Sterling falls to lowest levels for five months

The last 24 hours have been fairly volatile for cable, since yesterdays post GBP/USD rates have fallen to there lowest levels for five months. Last night rates dipped to $1.5807 a level not seen since August 2012 before recovering back just below $1.59. In today's post we will take a look into events that caused this movement and what we can expect over the next few days.

Despite some negative news first thing this morning the pound slowly recovered over the course of the day. Early on saw the latest UK public net borrowing figures released. The Office for National Statistics (ONS) reported that Government borrowing had increased slightly for the month of December and will once again add to the increasing speculation that the UK's prised AAA credit rating could come under threat. If the UK was to have its rating downgrading it could mean sterling will seem less appetising for investors which means the value of the pound could drop against a number of different currencies.

One positive for the UK today was the 10 year bond auction, results were more or less as expected and lent some much needed support to the to the pound. After the auction cable rallied and reached a high of $1.5892 by mid afternoon.

However, the recent climb may be shorted lived, this evening Bank of England (BoE) Governor Sir Mervyn King is due to hold a press conference. In tonight's speech Sir Mervyn will talk about how the BoE view the current UK economy and the value of the pound. His comments can lead to some swings in rates as they may determine a short-term positive or negative trend.

Since the turn of the year cable has been on a downward trend, since the 11th January rates have dropped by nearly 2.2%. This is not all down to Sterling's troubles, the temporary package put together by President Obama to stop the U.S going over the fiscal cliff went a long way to increasing investor appetite for the greenback, but with the official GDP figures for the UK due for release on Friday many analysts believe we could see rates continue to fall.

If you need to buy or sell dollars in the coming months, it is vital you know what tools are available to help you make the most from your currency transfer. With a range of currency contracts available, not only can you secure your rate of exchange for up to two years in advance but also ensure you get the timing right on your transaction. If you haven't done so already click here to complete the contact form for a free, no obligation consultation. 

Cable weekly overview

Last week was a negative one for GBP/USD as the dollar started to retrace some of the losses it made against sterling over recent weeks. Cable has been a volatile cross over recent weeks due to both troubles in the UK and the ever mentioned fiscal cliff.

 

 As the graph above shows we opened around the 1.6150 mark and have steadily declined throughout the week.  With well documented troubles regarding the fiscal cliff in the US many clients are asking why the dollar is strengthening day on day against the pound. The answer is fairly simple, the US are making all the right noises at a time where the UK are making all the wrong noises and showing signs of entering into a triple dip recession.

The Christmas period was better than expected for the US economy with better than expected retail sales in November and December which was only revealed in Wednesdays FED Beige Book. It means the economy in the US has started to grow and show positive signs to grow further.

The Beige Book also revealed that the manufacturing sector was still under performing and the effects of the fiscal cliff were still having a knock on affect to the markets. This news caused the pound to start making small gains against the greenback. That was until jobless claims were shown to have reduced by over 30,000 killing off any rejuvenated hope from the UK.

So why is the pound so weak?

The UK is still under threat of losing its prestigious triple A credit rating by both Moody’s and S&P ratings agencies. A downgrade would reduce investors risk appetite and increase the likelihood of investors looking for a safe haven currency like the greenback. The main cause for sterling weakness however is the imminent threat of the UKentering into a triple dip recession.

A recession is caused by two consecutive quarters of negative growth. The fear for the UK markets is that recent data releases such as our recent GDP estimate of -0.3% indicate that the last quarter of 2012 was worse than expected and the first quarter of 2013 could follow suit. Later this week the official GDP figures are released and if they match the estimates it is highly likely we could see sterling lose even more ground against the dollar.

Either way you look at the market it is a difficult time to gauge any future movements, reinforcing the importance of staying in close contact and utilising the tools that are available. Click here to complete the contact form for a free, no obligation consultation.

 

Sterling falls to fresh lows

Sterling continued to lose ground against the greenback today as rates once again dropped below $1.60.
A lack of data releases from the UK meant that the pound was at the mercy of events around the globe and in today's post we will take a closer look at sterling's movements and the events that triggered this latest decline.

Over the course of the morning sterling climbed gradually against the dollar as markets reacted to the U.S beige book report from the previous evening and at its highest point mid-market levels reached $1.6040, well short of the $1.6150 we witnessed earlier in the week.

