The Italian elections continue to worry markets | Smart Daily Currency Note
GBP/EUR – 1.1532
GBP/USD – 1.5114
EUR/GBP – 0.8665
EUR/USD – 1.3082
GBP/AED – 5.5514
GBP/AUD – 1.4786
GBP/CAD – 1.5492
GBP/CHF – 1.4077
GBP/CNY – 9.47
GBP/HKD – 11.7152
GBP/HUF – 341.49
GBP/INR – 81.03
GBP/JPY – 138.50
GBP/NZD – 1.8304
GBP/RUB – 46.16
GBP/SEK – 9.7372
GBP/ZAR – 13.3356
Sterling had a mixed day yesterday – starting off on the front foot reaching highs of 1.1650 against the euro and 1.5220 against the US dollar before losing ground later in the day. Sterling struggled after one of the Monetary Policy Committee (MPC) members from the Bank of England (BoE) suggested he was open to more monetary easing and furthermore, that the prospect of negative interest rates had been raised at central bank meetings. Furthermore, realised sales data from the Confederation of British Industry (CBI) came out lower than expected. Out today we have the second estimate of the UK’s fourth quarter GDP which is expected to show a contraction of 0.3%, the same as the first estimate. Moreover, more MPC members will be speaking today, and following yesterday’s volatility, the market will pay close attention to what they have to say. Call now for the latest updates on sterling.
It has been a turbulent few days for the euro, news of the inconclusive Italian election yesterday drove the euro to a seven week low against the dollar – whilst weakening by three cents against sterling. The damage was not as widespread as first feared however, as traders became confident that the European Central Bank (ECB) would intervene to limit the fallout, and the euro strengthened in the afternoon. Today is likely to be just as volatile with two important events. Firstly, we expect an Italian 10 Year Bond auction this morning – a key way for governments to borrow money and high yields mean high borrowing costs for the Italian Government. Secondly, in the afternoon the ECB President is speaking in Germany, we traditionally see a great deal of volatility during his speeches as markets look for hints as to future monetary policy. Get in touch now for the latest news and rates.
The US dollar generally performed well yesterday, strengthening against the majority of its currency partners with Consumer Confidence figures and New Home Sales data (rising in January to the highest since 2008) both coming out much better than expected. Along with this, the Federal Reserve Chairman backed the central bank’s current stimulus program, saying that they will support the asset purchases with “little risk of inflation or asset-price bubbles” causing the dollar to strengthen further. In the testimony he stated that “We do not see the potential costs of the increased risk-taking in some financial markets as outweighing the benefits of promoting a stronger economic recovery.” Although he also warned that the automatic federal budget cuts in line to begin 1st of March will add a “significant” burden to the economy if lawmakers are unable to avert from the reductions. Today we will see Core Durable Goods orders along with the second part of the Chairman of the Federal Bank’s “congressional testimony” on monetary policy.
Elsewhere, the Canadian dollar fell to a eight month low versus the US dollar following better than expected data out of the US and the comments from the Chairman of the Federal Bank. The commodity backed currencies struggled in general yesterday whilst the Japanese yen prospered due to risk aversion driving the markets and traders seeking safer havens for their money. The Russian rouble was one of the worst performers yesterday after GDP data released showed that the economy had contracted by 0.3%. Call in now for a market update and a live quote.
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EURO/GBP – 1.213
US$/GBP – 1.516
CHF/GBP – 1.620
CAN$/GBP – 1.609
AUS$/GBP – 1.791
Sterling jumped to an 8 week high yesterday against the US dollar of $1.5144/£1 as the dollar fell due to poor manufacturing, housing and employment data. The pound started the day poorly after lower than expected Chinese manufacturing data cast doubts over the global recovery. UK manufacturing data showed a drop from 58.0 to 57.5 which added to sterling’s woes. However, the pound rallied by over 1% against the US dollar after a similar measure of manufacturing activity in the USA showed the sharpest drop since December 2009. In addition, poor housing sales data added to the dollar’s problems. Against the euro, the pound weakened after concerns over European sovereign debt eased. In terms of data, there is construction PMI data out in the UK today which is expected to show a small improvement. With a lot of volatility, yesterday was a classic example of why it is so important to speak to a currency specialist sooner rather than later in order to take advantage of large upswings and avoid buying at the bottom of the market. Call in now for an up to date assessment of where things are heading for the pound.
In the Euro zone, the euro recovered after a poor start to the week. It was down earlier in the week as financial markets closely followed the repayment of 440bn worth of emergency loans paid out to banks, but in the end the repayment date passed without a hitch. Credit rating agency Moody’s had added to the euro’s woes as it downgraded the outlook for Spanish government debt. However, these concerns were eased after a Spanish bond auction for 3.5bn worth of bonds was well received by the financial markets – very much going against what had been expected, especially in light of Moody’s downbeat assessment of the situation. Out later today there is unemployment data and PPI data for the region – both of which have the potential to move the market. Get in touch now for a live exchange rate.
In the USA, following an expiry of tax credits for property buyers, pending home sales dropped by 30% in May and the ISM manufacturing index fell from 59.7 to 56.2 – the biggest fall in activity since December 2009. The big event of the day though is the US Non-Farm payroll data – out later this afternoon. Most analysts are expecting a fall of over 100,000 jobs on the month, and this data generally sets the tone for the following week’s sentiment for both the US economy and the global recovery as a whole. Get in touch now to ensure you don’t fall victim to adverse market movements.
Elsewhere, the Australian dollar gained overnight after the new Prime Minister Julia Gillard reached an agreement with mining companies over the proposed super tax that was the downfall of the outgoing Premier Kevin Rudd. Call in now for a live price, as the higher yielding currencies have been particularly volatile of the last week as risk appetite/ aversion drives relatively wild swings in the exchange rate.
Exchange rates change every second – call Smart Currency Exchange for a live up-to-the-minute quote on our Freephone number: 0808 163 0102 (+44 (0)207 898 0541 from outside the UK) or fill out our online quote form at: SmartCurrencyExchange.com/quote.aspx