Daily Archives: June 30, 2011
The Pound has continued to weaken against the Euro even with the ongoing Greek debt issues.
To many it just does not make sense just how the Euro continues to gain against the Pound with all of the problems in Europe, and if I am honest then I personally am quite surprised we aren’t closer to 1.20 than 1.10, however by the look of it we may well even drop well below 1.10 in the near term before things get better.
One of the helping factors this morning is the new leader of the IMF being European, this suggests that they will be slighly more pro Euro assistance and could well continue to strengthen the Euro over the course of the week. The head of the European Central Bank Jean Claude Trichet also has been hinting throughout June that we should see another rate hike for Europe.
For those that aren’t aware, a rate hike is generally seen as positive for the currency concerned however I personally believe this one has been priced into the market already. Today we see Greek Austerity measures hitting the headlines, personally I feel we may see a little Euro weakness dependant on the outcome as I feel there could be big trouble over there should this be passed.
In short, an important week ahead for the Euro – watch this space for how things actually pan out.
The Pound has been range bound against the Dollar of late, I would expect this to continue in the near term without any major surprises popping up. It seems that the Pound is dipping just over and just below the 1.60 barrier.
Sterling New Zealand Dollar
A tricky currency pairing of late – The New Zealand Dollar has made huge gains against the Pound of late and this is due to a couple of factors in my opinion.
Firstly, carry trading is playing a huge part in todays market – this is where someone borrows money in a currency with a very low interest rate (JPY,GBP) and shifts the funds over to a currency with a very high interest rate (AUD, NZD) gaining their return on the interest.
This some day I believe will unwind rapidly and cause huge weakness to the Australian Dollar and New Zealand Dollar, however we could well be waiting quite some time to see this.
Secondly, much like Japan – I believe that New Zealand may be selling off their investments worldwide and bringing them back into NZD in order to fix and recover from the horrible earthquakes that have rocked their capital of late.
Sterling Swiss Franc
Personally, I cannot see the rates against the new fashionable safe haven of currencies for too long. It will no doubt start having an impact on the Swiss and things have to turn around at some point.
Those with CHF mortgages must be having a nightmare, I know this because I deal with many and I really do feel for them!
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For anyone with a Euro requirement, the recent saga in Greece has caused much uncertainty and left Euro buyers not knowing which way to turn. Yesterday the Greek parliament had a key vote to push through severe austerity legislation to ensure that bailout funds from the EU/IMF keep the economy from collapse.
A close 155-138 vote was crucial not only for Europe but also for “the stability of the world economy,” said European Union President Herman Van Rompuy.
A second vote will happen today aimed at reforming laws to allow the package to be implemented. If approved, European Finance ministers will then meet on July 3 to approve the next bailout tranche and discuss options to ensure continued financing for the country.
Tens of thousands of Greeks have been taking to the streets since early on Tuesday with 48 hours of strikes by 80% of the population. This as a mark of protest against what they see as unreasonable demands from the EU and IMF with huge austerity cuts.
I believe that if the politicians had not approved the bill, Greece would have been pushed to the brink of defaulting on its debts and the country would have gone down the pan. But even though the government has won backing for its plan, the nation’s problems seem to be far from over.
From the currency perspective the pound bounced back from an 8 week low against the single currency in what was a very volatile day for word markets and today will surely be the same.
For those of you hoping that the issues in Greece would dent the impressive flight the Euro has taken, I think you may have further disappointment around the corner. There have been strong rumours that the ECB will raise interest rates again next month and when this occurred at the beginning of April the pound lost 3 cents over the course of a week. If you couple this with recent weak UK economic data I think the pound will weaken further and levels of 1.08/1.09 are just around the corner.
Sterling’s biggest loss of the day was against the CAD yesterday as Canada’s annual inflation rate jumped to the highest level in eight years last month, rising to 3.7 per cent, much higher than economists had expected. That prompted speculation that the Bank of Canada may have to raise interest rates earlier than expected and calls are for a rate hike before the year end. The pound lost around 2 cents against the CAD after the data release. If you had traded before the data release you could have achieved an extra $3780 on a £200K purchase.
We have seen the pound fluctuate by over 6 cents in the last month alone and for those with a requirement to buy Canadian Dollars the outlook is bleak if interest rates start to rise by the year end.
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