Cable weekly overview

With the US presidential election out of the way, markets last week were centred around discussions over the impending ‘fiscal cliff’, due to be implemented in the new year. The fiscal cliff is a combination of massive spending cuts and tax increases and is expected to send the US back into recession. Movements in the GBP/USD were also largely driven by events in Europe as the rate tracked movements in EUR/USD, pushing Cable to near a two-month low with concerns over Greece encouraging safe-haven flows into the US currency.

Sterling recovered somewhat on Tuesday morning as better than expected inflation figures were released for October. The pound consequently jumped half a cent against the dollar, breaking back through the $1.59 mark. However, its recovery was only temporary with sterling’s gains evaporating as market players realised that UK policymakers would be more concerned with encouraging economic growth than controlling inflation, fuelling speculation that more quantitative easing would be announced in the near term. Sterling continued to slide, losing nearly half a percent against the U.S dollar midweek, despite official figures showing unemployment had fallen by nearly 49,000 for the months July-September. Cable fell from high of $1.5914 back to $1.5840 as Sir Mervyn King announced that the Bank of England had cut the UK growth forecast for 2013 back to 1%.

We also saw the release of another batch of poor UK data as retail sales for October came in much weaker than expected, falling 0.8% month on month. Analysts saw this release as significant as it had been expected that retail sales would begin to stabilise. This raised fresh concerns that the UK would soon lose its triple A credit rating if the country recedes into a triple-dip recession. As a result, GBP/USD continued to drop further, despite poor data across the pond, with jobless claims worse than expected. However, questions were raised as to whether this was partly due to Hurricane Sandy.

With so much uncertainty in both the US and Europe, markets are particularly volatile at present. It is not unusual to see movements of more than 2 percent over the course of a trading week. If you are buying a property overseas, or if you have foreign invoices to pay, the cost of your goods or property will fluctuate in line with movements in the foreign exchange markets.

As a specialist currency broker,  I can provide you with various tools to limit your exposure to wild swings in the currency markets. Forward contracts, Stop Loss and Limit orders are all useful if you are working to tight budgets or are simply looking to maximise the return on your currency. Click here to contact me today for a free, no obligation consultation and take the first step to making the most of your currency.

Sterling loses ground on the back of BoE growth cut

Sterling fell by nearly half a percent against the U.S dollar on Wednesday despite official figures showing unemployment had fallen by nearly 49,00 for the months July-September. Cable fell from the days high of $1.5914 back to $1.5840 as BoE (Bank of England) Governor Sir Mervyn King announced that the central bank had cut the UK growth forecast for 2013 back to 1%. 


 







The positive news for the UK continued this morning (Wednesday) as the unemployment figures were released, The Office of National Statistics (ONS) announced that unemployment had fallen to 2.51 million largely thanks to a decline in youth unemployment. This latest data release  pushed the pound back over $1.59 mark early doors, but could not sustain the gains as Sir Mervyn presented the BoE quarterly inflation report.

Despite the recent UK GDP growth for the 3rd quarter the report said the UK could be stuck in a "low-growth" environment,  as  the continuing economic issues surrounding the euro zone and the rest of the world would continue to impact the United Kingdom.

Sir Mervyn indicated that growth would continue to zig-zag, and that the growth for the last quarter (July to September) was influenced by a number of one-off events, such as the Olympics and the Queens Jubilee. These events over inflated the figures and are not necessarily "a reliable guide to the future".

Later on today (Wednesday) we could see further movement for cable as The Federal Open Market Committee (FOMC) minutes are released from their latest meeting. The FOMC meet eight times a year  to review economic and financial conditions in the U.S. The minutes are released by the Board of Governors of the Federal Reserve and are a clear guide to the future US interest rate policy.

With the volatility set to continue it is important as ever to get the timing right on currency transfer. To put today's rate movements into perspective a £200,000 would have seen a difference of nearly $1500 between the high and low of the day. At Foremost Currency we have a number of different currency contracts that can protect you from adverse market movements or help you target a rate that is not currently achievable. To take next step click here to complete the contact form for a free, no obligation consultation to see how we can make your money go further.

GBP/USD weekly overview

The US presidential elections took centre stage last week as markets eagerly anticipated the results. Polls
suggested the race between Barack Obama and Mitt Romney was too close to call and, as a result, the
uncertainty over the outcome encouraged safe haven flows into the dollar, pushing it higher against the
pound. On Monday alone the buoyant US currency gained 0.4% against sterling.
 

As it was announced that Obama had in fact won the election, and by a fairly substantial margin, the dollar
lost ground against the pound as investors began selling the US currency. Victory for Obama was seen as
ensuring easy monetary policy in the States in the near term. However, sentiment quickly changed and the
dollar subsequently rose to a two-month high against most major currencies.

Concerns over the looming fiscal cliff helped boost demand for the safe-haven greenback, keeping GBP/USD rates below the 1.60 mark. The ‘fiscal cliff’ is essentially a mixture of tax increases and spending cuts, due to extract around $600 billion from the US economy. The year-over-year changes for fiscal years 2012-2013 include a 19.63% increase in taxes and 0.25% reduction in spending. The fiscal cliff is expected to increase the chance of the US entering recession again in 2013. As is often the case, concerns over the world’s largest economy actually strengthen its currency, as investors move their assets into the safe-haven dollar. After the dust had settled from the US election, the focus quickly shifted to Spain and talks of another
bailout for the struggling nation’s economy.

The dollar made further gains against sterling as it was announced that Spain was in no hurry to seek another bailout, encouraging further safe-haven flows into the dollar. Another bailout would be seen as positive for Spain and the Eurozone as a whole.

The attention was entirely on Europe as the week drew to a close with key announcements from both the
Bank of England and the European Central Bank. On Thursday the Bank of England announced that they
would not be opting for further monetary stimulus in the near term after better-than-expected GDP figures
eased concerns over the state of the UK economy.

As stated in the Euro report, the UK’s central bank also decided to keep interest rates on hold, as did the
ECB. Sterling subsequently rose against the dollar, recovering from a two week low of $1.5930 struck earlier in the day.

Despite some positive news from the UK, GBP/USD rates plummeted on Friday, with the cross trading around the $1.59 level as markets began winding down ahead of the weekend. There is so much uncertainty surrounding the U.S and UK economy, getting the timing right on your currency transfer remains critical.


If you need the best exchange rates, the first step is to contact me for a free consultation. Click here to complete the application, I can then let you know the options available to you, making sure you are not caught out by adverse exchange rate movements, and ensure you make the most of your currency.