Pound Weakness

Sterling Drops Across The Board As UK Recession Deepens

This morning thew pound dropped across the board following the UK GDP revision for Q2 which was estimated to be a slight improvement from the first reading at -0.2% compared to -0.3% last month. Instead it came out at -0.7% which is a massive difference to expectations and shows growth is much worse than first thought. This most likely isn’t being helped by the issues in the Eurozone and the weak Euro making imports/exports more costly. Also the unusually wet summer and additional Bank Holiday have affected the retail sector adding to the UK’s woes.

The pound is trading half a cent down against the US and Canadian dollar, 1 cent down against the Kiwi and Aussie dollars.


Commodity Currencies Continue To Gain

The Pound continued to fall on Thursday and Friday against most other currencies, including the US, New Zealand, Australian and Canadian Dollars and UAE Dirham.

The ‘commodity currencies’ have all gained significant strength recently, giving worse rates for sending money to South Africa, New Zealand and Australia in particular. On the other hand, if you have assets in any of these countries to bring back to sterling, now could be a good time to consider fixing an exchange rate.

This week, we don’t have any major data due out in the UK, and now that Wimbledon and the British Grand Prix are also over, perhaps headlines will all be focussed overseas. Foreign exchange rates are still as unsettled as the British summer, so do let us know at Currency Index is you have a transfer that you would like us to help with in the coming weeks.


Commodity Currencies Get A Boost

The Pound ended June at reasonable levels against the Euro and US Dollar, despite the European summit providing a surprise deal for Eurozone bonds which had strengthened the Euro overnight on Thursday. Rates recovered somewhat on Friday, even though Bank of England governor Mervyn King gave a speech on Friday, which often softens sterling.

With a newly found confidence in the prospects for the global economy, commodity currencies have also performed well against the pound over the last week with the Australian and New Zealand Dollars, and South African Rand, strengthening 2.09%, 1.7% and 3.48% respectively (giving lower rates for sending money to Australia etc).


Investor Sentiment Pushes Cable Lower

Trade between the pound and the dollar has been going only one way this week…. down. As the problems in Spain continue to worry investors their appetite for risk is decreasing and as always in these situations the safe haven US dollar is the main beneficiary.

With the issues in Europe looking set to continue, I cant see the downward trend of cable halting. If they break through current resistance points trading in the early 1.50′s could be a possibility in the next couple of weeks.

The GBP/USD rates have come down some 5 percent in the past month, making a difference of around £8000 if you were looking to purchase a house for $250,000. That is a substantial amount in anyone’s books and could be the difference between affording the property or not.

This is a prime example of why tools like “forward contracts” and “stop loss orders” are useful, which you can use minimize exposure to movement. The forward contract lets you fix an exchange rate for settlement up to a year ahead, whilst only parting with a small amount of your capital. A stop loss order is put into the market at a rate below where the market is, your minimum acceptable trading level. If the rates are dropping this stops you losing out on purchasing as the order is automatically triggered if it hits the pre-determined level. Handy if you have a budget and the market is dropping, which without the stop in, could cost you the property.

If you have a US dollar requirement, be it for property or for business requirements it may be prudent to get in touch to discuss the options available to protect yourself. Contact me directly here or speak to one of the brokers at Currency Index today.

 

 


Kiwi Dollar Gains Against Pound

Overnight the weakening of the Kiwi dollar reversed as Standard & Poors gave the go ahead for the New Zealand governments plans to get their budget deficit back into surplus. This news gave the Kiwi a 2 cent rally over sterling. The rates are more than likely to remain volatile as the antipodean currencies are seen as high risk with investors. While the crisis unfolds further in the Eurozone and sentiment is risk averse I think we will be seeing exchange rates on GBPNZD remain above 2 for some time. Welcome relief for those out there looking to move funds to New Zealand but beware the volatile currencies like this which are investor led on the main can swing drastically and being on the other side of the world the time difference means these swings tend to happen overnight in the UK.


The UK Recession Deepens…..

Yesterday was all about the UK GDP figure, the second reading for Q2 2012. The first revisions had shown we were technically in recession and despite this the pound had held its own against the Euro with the zone in crisis. Of late the pound had slipped against the USD as investors retreat from riskier currencies and stockpiled the safe haven dollar.

The final reading came out at 9.30am, and despite expectation for no change, the final revision came in lower at -0.3% for the quarter and for the first time since 2009, the year on year figure posted a negative too at -0.1%. What was to come was a rocky day as the pound steadily lost ground across the board, all except against the Euro where losses were capped for most of the day. As often we have seen this past week, with the Eurozone is in such turmoil even the poor GDP figure couldn’t stop the pound gaining back as trade concluded. So still we have trading levels against the Euro near to the 3.5 year high buyers have enjoyed lately. With many worried about the rising problems in the EU countries, at Currency Index we have seen an increase in those expats selling property and repatriating the funds to the UK. If this is the case for you, then it’s worth noting the recent trends and strong sterling against the single currency. A forward selling contract might be the way forward for locking that exchange rate in one of the dips in trade in order to maximise returns.

