US GDP Figures cause instability in the fx markets

With the Federal Reserve announcing last night that interest rates will be kept on hold and GDP figures for Q4 2012 showing that the economy has shrunk by -0.1% the US Dollar has seen a sell off overnight. With predictions that the US would continue to grow these surprise figures have caused shock waves through the currency markets.

With the lack of confidence this has seen a sell off of USD and less appetite for riskier currencies including the Australian Dollar which has hit 1.52 this morning having tested support levels of 1.50 during most of this week. The news from America was the first time the US economy has declined since 2009 during the global recession. Tomorrow sees the release of Non-Farm Payroll data so if the news is bad again we could see GBPUSD exchange rates hit 1.60 early next week  providing some welcome buying opportunities.

With GBPEUR exchange rates the lowest since the end of 2011 trading at around 1.1650 we have seen a movement of over 5% since the start of January. Ways in which to avoid losing further if current trends continue is to look at buying a forward contract which means for a small deposit you can secure an exchange rate for a future date. Clients that have purchased Euros at the start of January have already seen the benefit of using this type of contract. It is rather surprising to see GBPEUR rates at these levels as the Spanish economy earlier this week saw a decline in output of 1.8% and GDP measured at -0.7% at the end of 2012. Typically this would weaken the single currency which goes to show the precarious positions Sterling finds itself in.

Also, the Secretary of State for Unemployment in France claimed the country is ‘bankrupt’, again this would usually cause a lack of confidence in the Euro but the Euro continues to remain strong against Sterling and the highest level against the US Dollar since 2011.

The Swedish Krona has hit the lowest level against Sterling seen since 1992 this week testing levels of support at 10. This has been caused by Europe remaining strong and investor confidence high in Europe. There are talks that the Riksbank may cut interest rates next month but this appears to have been overlooked by the markets.

For further insight into the currency markets and to find out how to save money when transferring currency feel free to contact me directly Tom Holian [email protected]