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Posted June 24th, 2010 by Charles Purdy


EURO/GBP – 1.218
US$/GBP – 1.495
CHF/GBP – 1.654
CAN$/GBP – 1.555
AUS$/GBP – 1.722

Sterling hit a 6 week high against the US dollar of $1.4999/£1 after sentiment was given a large boost. Firstly, following the emergency budget on Tuesday, credit rating agency Moody’s stated that the UK will retain the AAA credit rating if it successfully implements Tuesday’s measures. In addition, investors were in for a shock when the Bank of England’s minutes for this month’s meeting on monetary policy showed that one of the Bank members voted for a rise in interest rates – the first time for over 2 years that anyone has voted for a rate hike. With VAT set to rise to 20% and a round of tough spending cuts, the affirmation from Moody’s should ease investor concern over the UK. As a result, the pound saw a welcome boost. However, many analysts said that whilst the rise was justified, there are still genuine concerns over the possibility that the cuts and tax hikes could stifle out growth. As a result, many expect that the pound will not have the momentum to push far past $1.50/ £1 for some time. Get in touch now to take advantage of the best price in 6 weeks.

In the Euro zone, the euro fell against the pound as investors flocked to sterling. The pound hit 1.2189/ £1 at one point yesterday. Sentiment towards the euro is still poor, as Portugal announced that borrowing from the ECB by banks in the country doubled in May to a new record level. Banks in the region are having to borrow directly from the central bank, as they face difficulties borrowing on the ‘interbank’ market. The interbank market is where banks borrow money on a short term basis (e.g. overnight) to pay obligations. Due to poor sentiment in the region, the interest rates for overnight lending are prohibitively high and banks are going to the central bank for financing. Out today, we have some retail sales and industrial data – call in now for a live exchange rate.

In the USA, the Federal Reserve kept interest rates on hold. And the language in their statement was slightly more pessimistic than last month, suggesting that an interest rate hike by the end of the year will be less likely. This added to the US dollar’s losses against the pound. Out later today, we have US durable goods orders which are expected to drop marginally for the month. Call in now for a live price.

Elsewhere, the Australian prime minister has resigned due to unpopularity over a ‘super-tax’ on natural resources companies. This has boosted mining stocks and has seen some Aus dollar strength overnight, as the threat of punishing taxes on Australia’s biggest economic earners has now receded. Get in touch for a live 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

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Posted June 23rd, 2010 by Charles Purdy


EURO/GBP – 1.209
US$/GBP – 1.486
CHF/GBP – 1.644
CAN$/GBP – 1.530
AUS$/GBP – 1.705

Yesterday we had the first budget from the new coalition government. The reality of the budget was very much as expected given the huge hole in the public finances and the need to match income to expenditure. And it is often stated that it is best to get all the bad news over quickly rather than dragging it out and prolonging uncertainty and undue suffering. So the new Chancellor laid out a very clear plan of action stating what was going to be done and how. The financial markets initial reaction has been positive which is important to sterling’s stability in the currency market as we have to remember that lenders to this country have to be convinced that we will be able to service our debt longer term. Sterling has gained against both the euro and the US$. The one unknown is what the effect of the cuts in expenditure, the increased VAT and austerity measures elsewhere in the world will have on growth in the UK economy, but the belief is that we will avoid a double dip recession. So we have taken a small step forward but the level of uncertainty is still high and that is why it is important to get in touch now and minimise the chance of losing out.

The euro zone is still suffering. On Monday we had the head of the Bank of France state that certain banks were beginning to find increased funding problems. This is what happened before Lehman Brothers went bust. The reason given is that the European Central Banks 12 month loan facility totalling 442bn comes to an end this month but this is to be replaced with a similar sized stabilisation facility so we should see this pressure ease. We also saw some downgrading of some French banks credit ratings which also knocks confidence in the euro zone and the euro which continues to weaken.

The US$ has been trading in a narrow ranger against sterling for the last few days. The major news over the weekend was the Chinese decision to let the Yuan move more freely against the US$. This moving freely is all relative as it will still be very controlled but it does mean that Chinese exports will become more expensive and less competitive and make other countries exports into China cheaper. So the logic being applied is that we will see a rebalancing of the world’s cash flows with China’s trade surpluses reducing.

And the other beneficiaries from the Chinese reduction in currency controls are the commodity backed currencies who will see their exports to China become more competitive.

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

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