The greenback, as mentioned continued to rally against the pound yesterday gaining another cent to add to the 6 cents already gained over the past 10 days. Investor sentiment is low the crisis in Europe develops daily and with the UK previously being favoured as the safe bet, the thought of recession, reduced growth forecast and the chance of further QE has changed that thinking. The pound is now wide open to negative sentiment and data releases which recently its seemed immune too. As the week comes to a close today and we enter the final few days of the month will the pound hold up or will investor sentiment continue to push sterling lower?

Today is very light on data with only a German consumer confidence survey to digest and across the pond the Reuters consumer confidence index later in the day. As news that Bankia shares in Spain have been suspended this morning ahead of an expected bailout call from the bank to the Government it could be another jumpy day for the Euro, but as we know these markets are very unpredictable so only time will tell!


Euro And US Dollar Gain Value

Last week saw a dip in exchange rates for the Pound against both the Euro and US Dollar. In the USA, non-farm payrolls on Friday showed that more jobs had been created than expected, which gave the dollar some strength, and in Europe private creditors holding Greek debt agreed a write-down of value which means that the EU bailout can go ahead, giving the Euro strength too.

The Pound also finished the week lower against the Canadian, Australian and New Zealand dollars. Interest rates were held as expected last week in the UK, Eurozone, Australia and Canada, having little effect on exchange rates, and the Bank of England also held Quantitative Easing at its current level.

This week, the main data in the UK is unemployment, due out on Wednesday morning. After recent news has been positive for the UK and the Pound, sterling is vulnerable to any negative data and exchange rates could fall on Wednesday if the headline unemployment rate increases from 8.4%.

Elsewhere, if you are buying or selling US Dollars, keep an eye on the FOMC minutes released tomorrow (Tuesday) at 7pm, and Friday’s inflation figures, while if you are looking to make a Euro transfer, the ECB monthly report on Thursday will be important, as will Wednesday’s CPI inflation figures. The Euro may have scope for more strength (lower exchange rates) this week now that the Greek bailout looks set to happen, despite question marks over the long-term sustainability of the deal.

Many of our clients are currently using Forward Contracts to lock into rates for the coming months, and if you would like to see what kind of rates are available to fix for your own requirements, please fill out the contact form or contact me directly sre@pounddollarexchange.co.uk.


Data Heavy For Buying Dollars

If you have a buying dollar requirement, whether its Canadian or US be aware of the various data releases today which will influence your purchase. Following the UK data this morning we are already seeing pound weakness across the board and this afternoon the following releases will bring further movement.

Canada:

Unemployment Rate, Net Change In Unemployment (both out at 12pm) & the less influencial International Merchandise Trade & Labour Productivity figures (at 1.30pm).

US:

We have a raft of major employment data which historically can lead to major swings in the exchange rates,

Non-Farm Payroll, Average Hourly & Weekly Earnings, Unemployment Rate & Trade Balance all at 1.30pm. Later the GDP estimate and Wholesale Inventories come out at 3pm.

Keep up to date with the outcomes and rate changes here at pounddollarexchange or contact me directly if you have a requirement and would like to be kept posted on developments.


Cable Slides Off Poor House Data

Pound to US dollar exchange rates (known as Cable) fell as the Halifax house price index figures came out lower than expected. We have seen a full cent gain by the dollar since trade opened, dropping below 1.58. Recent figures from the US have been good and although one would expect a stronger currency off the back of positive figures the case has been the opposite. Euro Dollar rates also pushed lower following the weak Euro zone GDP figures earlier today, with the dollar gaining 75 points so far.

The USD is seen as a safe currency so when investors are worried about global economic factors the dollar is bought up making it stronger. As America is the largest global economy, if data is coming out better than expected investor confidence grows, they are less worried and investments become riskier. The result of this is selling off the safe haven dollar and buying riskier currencies like the “commodity” led Canadian, Aussie and NZ dollar and to some extent sterling.

With no data out from the States today we may well see the slide in cable continue but over the rest of the week comes a raft of employment and jobs data so check back for updates on how the rates are affected. If the key non-farm payroll figure on Friday comes in better than expected I predict we will see higher pound to dollar exchange rates. If you have a requirement register your interest at sre@pounddollarexchange.co.uk and I can keep you posted as data releases unfold.