Yesterday’s trading saw Sterling weaken against the Euro for the sixth day in a row.
This is contrary to what a lot of analysts had predicted, as the UKs Gross Domestic Product (GDP) growth of 0.6% was expected to bring Sterling strength. The fact that GBP is so weak after a positive growth, underlines the feeling of huge uncertainty within the City as to what Mark Carney, Governor of The Bank of England, is planning to do to grow the UK Economy to a position of strength.
Looking forwards, I believe that tomorrow could see a lot of volatility for Sterling. Although I don’t believe we will see a change in the Bank of England’s Interest Rate at 09:30, there is a strong chance that a carefully worded statement released simultaneously to the announcements could advise further on future policy. Mark Carney has been keen to explain his plan for ‘forward guidance’ which is basically his future plans and early warnings for the economy, to minimize shock to the market. Despite this, Sterling is entering its fourth month in a row of losses against the Euro.
On the other side of the currency pair, the Eurozone Consumer Price Index is released today at 10:00 BST today and expected to show a slight improvement. This could really emphasise the uncertainty and weak position that Sterling is in, potentially adding fuel to the Sterling weakness fire.
I believe that there is a strong chance that during trading today we could see the ‘midmarket’ level slip even lower, providing what could be some excellent Euro selling opportunities. Euro sellers should also be wary as today could become the seventh day in a row for Sterling loss – it could be wise to get your transaction sorted prior to any GBP revival to higher levels!
With all of this in mind, I would strongly urge clients looking to buy or sell Euros to get in touch to discuss with a currency expert, the options available to avoid adverse market fluctuations.
GBP-USD (Cable) looks to have an incredibly busy couple of days ahead.
Today the US releases its GDP figure for Quarter 2 2013. The expectation is for a growth of 1.2%, a slight reduction against the previous quarter’s figure of 1.8%. Should we see a figure different to that expected, there is a strong possibility that the rates could move significantly in either direction!
GDP is followed later on in the day by the US Federal Reserve (FED) interest rate decision at 19:00 BST. The interest rate is expected to stay at 0.25% however just after the FED makes its Monetary Policy Statement and holds the associated press conference. US Monetary Policy is an incredibly provocative affair, the indicator released two weeks ago that the policy could be wound in (tapered) sparked immediate USD strength, pushing Sterling back to a six month low.
Coupled with the Non-Farm payroll data on Friday, USD buyers could be wise to conclude their currency purchase today, eliminating the associated risk of being stuck with nothing but the 6 month low buying price!
Australian Dollar Forecast
Sterling made strong gains against Australian Dollar yesterday, as the Head of the Reserve Bank of Australia (Glenn Stevens) indicated that the ‘soft inflation report meant scope to cut interest rates further if needed’.
There is a strong chance that GBP AUD could hit 1.70 today and would provide a 34 month high.
The formal interest rate decision is next week, however as is consistent with the currency markets ‘the bark is as bad as the bite’, so be wary of any forecasted RBA statements.
Should you be selling Australian Dollars and have not yet organised your transaction, it would be prudent to get in touch. As the rate has moved against you substantially since yesterday, could you afford to gamble with the rate slipping even further next week?
Please feel free to get in touch should you have a transaction planned.
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