 

Yesterdays FED beige book (which consists of the 12 Federal Reserve districts) reported that the U.S economy is witnessing some growth, economic activity has picked up speed since November, thanks mainly to an increase in retail sales leading up to Christmas.

However, it was not all good news, the report also detailed that the manufacturing sector was still under performing and the fiscal cliff was still having a knock on affect on investor confidence. Unemployment still remains high on the FEDs agenda, they have indicated that reducing the long-term unemployment rate was a priority.

The gains that sterling made during the morning soon evaporated, US initial jobless claims came in much better than forecast and will have been seen as a major positive by the Federal Reserve. The consensus has been for the numbers to fall against the previous month but figures released actually showed the number of first time claimants had dropped by nearly 30,000 more than forecast.

As the data was released cable dropped by nearly 0.5% to hit a low of $1.5960 for the day. to reach it lowest levels for a number of weeks. With the pound seeming to come under enormous pressure, the potential for rates to carry on declining seems to be growing. Sterling has fallen across the board since last weeks GDP estimates and with the official figures due for release on the 25th we could see cable slip even further from the $1.60 mark.

To put the sudden drop into perspective a $200,000 dollar purchase would have cost you nearly £700 more after the decline and the  it once again outlines just how volatile the markets can be and how important timing can be. If you need to buy or sell dollars in the coming months click here to complete the contact form for a free, no-obligation consultation.

GBP/USD exchange rates lose over a cent

Good afternoon, today saw the pound lose the gains that where made last week against the dollar as poor euro-zone data increased safe haven flows into the states and increasing the value of the greenback.

Rates dropped from a high of $1.6154 to $1.6035 as euro-zone factory output fell again for the month of November, the decline is the third consecutive month and comes despite predictions of a rise.











Tuesday could see further movements as the UK data releases come thick and fast. Tomorrow we will see Retail and Producer Price index (RPI and PPI)  along with Consumer Price Index (CPI) for December. This will give another indication to whether the UK economy contracted in Q4 of 2012 and could fuel speculation that further stimulus is needed from the Bank of England (BoE).Most forecasts show they are expecting a rise in figures from November but following Fridays surprise negative GDP estimate the door is open for further declines.

Over in the states some analysts believe the U.S economy could be on the up, last week saw the U.S trade deficit widen as imports of consumer goods increased unexpectedly in November. Import of goods increased by $4.6 billion and could be a sign that the U.S retail sector is growing and that spending is increasing.

As mentioned in previous posts there seems to be a fair amount of focus on the UK at the moment and a run of poor data tomorrow and over the course of the week could well see GBP/USD rates drop back below $1.60.

With so much volatility in the currency markets it is vital to get the timing right on your currency transaction.With a number of currency contracts at my disposal we can work together to ensure your money goes as far a possible. If you would more information click here to complete the contact form for a free, no obligation consultation.

Sterling/dollar weekly forecast and overview

Last week saw some big movements for the GBP/USD cross. Early on we saw sterling fall to its lowest levels for a month to $1.5995 before a 1.1% gain towards the end of week saw cable push back towards $1.62. The gains came despite a relatively poor week in terms of data releases from the UK, so what caused the spike in rates? In this week’s report we will take a closer look at to what caused this unexpected rise.

The Bankof England (BoE) and their policymakers met last week to discuss UK interest rates and their stimulus package. They met on Thursday and as expected kept interest rates on hold and decided against adding to the existing Quantitative Easing Programme (QE) and as a result there was little movement between the currency pair.  

One thing that would have been on the agenda in regards to stimulus would have been the poor retail sales data that was released at the start of last week. Figures released from the British Retail Consortium showed that Christmas sales barely increased for retailers and will once again fuel speculation that the UK economy may have contracted for the final quarter of 2012.

All eyes were on the initial UK GDP estimate released on Friday afternoon, it had been predicted for the economy to grow by 0.1% but the actual figures showed a contraction forecast of -0.3%. As the data was released sterling fell just over half a point from $1.6160 to 1.6095. With Manufacturing and Industrial Production figures for November released on Friday morning also came in well below forecast, the UK is facing the possibility of a triple-dip recession. (Recession is two consecutive quarters of economic contraction) The focus will now turn to the 25^th Jan when the official GDP figures are released, if the report shows the UK economy has contracted again questions will be raised as to how the BoE will attempt to solve the crisis.

