housing Market. Last month these figures came out considerably lower than expected, creating a huge question mark over its health, and if the negative data were to continue we could see Sterling weaken across the board as it did before. At the same time the M4 Money Supply is released by the BOE. This measures all the sterling in circulation within the UK, and is considered as an important indicator of inflation. An acceleration of the M4 Money supply would be positive for Sterling, whereas a decline would be negative.
2:00pm – Consumer confidence levels are released for the US. This captures the level of confidence that individuals have in economic activity. A high reading would be positive for the greenback, whereas a low reading would be negative.
Wednesday 30th
4:00am – Bank of Japan announce their interest rate decision.
10:00am – A host of vital data will be released for the Eurozone Wednesday morning. Consumer confidence, Economic confidence, Consumer price index and Unemployment rates are all announced at the same time. Anyone with a current Euro requirement should take this data release into consideration when picking an opportune time to secure your rate.
10:30am – GfK release their consumer confidence levels for April in the UK. These confidence levels can have a significant effect on the currency in question if any unexpected levels are announced.
12:30pm – Both Gross Domestic Purchases price index and Personal consumption expenditure figures are announced for the USA. These are seen as important indicators of current inflation levels, and high or low readings could offer strength or weakness to the dollar.
6:15pm – The Federal Reserve announces their interest rate decision for the US. If interest rates are cut again, then the value of the dollar could fall even further making your dollar purchase even more affordable. However after such a significant cut having already been made last month, this may not be the case.
Thursday 1st
9:30pm – The Manufacturing Purchasing Managers Index (PMI) is released for the UK. This is an important indicator of business conditions and the overall economic condition in UK. Any reading over 50 is seen as positive, and below as negative.
12:30pm – Further important data for the USA is released. Measures of personal income and personal expenditure will give further indication of consumer optimism and economic growth. Again high readings are positive and low negative.
Friday 2nd
8:30am - The non-farm payrolls measure for the USA is released. This is the number of people on the payrolls of all non-agricultural businesses and is one of the most important piece of data contained in the employment report.
12:30pm – Average hourly earnings and Unemployment rates are released for the US. A high reading would be positive for the hourly earnings and a low negative, whereas a high reading for the unemployment rates would be negative, a low positive.
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
GBP vs EUR = +2.02%
GBP vs USD = +0.38%
Sterling reaches 3-week high vs Euro
Sterling experienced a very similar week to the previous, starting the week with the continuing downward trend that has been so prominent in recent months, but again rallying to a 3-week high against the Euro by the end of the period. In the same fashion as the previous week, Sterling gained over 2% on Thursday and Friday, recovering comfortably from the losses suffered early on. Surprisingly, Thursday's gains followed some contrasting data which gave mixed signals on prospects for further interest rate cuts in the UK. The Office of National Statistics said retail sales volumes dipped 0.4 % in March but upward revisions to back months lifted the annual rate to an above expected 4.6%.
Sterling has been suffering greatly over current expectations surrounding future interest cuts within the UK. It is almost certain that there will be further cuts form the BoE, it is more a case of how and when. There seems to be a great deal of uncertainty surrounding the health of the UK economy, and this seems to be reflected by the extreme volatility of the currency market.
Again on Friday, Sterling continued to gain further ground against the Euro following the official GDP (Gross domestic product) figures for the UK which showed GDP grew by only 0.4% in the first quarter, a three-year low and down from 0.6% in the previous quarter. The majority of analysts were forecasting a 0.5% rate. Normally speaking, negative data of this sort would cause Sterling to weaken, however its gains were fueled by investors who took comfort that the growth did not post a nastier surprise.
"The market was very heavily positioned for sterling weakness and was expecting weak data. They got the weak data, but sterling failed to go down" said Ian Stannard, senior foreign exchange strategist at BNP Paribas.
Traders have commented that thin liquidity was accentuating the moves in currency markets, and it seems to be increasingly difficult to predict the short term direction for Sterling with such mixed data to hand. Many analysts had predicted 4 or more interest cuts by the end of the year, however a most recent Reuters poll this week pointed to just 2 interest cuts, taking the base rate to 4.5% by the start of 2009. Following upbeat retail sales and the surprise split decision from the Bank of England minutes last week, a rate cut next month seems less likely and suggests the monetary policy may loosen more gradually.
Sterling has experienced a great deal of unexpected strength over the last couple of weeks, however this strength has not come from positive data that could indicate the start of something more refreshing. In reality it has just bounced back following more negative data that simply wasn’t quite as bad as some were expecting. This means that the worse is surely still to come, though answering the question of when seems now a tougher task than first thought. Spikes of this nature have been very rare and very short lived over the past few months and so anyone considering a Euro purchase in the near future may look to do so while the market is in your favour. Contact your FCD account manger today to discuss your requirement even if it is not coming up for a few months, as your currency can still be bought today with a small deposit.
The busy week ahead of us
This week’s economic calender is fairly full, with a number of significant data releases ahead for the major currencies. Sterling's gains against the US dollar and the Euro last week could be under threat should the forthcoming information not go as we may hope.
Monday 28th
8:00am – The ECB's president Jean Claude Trichet will be giving a press conference as to how the ECB observes the current European economy and the value of Euro. Depending on his view, his comments may determine a short-term positive or negative trend for the Euro, potentially making your Euro purchase cheaper or more expensive.
Tuesday 29th
9:30am - The Mortgage Approval figures are released by the Building Societies Association. This is considered as a leading indicator of the UK Housing Market. Last month these figures came out considerably lower than expected, creating a huge question mark over its health, and if the negative data were to continue we could see Sterling weaken across the board as it did before. At the same time the M4 Money Supply is released by the BOE. This measures all the sterling in circulation within the UK, and is considered as an important indicator of inflation. An acceleration of the M4 Money supply would be positive for Sterling, whereas a decline would be negative.
2:00pm – Consumer confidence levels are released for the US. This captures the level of confidence that individuals have in economic activity. A high reading would be positive for the greenback, whereas a low reading would be negative.
Wednesday 30th
4:00am – Bank of Japan announce their interest rate decision.
10:00am – A host of vital data will be released for the Eurozone Wednesday morning. Consumer confidence, Economic confidence, Consumer price index and Unemployment rates are all announced at the same time. Anyone with a current Euro requirement should take this data release into consideration when picking an opportune time to secure your rate.
10:30am – GfK release their consumer confidence levels for April in the UK. These confidence levels can have a significant effect on the currency in question if any unexpected levels are announced.
12:30pm – Both Gross Domestic Purchases price index and Personal consumption expenditure figures are announced for the USA. These are seen as important indicators of current inflation levels, and high or low readings could offer strength or weakness to the dollar.
6:15pm – The Federal Reserve announces their interest rate decision for the US. If interest rates are cut again, then the value of the dollar could fall even further making your dollar purchase even more affordable. However after such a significant cut having already been made last month, this may not be the case.
Thursday 1st
9:30pm – The Manufacturing Purchasing Managers Index (PMI) is released for the UK. This is an important indicator of business conditions and the overall economic condition in UK. Any reading over 50 is seen as positive, and below as negative.
12:30pm – Further important data for the USA is released. Measures of personal income and personal expenditure will give further indication of consumer optimism and economic growth. Again high readings are positive and low negative.
Friday 2nd
8:30am - The non-farm payrolls measure for the USA is released. This is the number of people on the payrolls of all non-agricultural businesses and is one of the most important piece of data contained in the employment report.
12:30pm – Average hourly earnings and Unemployment rates are released for the US. A high reading would be positive for the hourly earnings and a low negative, whereas a high reading for the unemployment rates would be negative, a low positive.
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
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