Daily Archives: June 1, 2012
GBP weakenes to a 4 and a half month low against the USD and rocks against the Euro!!
Sterling exchange rates have had an extremely bumpy ride today. The pound fell to over a 4 and a half month low against the USD and witnessed losses down to 1.2370 against the Euro.
The reason for sterling dropping across the board was down to more negative data to come out of the UK economy. UK manufacturing showed that activity shrunk at its fastest pace in three years. With the UK economy already under massive stress showing that we are officially in a recession, this latest data release has put a lot of stress on the exchange rate.
Every time that we see negative data for the UK the markets are interpreting it that we will see the Bank of England initiate more QE and this makes the pound fall even further. After all we all know what the mere mention of QE does for the pound.
If you are a seller of Euros to buy sterling then this morning brought a small glimmer of hope where you could have capitalised on the Euro spike. The bad news is that the pound has marginally recovered and it is unlikely that we will see any further major declines for the pound against the Euro as I feel that the major issues in Europe outweigh those of the UK economy.
Against the USD the pound has had its worst week since November last year. The Bank of England has stated that as issues persist in the Euro zone, the UK economy will be under pressure and sterling will more than likely fall.
We have a very long bank holiday weekend for the golden jubilee. Because the UK will be closed for business the currency market will still be moving around so you may be wise to get any limits in the market prior to close of business. You can email me with your requirement and details at bma@currencies.co.uk so we can discuss the best options that are available to you.
Euro latest and U.S GDP figures released at 13:30pm – Volatile day for GBP, EUR, USD, AUD, NZD, ZAR, CAD, CHF
The Euro will remain the main talking point for weeks and months to come. Bond markets are showing extreme stress which is usually the first sign of a crisis. The problem is that it this is all unprecedented and I do not believe anyone actually knows what to do. We have elections up and coming in the next few weeks across some of the most noted economies in trouble which could lead to absolutely anything.
In fact, last night on the BBC news a 5 minute report on Spain and the problems there suggests that they may be next to step in line for a bailout – A record 66 Billion Euros was taken out of Spanish banks by citizens and investors in March, the highest since records began. Along with this there were anti austerity riots in the streets and many protests across the country. Spain still stand tall and say they do not want a bailout and should not need one… but so did Greece… and Ireland and Portugal just before they got one. Just how much money does the IMF have left?
My personal thought is that I do not feel Sterling will fly much higher against the Euro unless something absolutely huge comes out that is Euro negative. Even when we do see bad news for the Euro it brings further worries to the U.K and indeed the pound as we are vastly exposed to European problems too, the main benefactor in all of this (as it has been in the last few weeks) will more than likely be the Dollar.
U.S GDP and Non-Farm Payroll
U.S GDP figures came out yesterday afternoon along with a host of other data which actually led to the Dollar gaining a little strength yet again.
In times of uncertainty you do tend to see the Dollar gain strength as investors pull of riskier assets and look for a ‘safer haven’.
Today at 13:30pm we have a data release important for those with a Dollar interest and indeed interest in the ‘riskier’ currencies such as the AUD, NZD and ZAR. Non-Farm Payroll data is essentially the number of people in Non-agricultural employment over in the States and is a key indication as to how their economy is performing.
This release can cause quite a lot of volatility because predictions are made in advance and these can be wildly out. The market moves on rumours and predictions as well as fact, and should the figure come out quite a way from initial predictions the market does correct itself rather swiftly.
The reason this effects the AUD, NZD and ZAR and pretty much most majors is because as I am sure you can imagine it will affect attitude to risk and will lead to rapid movements of large amounts of money globally in what generally presents
a volatile end to the week in advance of the Bank Holiday weekend.
Jubilee – Get your trade in today!
I’m guessing if you are based in the U.K you will be fully aware of the Bank Holidays we have on Monday and Tuesday of next week due to the vast array of flags and bunting up and down every high street in Britain right now. If you have a pending trade to carry out please be aware that whilst we are not here the markets will still be moving so it may be prudent to either book out your currency today or at least put some protection in place for adverse market movements – Contact us today on 0044 1494 787478 for further information on how to do this. Or email me directly djw@curencies.co.uk
