Currency markets are traditionally driven by 4 factors referred to as the “currency compass.” These are:
- Acts of terror
- Acts of god – for example the snow in the UK last month
- Political uncertainty – for example comments from heads of central banks
- Economic data – GDP figures, interest rate changes (there are about 30 reports that are watched keenly each month from every country.)
When you are making your decision on when to complete your currency purchase you need to be happy with the current level and have a view on wheat may be around the corner that could change markets.
Over the weekend Ireland and Portugal both were granted extensions to their loans from the EU/IMF of a further 7 years. This makes the recovery more long winded but avoids the risk of a further bailout being needed, creating some euro strength first thing this morning as I expected and mentioned in my blog last week, revisit it by clicking here.
We also saw data from China showing a slowdown in growth from an expected 8% to 7.7%, this has weakened economies dependant on their growth so it is now over a 1% cheaper to buy Australia Dollard (AUD) and New Zealand Dollars (NZD.)
This week forecast
This week focus in the UK will be political and economic. There is a host of data for the UK this week with the key day being Wednesday before a widely expected drop on Thursday.
On Tuesday Production Price index and Consumer Price index are released and expected to show a contraction, sterling weakness is expected as a result. On Wednesday we have Unemployment change and The Bank of England minutes. This has the potential to change the markets significantly as it gives the market a view form inside the BOE with regards to Quantitative Easing. If this increases expect rates to fall, if the information decreases the likelihood of more QE rates are probably going to stay steady or get slightly better. Thursday sees UK Retail figures which are expected to show a steep drop due to the weather we saw in march stopping people get to the high streets. I certainly was not out spending, where you?
So a busy week, buyers I would move before Thursdays Retail figures. If you like a risk maybe take the gamble over the BOE minutes but otherwise I would be buying beforehand. Buyers of the pound so selling euros or selling dollars, I would be inclined to wait until the end of the week as your levels will probably improve.
These are my views at the moment but are subject to change as forecasts and commentary change. If you are not sure what outcome is positive or negative for your currency transfer please do contact me STEVE EAKINS at [email protected] and I can explain the implications and available options.
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