Some analysts are predicting we could see a further £50 billion of QE in the first half of 2013 and if the BoE opt to go down this road again it is likely we could see sterling lose ground against a number of currencies. (Under QE the bank creates money and uses it to purchase government bonds to try and stimulate the UK economy)

Despite the poor data and uncertainty surrounding the UK we did see a big spike for cable on Thursday. As mentioned in the Euro report, Mario Draghi did an excellent job in talking up the euro, increasing investor appetite for riskier currencies. This led to investors pulling out of the safe-haven dollar and heading back to the single currency, weakening the dollar which in turn pushed rates towards $1.6170.

So what next for the GBP/USD cross?

This recent surge may only be temporary. Over the last couple of weeks we have seen a steady decline for the pound against the dollar, the package put together by President Obama to avoid the U.S falling over Fiscal Cliff seems to have done its job and lent some much needed support to the greenback. With the UK coming under threat from losing it prized triple-A credit rating (which means investors could lose confidence in the pound) and safe haven flows into the UK easing as the euro-zone stabilises the potential for the pound to weaken against the dollar will continue to grow.

To put last week’s movements into perspective, if you were looking at purchasing $200,000.it would have cost you nearly £1400 more at the start of the week compared to Thursdays high. It also highlights just how important it is to get the timing right on your currency transfer and to stay in touch. If you haven’t done so already click here to complete the contact form for a free, no-obligation consultation.

Sterling rallies against the dollar as rates climb by 0.75%

After yesterdays decline sterling rallied against the dollar today as rates recovered and climbed almost 0.75%. At the start of the day the mid-market price was hovering just over the $1.60 mark before hitting $1.6133 in the afternoon. In today's post we will take a closer look into the events that caused this sudden spike.

There was little movement in the currency markets as the Bank of England announced (as expected) to keep interest rates on hold and to not extend their quantitative easing (QE) stimulus programme.

QE is when the bank will create money to pump in to the economy to try and stimulate growth, in the past when the BoE has injected cash it has flooded the market and weakens the value of pound. This tends to mean you will see sterling fall against a number of currencies.

Although the bank has opted not to go down the QE route this time round, it will be interesting to see how policy makers voted when the minutes of today's meeting are released later in the month. Many analysts still feel the bank could look to add to the £375 billion they have pumped into the economy so far, especially if figures released on the 25th of this month show a contraction in growth for the final quarter of 2012.

The main driver for the rise in today's rates came as the European Central Bank (ECB) President Mario Draghi spoke after the Central Banks monthly meeting, he said that policymakers voted unanimously to keep interest rates and hold, lending extra support to the single currency.

This led to a sudden drop for the GBP/EUR cross but at the same time caused a sudden spike for cable, Investors would have been buoyed by Draghi's comments with investor appietite returning to riskier assets. This caused the GBP/USD cross to jump from $1.6045 to $1.6133 in the space of a few hours.

To put this rise into perspective, if you were looking at purchasing $200,000.it would have cost you nearly £1000 less in the afternoon than first thing this morning. It also highlights just how important it is to get the timing right on your currency transfer. Click here to complete the contact form for a free, no obligation consultation.

Sterling falls to its lowest levels in a month

Wednesday saw sterling fall to its lowest levels in a month against the dollar to $1.5995 during the afternoon.The GBP/USD cross fell by nearly 0.5% over the course of the day as weak sales data released in the UK highlighted the issues still surrounding the UK economy and future growth.

The recent data release from the British Retail Consortium showed that Christmas sales hardly increased for retailers and will once again fuel speculation that the UK economy may have contracted for the final quarter of 2012.

Weak data from the UK could increase the chances of further quantitative easing from the Bank of England in coming months and could come under discussion when policymakers meet tomorrow at their monthly meeting. Today's data is unlikely to cause a knee jerk reaction though, as it is widely expected that the BoE will keep interest rates on hold and refrain from adding to the current QE programme to try and stimulate further growth.

So what next for cable?

Over the last couple of weeks we have seen a steady decline for the pound vs the dollar. The temporary package put together by President Obama and White house representatives to avoid the U.S falling over Fiscal Cliff seems to have done its job and lent some much needed support to the greenback. With the UK under threat from losing it prized triple-A credit rating (which could mean investors losing confidence in the pound) and with the euro zone crisis easing, safe haven flows into the UK are also slowing. If things continue as they are it is possible we could see rates continue to fall.

If you are thinking of buying or selling dollars in the coming months there are a number of tools at your disposal to make the most of your currency purchase. Click here to complete the contact form for a free, no obligation consultation.