The Pound to Euro exchange rate reached a high point of 1.2673 on Friday.
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.
• Weak German IFO’s – suggest shrinking economy.
• UK Q2 GDP upgraded – up from -0.7% to -0.5%.
• US Data improves – Durable Goods Orders rebound positively.
• August Bank Holiday leaves Sterling stranded – however London buses continue to run throughout the night.
On Friday the Office for National Statistics released their revised second quarter UK growth figures revealing a contraction of -0.5%. The figure fell in line with analysts’ expectation and marked a +0.2 upgrade on last month’s initial estimate. The release did not give the Pound an overly impressive boost as it was largely priced-in beforehand and still painted a pretty bleak picture of the UK economy. The new report detailed fragilities in the export industry, falling demand for investments, and jittery consumer spending.
However so far during Q3 economic data emanating from the UK has picked up significantly, largely due to the Olympic Games, and should ensure that the Bank of England refrain from any further quantitative easing measures in the near future. But although the UK Central Bank is likely to remain on the sidelines over the coming weeks and months, the threat of further stimulus remains as the UK economy remains mired in recession.
The Pound to Euro exchange rate reached a high point of 1.2673 on Friday in response to the UK’s upgraded second quarter GDP print. However, Sterling’s half-cent gains were swiftly reversed during the afternoon as global risk appetite took a turn for the better as Durable Goods Orders in the US improved at a faster rate of expansion than expected. This supported the Euro as it suggested that an increase in global growth prospects could dampen the Pound’s appeal as a safe haven from the raging debt crisis on the continent.
On Monday German IFO economic survey data continued to decline from last month’s turbulent figures. August’s Business Climate index fell from 103.3 to 102.3, the Current Assessment indicator dropped from 111.5 to 111.2, and the Expectations figure printed at 94.2 compared to 95.5 last time out. The soft German survey data did little to affect the Sterling / Euro exchange rate as the mildly negative figures fell in line with economist’s projections of increased deterioration in the German economy.
After reaching a 3-month high of 1.5911 on Thursday, the Pound to US Dollar exchange rate embarked on a 1.5 cent pullback through Friday to Monday as investors looked to take advantage of profit-making stances. However Sterling’s ascendence could reccomence in the near future as the latest Federal Reserve minutes report continues to support the UK currency over the safe-haven US Dollar. With the Bank of England opting to concentrate on monitoring its current programmes rather than jump ahead with further stimulus it is entirely possible that we could see the Pound to US Dollar exchange rate test psychological resistance at 1.6000 over the coming weeks.
The Pound to Canadian Dollar exchange rate has fallen by approximately 1.5 cents from around 1.5770 on Friday to around 1.5620 early this morning. The Canadian Dollar benefitted on Friday from a strong rebound in US Durable Goods Orders. The figure, which relates strongly to the Canadian Dollar due to the nations’ extremely close trade ties, bounced back from -1.6% in June to +4.2% in July. With UK markets closed during Monday to concentrate on Notting Hill Carnival and other alcohol-fuelled affairs, the Pound has not found itself well supported against the ‘Loonie’.
The Pound spiked to a 40-day high against the Australian Dollar on Friday morning as the upgraded UK Q2 growth figures sent GBP/AUD up from 1.5200 towards 1.5274. During the afternoon, however, the pair fell back down to 1.5171 as US Durable Goods Orders rebounded positively and boosted the appeal of riskier assets worldwide as the US, the world’s largest, economy was seen to be performing well. A slow day on Monday, which saw German sentiment decline, allowed the Pound to claw back some of its losses and consolidate at around 1.5220.
New Zealand Dollar
The New Zealand Dollar has followed been following a similar path to its Antipodean neighbour, the ‘Aussie Dollar’, against the Pound since Friday as general sentiment has been affected by the same stimulus. The ‘Kiwi’ Dollar fell in tandem with the Australian Dollar on Friday morning due to an upgrade to the second quarter UK GDP print, and rose in unison with its Asian counterpart during the afternoon in response to the strong US Durable Goods data. GBP/NZD consolidated at around 1.9540 earlier this morning.
Data Released Today
07:00 EUR German GfK Consumer Confidence Survey (SEP)
15:00 USD Consumer Confidence (AUG)
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