Monday 29 October 2012

A volatile week for the Pound/Dollar cross


Last week saw a huge swing for the sterling dollar cross. After the previous weeks high of $1.6178 sterling fell to its lowest levels in six weeks before rallying and gaining 1.5% to claw back the deficit. In this week’s report we will take a closer look at the events which caused the move and what is predicted for exchange rates in the coming weeks.









Early last week we saw the pound fall to its lowest levels since the beginning of September, hitting a low of $1.5919. The move tracked a fall in the euro against the greenback as falling stock futures in the U.S prompted investors to sell riskier currencies and head back to the safe haven of the U.S dollar.

However, the gains for the dollar did not last as there was finally some positive news for the UK economy. Last week saw the release of the UK GDP figures which confirmed that the UK had finally climbed out ofrecession with better than expected data. Official figures from the Office of National Statistics showed the UK economy had grown by 1% in the 3rd quarter beating estimates of 0.6% which pushed cable back over the 1.61 mark.

Although at first glance it looks great for the UK, the higher figures can be put down to a couple one off events. Olympic tickets sales are believed to have boosted the economy by 0.2% and with the extra bank holiday for the Queens Jubilee, the figures seemed enhanced when compared to the previous quarters. In the next couple of months the data will be revised and it is possible we could see the growth figures reducedwhich could again cause some volatility in the currency markets.

Despite the positive news last week concerns over the UK economy will remain as we are still seen as being vulnerable to the troubles surrounding the euro-zone, especially as they are our largest trading partner. As a result the majority of market analysts expect sterling to struggle to reach the 1.63 mark we saw earlier in the year. There is also the growing speculation to whether the Bank of England will opt for further stimuluswhen they meet next week. Last week BoE Governor Mervyn King said the central bank were ready to injectmore cash into the economy if the recent positive signs fade.

If policy makers were to add to the £375 billion they have already pumped into the UK, we could well see sterling lose the ground it made against the dollar when Fed Chairman Ben Bernanke agreed to add $40 billion per month in to the U.S economy for the foreseeable future.

With so much volatility surrounding the currency markets at the moment it is as important as ever to stay in touch. I can talk you through the different types of currency contracts that are available to ensure you get the timing exactly right and that you make the most from your currency transaction.Click here to complete the contact form for a free, no obligation consultation.

Thursday 18 October 2012

Sterling rallies following postive UK retail figures



Thursday saw a swing in rates for the pound/dollar cross following better than expected retail sales data. Early trading saw cable climb by nearly half a point following the positive UK data but the cross could not sustain the move a gradually fell away, tracking a fall in the euro against the greenback.

Data released by the Office of National Statistics (ONS) showed that UK retail figures had increased by 0.6% for September compared with a 0.1% contraction in August. The rise was put down to demand for school and winter clothing and helped sales recover following poor figures in August due to the Olympics. The positive news saw the GBP/USD cross rise from $1.6117 to $1.6168, edging back to the high of $1.6180 we saw on Wednesday following the better than expected UK employment figures.

This positive news for the UK will lead to further speculation regarding the Bank of England QE programme. Many experts had predicted the BoE will add to the £375 billion they have already pumped into the UK economy, but if GDP figures show the economy has grown in the third quarter we may see them hold of for the time being. If the BoE were to opt for further stimulus we could see sterling come under pressure and rates could fall against a number of different currencies.

Trying to predict the currency markets is almost impossible to predict, with so much volatility in the markets getting the timing right on your currency transaction in one of the most important things you can do. If you want to make the most from your currency transfer click here to complete the contact form for a free no obligation enquiry.