Sterling report and forecast against Dollar Euro and Australian Dollar

GBP USD Rate Consolidates on Interest Rate Expectations

GBP/EUR  There is every chance that September could  prove to be a defining month for the Euro and may provide us with a clearer  indication of the next significant move for this currency pair.

With the Spanish  banking system in need of potential further bailouts, it is the handling of this situation  and the repercussions of any further monetary assistance, that could prove  pivotal to one of the EU’s largest economies keeping its head above water. We  also have Greece coming under the spotlight once again and any decision on an  extension to their debt programme or elimination from the Euro may have a  significant impact on GBP/EUR exchange rates and could provide a spike for the Pound Euro pairing and another buying opportunity, if not handled with the upmost caution by EU leaders.

I do however feel Sterling could still drop a little further against the euro due to the  on-going EU debt crisis, as our own economy is at best stagnating. The warning  signs have been there for months, as PMI  data has been consistently poor and the  Bank of England cut growth forecasts on what seemed like a monthly basis. We  have seen multiple rounds of Quantitative Easing to try and boost lending but
with our banking sector causing more problems than they are solving, it seems to  have made little difference. Add to this continuing high unemployment and the  widest trade deficit since records began and I can see the pound coming under  increasing pressure over the coming months unless our economic data releases start to improve, and the wettest summer in years has certainly not helped trade.

In the current climate I feel that anyone that is due to buy Euros and waiting for the 1.30 level may be left  disappointed, unless there is a shift in public perception on the UK economy  and/or further fallout in the EU. I feel the EUR will find resistance at 1.25,  whilst any move up to the higher 1.20’s may be dependent on the outcome of  further reports from Spain and Greece.

GBP/USD – Despite the negative economic outlook for the UK  as highlighted above, we have seen consistent GBP strength against the USD over  the past couple of months. The USD has always been seen as a safe haven currency  due to the fact it holds value better than others during times of crisis but  with the upcoming election and string of poor economic data and the fact that the head of the ECB has managed to bring back a little appetite to risk on the markets the greenback is not  moving towards the 1.50 level many analysts had predicted but instead is edging  closer towards and has been slightly above 1.60.  The threat of further Quantitative Easing is  also on investors mind and whilst the political uncertainty remains, I think the  USD could continue to struggle, even with the poor economic sate of the UK  economy.

GBP/AUD  Sterling has rallied somewhat of  late against the AUD moving up through 1.55 and away from the 30 year lows back  in February. This is following reports that Australia’s economy is at risk of
recession in 2013. Commodity prices are rising and the demand in China for  Australia’s raw materials is starting to slow. There is also a general feeling  growing that Australia’s policy makers are becoming “complacent” but despite  these negative reports I still believe the AUD leads the way, as one of the  world’s strongest currencies and for that reason it may be wise to consider your  options soon.

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