Pound to Euro, US Dollar exchange rate: A strong Spanish debt auction sent the Pound to Euro exchange rate down by around 0.5 cents yesterday

Currency

A strong Spanish debt auction, which saw 3-month bond yields fall from 2.434% to 0.946% and 6-month note yields decline from 3.691% to 2.026%, sent the Pound to Euro exchange rate down by around 0.5 cents yesterday. A strong Spanish debt auction, which saw 3-month bond yields fall from 2.434% to 0.946% and 6-month note yields decline from 3.691% to 2.026%, sent the Pound to Euro exchange rate down by around 0.5 cents yesterday.

Please find below today’s update which gives you an insight into the current market conditions, enabling you to keep informed and up to date on the latest currency movements.

Headlines

GBP/EUR falls – 3-week low of 1.2571.
Spanish yields fall – despite deeper-than-expected recession.
US Data stumbles – Consumer Confidence at 9-month low.
Antipodeans fall vs. Sterling – EZ worries wreaking havoc in the Asian Pacific region.

Sterling

As the UK suffers in a mire of recession, one area of the retail sector has improved exponentially and that is the discount store. Chains such as Primark, Poundland, Lidl, Aldi, and TKMaxx have lost their negative stigma according to a report which claims that Britons have faced the “fastest deterioration in living standards of modern times.”

The bargain boon is expected to leave the value section of the retail sector worth £8 billion by 2015. Whilst not a patch on the square mile, in terms of economic worth, shops such as Poundland are beginning to have a positive influence on the value of the Pound itself.

Euro

A strong Spanish debt auction, which saw 3-month bond yields fall from 2.434% to 0.946% and 6-month note yields decline from 3.691% to 2.026%, sent the Pound to Euro exchange rate down by around 0.5 cents yesterday.

The Euro remained well supported throughout the day as it was announced that Mario Draghi will not be attending Friday’s important Jackson Hole Symposium. Some areas of the market took this news to suggest that the European Central Bank President is too busy working on the proposed bond-buying scheme, but this seems a little presumptuous as Draghi has many different things on his agenda right now – not just bond intervention – such as the creation of a new Eurozone banking supervision regime and the issue of seniority among private creditors.

However it was not all good news for the Euro yesterday as Spanish GDP figures were downgraded to reflect a deeper-than-first-thought recession in the debt-ridden country. The annualised second quarter print was downgraded from -1.0% to -1.3% in response to fragile consumer spending figures, which can be directly linked to the harsh bite of austerity.

As fissures continue to open-up in the fundamental make-up of the currency bloc it becomes difficult to envisage the single currency holding onto its current rates below 1.2600.

US Dollar

The Pound rose up by around 0.6 cents during the afternoon yesterday in response to an announcement that US Consumer Confidence fell to a 9-month low of 60.6 during August. The figure, which was expected to post a slight improvement from 65.4 to 66.0, stoked Federal Reserve stimulus hopes and subsequently supported the Pound against the safe haven US Dollar. Friday’s Economic Policy Symposium in Wyoming could prove decisive as, although the implementation of QE3 is unlikely, stimulus-boosting rhetoric will likely send the Pound racing up towards rates in the region of 1.6000.

Canadian Dollar

The Pound fell towards a 1-week low of 1.5564 against the Canadian Dollar yesterday as rumours, that Mario Draghi’s Symposium omission equated to an improved possibility of ECB bond intervention, sent global risk appetite higher. However the ‘Loonie’ swiftly surrendered its 0.7 cent gains during the afternoon as it was announced that the Spanish region of Catalonia had officially requested financial assistance from the government to keep itself afloat. This further increased the possibility of a full-blown Spanish bailout package, something which the Eurozone rescue fund is thought to not be able to afford. The deterioration sent risk sentiment down and as such GBP/CAD appreciated.

Australian Dollar

Australian New Home Sales declined from +2.8% in June to a worrying -5.6% in July which, combined with the Japanese government’s decision to reduce growth forecasts, allowed the Pound to appreciate by around half a cent against the Australian Dollar. With the possibility of Japan, one of Australia’s largest regional trade partners, facing a third quarter contraction the ‘Aussie’ was suitably rejected by investors.

New Zealand Dollar

With ECB bond-buying rumours and Fed stimulus hopes proving ineffective for the high-risk, high-yielding, New Zealand Dollar, the Pound was able to grow by an impressive 1.1 cents against the ‘Kiwi’ towards a 1-month high of 1.9696.

The Japanese government blamed knock-on effects from the Eurozone for “further slowing down of overseas economies and sharp fluctuations in the financial and capital markets,” as they cut their third quarter growth projections and this regional slowdown appeared to negatively impact the New Zealand Dollar.

Data Released Today

13:00 EUR German Consumer Price Index (YoY) (AUG P)

13:30 USD Gross Domestic Product Price Index (2Q S)

19:00 USD Fed Releases Beige Book Economic Survey

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  4. Pound to Euro, US Dollar exchange rate: The Pound lost out on 0.4 cents against the US Dollar
  5. Pound to Euro, US Dollar exchange rate: The Pound to Euro exchange rate fell by 0.4 cents yesterday

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