Today saw the release of the much anticipated ILO (Independent Labour Organisation) figures which although didn’t come out as badly as expected, still came out extremely poor and indicated we have a very long way to go before we make it to the other side of the current recession.
Unemployment rose by 220,000 to 2,435,000 in the quarter leading up to June which actually pushed the jobless rate to 7.8%. We also saw a 12 year high for the people claiming unemployment benefit, which increased by 24,900 to 1.58 million.
This certainly does not paint a great picture for the U.K economy and came out just an hour before the Bank Of England quarterly inflation report which was released at 10:30am. During this report the governor of the BOE Mervyn King warned that any recovery throughout 2010 would be ‘slow and protracted’
Alongside this rather depressing announcement King also mentioned that in order to stimulate the economy further measures may need to be taken alongside the Quantitative easing programme that is already in place. The British Chambers of Commerce have now mentioned that unemployment is likely to keep rising and that even if the economy ceases to contract and starts growing again then may even go above 3 million!
All of this information really does paint a sorry picture for Sterling in the near future, as with rapidly rising unemployment levels and even more stimulus packages due to be introduced it just goes to show that exchange rates still may get a lot worse before they get any better. Should you have an upcoming requirement to send money overseas it may be prudent to contact your account manager here at Foreign Currency Direct who will happily discuss the options available to you which include forward contracts, stop and limit orders.
Specific Currency NewsEUR - A relatively quiet day on the markets yesterday for the Euro however as opposed to our Governor suggesting that there is a bleak outlook for the U.K economy the head of the European Central Bank Trichet has recently been saying that he believes the outlook for 2010 in the Eurozone is fairly positive – Should this be the case anyone with future Euro purchases either now or in the near future may wish to consider their options.
USD - The federal reserve release their interest rate decision this evening at 19:15pm no rate change is expected however comment following this may cause volatility.
Other major currencies – The Australian Dollar and New Zealand Dollar have enjoyed the last few weeks trading against Sterling with the AUD dropping below the 2 level and hitting a 13 year low alongside the New Zealand Dollar also dropping to lows that have not been seen for a long time. The South African Rand however has lost ground recently against Sterling due to the ongoing threat of strikes over there, leading to electricity being cut off and productivity being seriously hampered.
The strength shown by the AUD and NZD may be down to carry trading – a full explanation of which is outlined below by Director and currency specialist here at FCD Stephen Hughes.
“Carry trades are an investor tool where large amounts of a currency with a low interest rate (such as JPY 0.1%) are borrowed and invested in a currency that provides a much greater return such as the Australian Dollar (3%) in order to benefit from the interest rate differential. These are often used in conjunction with foreign exchange forward contracts in order to remove any exchange rate uncertainty.”
During this volatile period for Sterling it is imperative you are in a position to act fast and be able to book a rate off the back of one phone call. In order to find yourself in this position click here to open a trading facility which is completely free and carries no obligation to trade. Upon doing this you will be allocated a personal and friendly account manager who can keep you up to date with market movements alongside making you aware of any excellent buying opportunities throughout the day.
Data out today
07:00am – German GDP data – This data will inform us of how much the German economy has grown or has shrunk throughout the last quarter and figures for year on year. Expected is -0.2% and any change from this may bring volatility.
13:30pm – US Retail Sales & Jobless Claims – Retail sales data will be announced for Month on Month and Year On Year – expectations are for a 0.3% drop MOM and 0.6% increase YOY, again any change should bring volatility. Jobless claims will effectively announce how many people in the U.S are claiming benefit currently, a rise will be seen as negative and a decrease positive.
This is a brief summary of todays report.
Click here to read the full report on our main website
If you are buying a property abroad, and want the best exchange rates, just click on the links below to go straight to our main site, or
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Have a great day and thanks for reading!
Daniel Wright
