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FCG Currency Market Report 14th April 2009 www.foremostcurrencygroup.co.uk
EUR
Sterling made modest gains against the Euro last week, predominantly off the back of negative sentiment in the Eurozone, a welcome change for anyone buying Euros .
At Thursday’s meeting, the Bank of England held interest rates at 0.50%. This was the first “no change” decision since September 2008. The following BOE Monetary Policy Committee’s statement was short and provided little in the way of new information. However, they did say that they would continue with the program of quantitative easing efforts and that it would take another two months before the program was completed.
The European economy suffered last week as Q4 GDP figures fell by 1.6%, worse than the 1.5% expected. This was the deepest quarterly fall for GDP figures to date and was put down to the massive fall in external trade. The strength of the Euro as a currency, especially compared to the weakness of the Pound has severely damaged their export market, which in turn has badly affected areas such as manufacturing as demand has evaporated.
The recent ECB monthly bulletin report showed risks of Eurozone deflation and implied that the ECB could cut rates further through the foreseeable future in an effort to encourage spending in order to stimulate the market. The relative strength of the Euro is clearly damaging their economy and this is providing some much needed support to Sterling
This week data releases are relatively thin on the UK side so once again it is likely that most movement will come from the European side. In particular CPI and Industrial production figures which are expected to be poor could provide further support for Euro purchasers.
Speak to you FCG Account Manager to discuss the use of Limit Orders to capitalise your position and achieve a specific euro exchange rate as the market moves up, whilst protecting yourself with a Stop Loss Order in case the market moves against you.
USD
Trading so far this week has seen the US Dollar showing little sign of strengthening against Sterling, Monday’s US retail sales and PPI data releases did little to attract further support for the Greenback.
This week we see a big week ahead for US economic and corporate earnings data releases, this will affect market sentiment and support for the greenback. The CPI data out on Wednesday and the March housing stats and jobless claim figures due on Thursday are likely to see some market movement, however barring any surprises these fluctuations in the rates of exchange may be short lived.
With the Greenback still primarily utilised as a safe haven foreign currency, investors in search of higher yields will look elsewhere to meet the demands for a higher return. Therefore unless alternative markets and riskier currencies become unacceptably risky, forcing investment back into US Dollar, the current trend looks set to continue.
This chart below by IT-Finance.com shows the interbank rate for GBP/USD from Monday 6th April to Monday 14th April:
With the Pound holding position against the Dollar and no major surprises expected this week from UK data releases, it remains to be seen if the cross will overcome its current resistance to break through the 1.50 barrier. The Bank of England has confirmed it will achieve its objective of purchasing £75bn in government bonds or guilts over the next two months, with £26bn injected so far, this has assured investors and traders alike that the UK’s plan for recovery is being delivered upon in a structured way.
Key Data Releases This Week
This Week’s Data
Below is a summary of some of this week’s key data releases. You can see that it is a very quiet week for the UK, the only data of note is some house price data, and also the BRC Retail Prices.
Most of the data this week is from the US (Producer Price and Consumer Price Index) and the EU (Consumer Price Index and Industrial Production). Recent Sterling exchange rate movements for the USD and EUR have mainly been caused by strength and weakness in those currencies, rather than any specific recovery for the Pound. Therefore keep in close contact with FCG to ensure you are fully aware of the potential impact of these data releases on exchange rates.
Tuesday
US - Producer Price Index
US - Retail Sales
UK - RICS House Prices
Wednesday
UK - DCLG House Prices
Japan - Industrial Production
US - Consumer Price Index
US - Fed's Beige book (looks at economic conditions)
US - NY Manufacturing Index
Thursday
UK - BRC Retail
Swiss - Producer and Import Prices
EU - CPI and Industrial Production
US - Jobless Claims
US - Building Permits
NZ - Consumer Price Index
Friday
AUS - Import and Export Prices
JAP - Consumer Prices
JAP - Bank of Japan economic survey
For a detailed explanation of how these economic data releases can affect your currency requirement, contact one of our expert currency brokers today on 01442 892060.