By Simon Eastman
The past week has been a mixed bag for those with sterling in hand, as the usual GBPEUR or GBPUSD have given little to write home about.
The pound has traded in a half cent range most of the week against the euro, as markets await the UK inflation next week ahead of next month’s meetings by the Bank of England and the European Central Bank, to see who cuts and by how much. With a lack of any real key figures, traders have had little else to go on, seeing the pound benefit following so poor German data in the week, but struggling to push up towards the recent peak.
Against the US dollar, sterling has been trading in a cent range, as the issues in the Middle East rumbling on, investors put their money into the safest of havens, being the greenback. This reflects in the 4 cent gain it has made against the pound in the last week or so, although having tested a major resistance ceiling, it seems markets need something else to affect the pair. Wednesday nights FOMC minutes following the recent 50 basis point interest rate cut by the Federal Reserve in the States didn’t throw up anything of interest, merely stating it was widely voted for and any further cuts would be subject to future data releases.
The flip side to investors taking a more cautious outlook is the commodity-based currencies, like the AUD, NZD and CAD all fall fowl of favour, with higher interest rates and more volatility, they yield more returns, so when risk appetite diminishes, these currencies weaken.
We have seen substantial gains by the pound over the week against such dollar currencies, with a 2.5-cent gain over the Canadian Loonie, a 5-cent gain over the Kiwi and 4-cent gain over the Aussie. For anyone moving to the north of North America, or further afield to the other side of the word, your money is going considerably further now, than it was a week ago. If oyu have a requirement, now could be an ideal time to lock in the rate on a forward contract. Check out our website or speak to one of the team today to find out more.
The only data out yesterday was from the US, which released its inflation readings, all of which came out better than expected. Higher inflation across the board gave a brief rally by the dollar, making gains against both the pound and the euro, but neither held for long, retracing quickly as higher inflation could give further credence to more interest rate cuts from the Fed, which is generally a negative for the currency involved.
Today we have a more varied supply of figures, starting with German inflation, plus UK GDP, industrial and manufacturing production and trade balance all coming out early doors.
After lunch for the Loonie buyers looking to take advantage of the week’s gains should note, unemployment and average earnings data comes out at 1.30pm, alongside the US Producer price index inflation figures, following on from yesterday’s Consumer price index. An increase is expected, so we could expect much of the same range trading to end the week. A Canadian business outlook survey and a couple of US Fed member speeches round off the week.
If you have a currency requirement and want to get it sorted rather than wait to see what next week brings, get in touch with the team today for some friendly guidance.