by Adam Solomon
Sterling / Euro and US Dollar exchange rates
The Pound weakened marginally against the Euro exchange rate yesterday, as data showed UK house prices dropped last month and the British Chambers of Commerce cut its economic growth forecasts. The Pound also declined significantly against the higher-yielding currencies, as Asian stocks rallied back following a dismal performance last week.
The UK currency edged to a high close to 1.56 against the Dollar, which primarily reflected wider U.S losses across the board. The data in the UK was disappointing again, as a separate report from the Confederation of British Industry showed that retail sales slumped to the lowest level since first quarter of 2009 this month.
Retailers are downbeat on the economic outlook, reinforcing fears that consumer spending will continue to deteriorate even through the Christmas period, compared to previous results. The Bank of England governor Mervyn King stated that the UK was increasingly threatened by the Euro-zone debt crisis and the comments from bank officials also suggested further quantitative easing is very likely in the first quarter of 2012.
The BCC said yesterday that GDP will increase 0.9% this year, 0.8% in 2012 and 1.8% in 2013, compared with previous estimates of 1.1%, 2.1% and 2.5%. The group also added that the risk of another recession “cannot be shrugged off” and predicted the Bank of England will add to its bond purchasing plan early next year to support the economy.
The UK government will announce plans for additional infrastructure spending in today’s Autumn statement, while economic growth forecasts will inevitably be downgraded. The extent of support for UK bonds and discussion surrounding the AAA credit rating will continue to be an important influence on the Pound and there was a retreat back towards 1.55 against the Dollar early this morning.
The Chancellor of the Exchequer George Osborne will present updated economic and fiscal forecasts today and there is increased speculation that government growth estimates will be slashed and budget shortfalls will be greater than previously anticipated. The Bank of England said last week that the threat of the Euro-zone debt crisis on the UK economy has increased.
Another report on the UK housing market this morning showed that prices rose for a third straight month in November, according to the Nationwide Building Society. The average cost of a home rose 0.4% from October, but the accompanying statement suggested that property values will “remain soft” and may decline again over the next 12-months.
The Australian Dollar and South African Rand bounced back yesterday following a modest improvement in risk appetite, but trading conditions remain volatile and both currencies have weakened this morning, as European stocks declined, halting a two day gain, before EU finance ministers convene to discuss insuring a portion of bond issued to debt-ridden nations.
Euro / US Dollar exchange rates
The Euro maintained a generally firm tone on Monday, amid speculation of an IMF backed loan package for Italy. There were also reports that Germany and France would move to issue elite bonds among the AAA nations and accelerate fiscal integration. Both the IMF and the German government denied that talks had even taken place.
Money supply into the Euro-zone was weaker-than-expected and underlying stresses within the banking sector remained extremely high. The latest Euro-zone bond auctions were marginally better-than-expected, which served to ease market tensions to a degree. Confidence will remain fragile and today may bring a bigger test to investor sentiment.
The Euro pushed to highs close to 1.34 against the Dollar before weakening again in the U.S session, as risk sentiment deteriorated once more. There was a warning from ratings agency Moody’s over the probability of a downgrading within the next few days. The Eurogroup meeting today will be watched closely, while the U.S consumer confidence report will also take on added significance.
Today’s Exchange Rate Data
EU – EU Finance Minister / Eurogroup Meetings
U.K 07:00 – Nationwide House Prices (November)
U.K 09:30 – Mortgage Approvals (October)
EU 10:00 – EC Economic Sentiment (November) – Industrial / Services / Consumer
U.K 12:30 – Chancellor’s Autumn Statement
U.S 14:00 – Case Shiller House Prices (September)
U.S 15:00 – Consumer Confidence (November)
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound weakened against the majors yesterday morning
- Pound Sterling, the Euro and US Dollar exchange rate currency news – The Pound weakened back towards 1.5820 against the US Dollar
- Pound Sterling, the Euro and US Dollar exchange rate news – The Pound weakened against the major currency rates
- Pound Sterling, the Euro and US Dollar exchange rate news flash – The Pound weakened back towards 1.5950 against the U.S Dollar this morning
- The Pound weakened against the U.S Dollar and the Japanese Yen exchange rates