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Monthly Currency Update - GBP/EUR July 09.

Monthly Currency Update - GBP/EUR July 09.

Old Jun 30th 2009, 10:58 pm
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Default Monthly Currency Update - GBP/EUR July 09.

Hi All,

Here is an overview of what’s been happening in the Currency Markets throughout June with the Euro.

The summer has finally taken hold down in Windsor and it looks like we could be in for some record breaking temperatures over the coming weeks! (Fingers crossed). I’m sure many of you will be jetting off to even warmer climes over the coming weeks, so all the best to those that are.

Virtually all the economic developments in the UK at the start of June had a positive influence on the Pound, starting with the UK’s manufacturing survey data which inched closer to the 50 expansion level, rising to 45.4, compared to the EU’s 40.7. The housing sector enjoyed another fillip with the Halifax survey rising 2.6% to mimic the Nationwide rise of 1.2% announced last month. The first time these 2 closely watched surveys have risen in tandem for many months. Finally the service sector survey from CIPS/Markit surpassed all previous green shoots by registering the first plus 50 result (+51.7) of any of the major nations in either category. There were some reservations expressed about the relevance of these numbers after they failed to predict the severity of the downturn going into the recession and it is fair to say they are based on opinions, although they are from the front-line. However, since the recession is all about a loss of confidence, an injection of this commodity, from whatever source, must be welcome and encouraging.

Any lingering suspicion that Gordon Brown’s political problems were damaging Sterling was swept away recently when he survived his appointment with his back-benchers and got on with running the economy without Balls. The markets then concentrated back on the usual data to find that the bare patch of earth that used to be the UK economy was starting to at least look green from a distance, even if it was a bit sparse and patchy if you got too close. Following those two positive numbers from the Nationwide and the Halifax, the Surveyors survey from RICS recorded another improvement up to -44. That still leaves many ‘further to fall’ forecasts valid but new buyer numbers and estate agents completions also rose again, as did mortgage approvals. The BRC retail survey fell by -0.8% like for like but no one was too shocked or worried after such a booming Easter in April. The new lawn turned a shade greener on the release of the latest manufacturing and industrial production figures for April. Both showed a small positive outcome and the former was revised to +0.1% in March. This was undoubtedly the result of the rebuilding of stocks after the drastic running down in Q4 and Q1 and the doomsayers doubt that this will be sustained later in the year. The NIESR forecasters thought differently and were bold enough to suggest that the UK may already have emerged from recession during the current quarter.

Meanwhile the Euro was struggling with German exports showing a record decline over the past year (-29%) and a major German retailing group, Arcandor, filing for bankruptcy taking Germany’s Karstadt (on a par with Woolworths) under. Ireland was downgraded for the second time in 3 months and Latvia’s problems, sent vibrations through any of the Euro countries with exposure to their smaller neighbours.

The official UK Retail Sales (-0.6%) disappointed market expectations for a rise in May but it was hopeful, to say the least, that May would have compared well to April’s amazing +2.6% result. Back on the survey evidence, the CBI industrial data improved slightly from -56 to -51 but export orders deteriorated. The only European data of note was a marked improvement in the German ZEW survey from 31 to 45, but this failed to excite any Euro bulls.

Comments from Bank of England Chief Economist Spencer Dale took the edge off Sterling’s latest rise against the Euro as he answered questions at the Parliamentary Treasury Committee. A criticism of the on-going quantitative easing programme was that too many Gilts were being bought by the bank from overseas investors, throwing into question the mechanism whereby the process would help lower long term UK rates and encourage corporate lending. Dale answered that when the sellers were from overseas the benefits would be accrued in the form of a lower level of Sterling.

The ECB were more helpful towards their own currency by injecting a record EUR 442 billion of one year funds into 1,100 banks in a move designed to lower rates for that term and ultimately stimulate lending. Having distanced themselves from the BoE/Fed type of quantitative easing, this move was a surprise and well received by the markets.

Data from both the UK and the EU was mixed overall. UK mortgage approvals rose while net mortgage lending fell and the CBI retail survey failed to improve on last month’s -17 reading. The German IFO survey improved, as did the flash estimate for this month’s PMI manufacturing survey, but the service survey fell slightly and the 35% annual decline in EU Industrial Orders made grim reading.

Current Central Bank Rates:

Europe (E.C.B): 1.00% (Next Meeting 2nd July)
UK (Bank of England): 0.50% (Next Meeting 9th July)

Highs & Lows of June:

High: 1.1900 – on the 22/06/09
Low: 1.1272 – on the 05/06/09

Difference on £200k

High: €238,000
Low: €225,440

A difference of €12,560

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.

Regards




Mark Bodega
Director - HiFX
Windsor2 is offline  

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