The Pound has ended the week down to a fresh 10 month low against the Euro as Friday’s trading comes to a close, whilst making ground against the antipodean currencies.
It all seems to me that the issue with China is having a big impact on all major currencies and i’m afraid we will not have seen the last of this for quite some time.
In just over a week China are expected to register the lowest growth figures we have seen from them in 25 years and all of this had been predicted on our forecasting sites for a number of months now.
This has a great impact on currencies like the Australian Dollar as if China is not performing then the Australian economy generally will drop off a little as it gets a huge income from exporting raw materials, hence the fact we have seen the AUD lose ground against most majors this week.
We are also seeing an unwinding of carry trades. A carry trade is where an investor borrows a large amount of money in a currency with a low interest rate(EURO) and then puts it into a currency with a higher interest rate(AUD,NZD), making a return on the difference. When the currencies with the higher interest rate start to weaken you do start to see what is known as an unwinding of carry trades, and with the Euro being cheap to buy last year it was used a lot as a base currency for these trades. This recent unwinding basically has led to lots of money flowing into the Euro which is making it more expensive to buy.
I personally feel that Euro exchange rates are artificially strong at present, however only when we see the Asian markets open late on Sunday night will we be able to see which direction most major currencies will be starting the week off heading.
If you have a currency exchange to make during these volatile times then it is vital that you have an experienced currency broker on your side who can both explain all of the various options you have available and who will also make sure that your transaction is treated just like it is their own.
All of the writers on this site work for a brokerage that turns over half a billion Pounds worth of currency a year and we have all been in the industry for a number of years so it is well worth getting in touch with us to see how we can help you both in terms of getting the most for your exchange rate and making sure your currency transaction is smooth and efficient.
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