Posts tagged “safe haven

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.

 

 


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.