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.

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.

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.

GBP/USD weekly overview

In this week’s GBPUSD report we will have a look at what events have dominated the cross and how they have affected the markets. Last week the single focus of cable was the run up to the Federal Reserve interest rate and Quantitative Easing meeting on Thursday.

  

Even as early as Monday the market was pricing in some sort of stimulus intervention as Cable reached a 4 month high. The trend of sterling strength against the dollar was maintained  on Tuesday as markets continued to price in movement coupled with a threat by ‘Moody’s Investors Service’ that the US was in danger of losing its triple A debt rating,  if next year’s budget talks do not result in lower debt to GDP ratio.

When the results finally came in late Thursday UK time the conclusion certainly didn’t disappoint those expecting some action. Ben Bernanke backed the purchase of $40 Billion of mortgage backed securities every single month until US growth as well as the US job market improves. In addition Fed Chairman Bernanke added to his commitment to get the US economy moving through spending by confirming that interest rates in the US would remain low and wouldn’t be raised until 2015 at the earliest.

This is probably the most decisive action that the market has seen from the US to deal with the financial crisis since its inception. At the very least it sends a clear signal to the rest of the world that the US are prepared to do everything necessary, including trying new strategies to navigate their way out of recession and into competitive growth.

Naturally following this announcement cable continued its upward trajectory as equities and perceived riskier currencies (including Sterling) made gains against the Greenback. With the Fed Chairman indicating that he would be prepared to pump $40 Billion into the economy every month until it has an effect, the market has the potential to continue the current trend of Dollar weakness. Essentially Mr Bernanke has embarked on an endless amount of quantitative easing and so it will be interesting to see how far the markets move off the back of this uncertainty.

Whilst this is undoubtedly a great time for dollar purchasers to be taking advantage of the recent gains, it would be wise to approach the market with some trepidation as the FX markets are notoriously volatile. Despite a clear shift in fundamentals there is no absolute guarantee that the technical levels will follow suit, and indeed there have been countless occasions throughout history where a sharp market movement has been followed by an equally sharp market retraction. To discuss the different type of currency contracts that are available click here to complete the contact form and take the next step to making the most of your currency exchange.

 

Weekly Economic Data that may affect exchange rates

Monday – The main data today is Trade Balance data from the Eurozone, showing imports and exports. Elsewhere we have UK House Prices. There are no significant releases from the USA today.

Tuesday – Some important UK data today including Inflation data, House Prices and Retail Sales, all of which are a barometer of overall economic health. In the Eurozone we have Economic sentiment surveys from Germany and the EU. In the USA we have a speech from the Federal Reserve, and some Housing data.

Wednesday – The Bank of England release their minutes today, which often causes volatility for Sterling. In the Eurozone we see the latest construction data output. In the USA there are Homes Sales data and another speech from the FED. Over in New Zealand we see the latest GDP figures at 11:45pm.

Thursday – UK Retail Sales are released today, showing full monthly and annual comparisons. In the Eurozone we have inflation data from Germany, Manufacturing data from Italy, Germany and France. We also see measures of EU Consumer confidence. Over in the USA we see the latest Jobless Claims, Manufacturing data, and yet another speech from the FED.

Friday – We end the week on a quiet note, with the only UK data of note Public Sector borrowing. There is nothing of note from the EU today. Over in the United States we have, you guessed it, another speech from the FED.

Weekly overview

The UK markets reopened after the bank holiday weekend and with no major data releases at the start of the week Sterling was driven by events from the States and Euro zone as everyone awaited Ben Bernanke’s speech on Friday.

Increased optimism around the Euro zone saw investors move from the safe-haven of the dollar as the Euro gained ground. We did have some good news out of the States as revisions showed that the economy had slowed less than previously estimated (1.7% up from 1.5%). The US is in much better shape than Europe and the UK but the next couple of weeks will determine in which way the rates will move and be affected.

 

If the Euro crisis continues as many expect; we could see more uncertainty as investors will instinctively move back into the safe haven of the dollar and we could see GBP/USD rates in the 1.54’s and EUR/USD rates back into the low 1.20’s. Sterling dropped against the dollar on Thursday as investors awaited the speech by Federal Reserve Chairman Ben Bernanke.

Bernanke spoke at Jackson Hole on Friday; his comments were to determine the value of the dollar and ultimately whether we were seeing a positive or negative trend for the US Economy. Bernanke stated that “the first two rounds of Fed asset purchases had raised US output by almost 3% and lifted employment by 2m jobs and thus wasn’t going to rule out further asset purchasing. The Fed chairman also urged Europe to press ahead with policy initiatives to resolve the ongoing crisis. Markets remained relatively unchanged as Bernanke said the “Fed would act as necessary to strengthen the struggling global economy, but there was no suggestion that action was imminent” halting speculation of more Quantitative Easing (QE).

September is notorious for being very volatile and no doubt this month will not disappoint, all eyes will be on the single currency and whether the ECB and German courts can wave through a realistic and convincing EU rescue plan, which could see EUR/USD rates back towards 1.30 and GBP/USD rates up near the 1.60 mark. With the Bank of England meeting due to take place next week all eyes will again be focused on Mervyn King and we will wait to see if there is any talk of another interest rate cut for the UK.

If you have an upcoming currency requirement now is the time toact, click here to complete the contact from for a free, no obligation quote to see how much you can save.