GBP/USD Weekly Currency Update

Old Dec 14th 2009, 2:45 am
  #1  
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Default GBP/USD Weekly Currency Update

Hi All,

As promised here’s a brief update on what’s been happening with the US Dollar over the last week.


The pace of the decline in Consumer Credit (-3.5b) slowed in October as consumer activity and confidence gradually stabilise. However, credit card debt is still contracting, a record ninth straight month.

Retail Sales however were able to post a better than expected 1.3% m/m gain in November and record a second straight monthly increase. The University of Michigan Consumer Sentiment (73.4 from 67.4) survey also highlighted improving retail conditions and increased speculation that the Federal Reserve could be forced to start thinking about raising rates sooner than previously anticipated. Bernanke stirred up the interest rate debate by saying that high unemployment and stable expectations should keep inflation subdued and that inflation could move lower dampening expectations of interest rate hikes coming sooner than expectations.


In the lead up to last week’s highlight, the pre-budget report, there has been a lot of focus on debt-ridden countries. In fact the pre-budget report proved to be more political than economic due to the election now being less than six months away and the headlines were all about extra taxes on banker’s bonuses. Sterling reacted by dropping to a 2 month low of 1.6164 before stabilising. In fact, considering where we were 12 months ago, with GBP/USD dropping 10 cents in a day post Lehman Brother’s debacle, it is surprising to see GBP/USD so stable!

Otherwise the data emerging from the UK last week disappointed expectations marginally with both manufacturing and industrial production failing to grow in October.


GBP/USD Movement – High’s & Low’s of last week (07/12//09 – 11/12/09)

High: 1.6517
Low: 1.6168

A movement of: 2.16%

Difference on £200k


High: $ 330,340
Low: $ 323,360

Difference of: $6,980

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

A further update will be added next week.

Regards,


Mark Bodega
Director, HIFX
Windsor2 is offline  
Old Jan 3rd 2010, 9:41 pm
  #2  
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Default Re: GBP/USD Weekly Currency Update

I'm looking at transfering £ to $, I will need it by April time, do you think I'm better to wait or buy now? At the moment there does' t seem to be much movement?

Originally Posted by Windsor2
Hi All,

As promised here’s a brief update on what’s been happening with the US Dollar over the last week.


The pace of the decline in Consumer Credit (-3.5b) slowed in October as consumer activity and confidence gradually stabilise. However, credit card debt is still contracting, a record ninth straight month.

Retail Sales however were able to post a better than expected 1.3% m/m gain in November and record a second straight monthly increase. The University of Michigan Consumer Sentiment (73.4 from 67.4) survey also highlighted improving retail conditions and increased speculation that the Federal Reserve could be forced to start thinking about raising rates sooner than previously anticipated. Bernanke stirred up the interest rate debate by saying that high unemployment and stable expectations should keep inflation subdued and that inflation could move lower dampening expectations of interest rate hikes coming sooner than expectations.


In the lead up to last week’s highlight, the pre-budget report, there has been a lot of focus on debt-ridden countries. In fact the pre-budget report proved to be more political than economic due to the election now being less than six months away and the headlines were all about extra taxes on banker’s bonuses. Sterling reacted by dropping to a 2 month low of 1.6164 before stabilising. In fact, considering where we were 12 months ago, with GBP/USD dropping 10 cents in a day post Lehman Brother’s debacle, it is surprising to see GBP/USD so stable!

Otherwise the data emerging from the UK last week disappointed expectations marginally with both manufacturing and industrial production failing to grow in October.


GBP/USD Movement – High’s & Low’s of last week (07/12//09 – 11/12/09)

High: 1.6517
Low: 1.6168

A movement of: 2.16%

Difference on £200k


High: $ 330,340
Low: $ 323,360

Difference of: $6,980

Whilst FX isn't the most thrilling of subjects, the sooner you begin to think about your money transfers, the more likely you are to make your money go further.

A further update will be added next week.

Regards,


Mark Bodega
Director, HIFX
chrisandjulie is offline  
Old Jan 4th 2010, 8:38 pm
  #3  
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Post Re: GBP/USD Weekly Currency Update

I preface my response by again saying that exchange rates are notoriously difficult to forecast given the numerous factors which
influence them. Our aim is not to advise you, but help keep you abreast of the latest opinions in the foreign exchange market.

As I'm sure you'll have read, the outlook for Sterling remains bleak: the combination of growing Government debt, low interest rates and potential need for further quantitative easing in a General Election year will make money markets nervous about buying or holding Sterling. Globally we expect uncertainty to continue as Central Banks and Governments attempt to protect fragile green shoots of recovery from a winter frost.

Key factors which could favour Sterling over the US Dollar in 2010:
- As highlighted in previous posts, doubts surrounding the long term position of the Dollar as the world’s global reserve currency might persist. Many analysts cite a risk of further shifts away from the US Dollar by global Central Banks. Others also emphasise in
particular the “decisions taken by Chinese authorities on Chinese Yuan exchange rate policy” as a key factor to be monitored.
- If inflation remains more subdued than expected, the US Federal Reserve might see little reason to raise interest rates. The
US Federal Reserve continues to caution that interest rates will likely remain exceptionally low for an ‘extended period’, and some experts are convinced that US interest rates will not rise at all over the next twelve months.

Key factors which could favour the US Dollar over Sterling:
- A relapse in investors’ appetite for risk could favour the US Dollar, often viewed as a safe-haven in periods of economic vulnerability.
- Higher US interest rates – the US Dollar could benefit if expectations grow that US interest rates will rise faster than in the UK.
- Further favourable trends in US employment data could also boost US interest rate expectations.

In 2010 the debate will focus on the impact of actions taken by Central Banks and Governments, coupled with the sustainability of economic recovery. For Sterling’s sake, a General Election will determine who holds the reins to the UK’s recovery, but reducing debt needs to be high on the campaign agenda to keep the UK’s credit-rating strong. Global risk appetite will again be a critical factor influencing exchange rates, and the potential for raising interest rates could also become a decisive factor.

A currency’s value will also be determined by the health of its economy; a thriving economy will typically attract more investment and capital inflows, and export more goods. To invest, or to purchase a country’s goods and services, investors and consumers will need to purchase that country’s currency, causing the currency to appreciate. With many countries having exited recession in the third quarter of 2009, the focus is now on the comparative rate and sustainability of that recovery. The International Monetary Fund’s World Economic Outlook (October 2009) projections that the US economy will grow by 1.5% in 2010, compared to 0.9% in the UK and 0.3% in the Euro zone.

With risk in both directions, coupled with the extreme volatility that is currently being witnessed in the currency markets, whether you wait until April to change some or all of your money is up to you. If you're on a tight budget and can't afford for the exchange rate to move against you I'd suggest you look at locking the exchange rate now for some or all of the funds you are looking to transfer. Alternativley you could transfer some or all of your funds as and when they become available. If however you're less concerned then by all means hold out for a better rate - you may be be right and you might be wrong!

Please don't hesitate to get back in contact if you need anything else or if anything in this email is unclear.

Best Regards

Mark

Mark Bodega
Director - HiFX
www.hifx.co.uk

Last edited by Windsor2; Jan 4th 2010 at 8:40 pm. Reason: Formatting
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