by Hannah Wilson
Sterling / Euro and US Dollar exchange rates
The Euro strengthened against Sterling during trading yesterday, trading down towards 1.1340 on interbank, making it a better time for clients interested in converting Euros back into GBP to consider securing a rate.
Sterling made gains against the USD during trading yesterday, benefiting from the rally in risk sensitive assets, trading up above 1.6000 on interbank and opening above 1.6100 this morning. After reaching interbank lows of -1.5500 recently, this uptrend has created a better opportunity for clients interested in purchasing the US Dollar to lock in a rate of exchange.
EU leaders have managed to persuade bondholders to take 50% losses on Greek debt and have boosted the rescue fund to an incredible €1.4 trillion. Officials have responded to global pressure to step up measures to fight the debt crisis, amid concerns that Greece will default and the threat of contagion to other high deficit nations like Italy and Spain.
Even though the key details of the rescue package are murky at best, the recent announcement seems to have restored short-term confidence in the markets and the Euro has rallied across the board as a result.
The clear signs of progress has significantly improved market sentiment, however there is a risk the Euro could become vulnerable again, as markets await details of where additional funding will come from.
In the U.S GDP data confirmed that the US economy has grown by 2.5% on an annualised basis – the fastest growth in a year. The report confirmed strong growth in consumer and investment spending, as well as a 4.0% rise in exports. Imports increased by a much smaller 1.9%, allowing net trade to contribute 0.2% to overall growth.
Markets are now awaiting this afternoons release of US personal income and spending data for the month of September, as well as the release of Q3 GDP data from Belgium.
Euro / US Dollar exchange rates
The Euro reached a 7-month high of $1.4247 on interbank during trading yesterday afternoon with market sentiment on a positive wave after details of Europe’s debt deal were released.
The clear signs of progress, which includes an agreement that private investors would accept 50% losses on their Greek debt holdings, leveraging of the EU bailout fund and recapitalisation of its banks have increased short-term confidence and sentiment within markets – however longer-term the Euro could remain vulnerable as markets await details of where the rest of the funding will come from.
European officials are beginning attempts to persuade China to invest in the bailout scheme. It is thought China may pay about 70bn Euros ($100bn) into the fund, which is expected to be boosted to 1tn Euros.
Interbank opened this morning at $1.4150 on interbank.
Today’s Exchange Rate Data
IRL 11.00 – Household Credit Growth (September)
IRL 11.00 – Retail Sales (September)
US 13.30 – Personal Income / Consumption (September)
US 13.30 – Employment Costs
BEL 14.00 – Prelim GDP (Q3)
US 14.55 – Michigan Sentiment