Weekly Market Update 09-02-2011
 

GBP/EUR
Range of the week: 1.1873 (Monday) – 1.1749 (Monday)
Variance of the week on £10k = €124

Major news or data for the week so far:

German Industrial production Drops
(Tuesday) It seems the UK was not the only major economy to suffer from poor winter weather. Industrial production fell 1.5% during December. Despite this drop the Euro continued to advance due to figures still being over 10% better than the same month in 2009.

UK Trade deficit widens to highest level since August 2005
(Wednesday) The gap now stands at £9.247bn up from its previous figure of £8.460bn. The consensus was for a widening in the figure but came in much worse at just over the £9bn mark. A lot of this rise has been attributed to increases in oil imports, and with fears of prices increasing, it may be a while before the UK can finally get it’s trade surplus under control. It seems this news was not a big surprise to many however, as little could be seen off the back of this data in the FX market. Poor GDP figures over winter and rising unemployment has left many expecting nothing but “poor shows” when it comes to economic figures being published about the U.K, and could go some way to explaining this.

Osborne set to announce UK bank deal
At lunch time today the long awaited deal between the UK government and UK banks is set to be announced and is said to be worth billions in lending to individuals and more importantly, small businesses. Over the past 3 years many businesses have failed, gone bust, with spiralling costs and debt problems. Due to the banks refusing to lend money to these small business many have had no choice but to cease trading. The increasing number of businesses going bust has been attributed, in part, to the UK’s low GDP figures. The more money our businesses make the better the GDP readings should be. Talks have been going for some 10 weeks now so will interesting to see what has been agreed over the next few hours.

Coming up
Bank Of England MPC meeting results (Thursday) at 12 Midday. No change to interest rates or asset purchasing expected.

Summary
Despite a poor show of data for the UK over the past few weeks, the Pound has stayed stuck within the confines of a 1.15 to 1.20 range against the Euro. Very little has shaken this currency pair since November last year, as it seems our European neighbours have little to unbalance the last 2 months either.

GBP/USD
Range of the week: 1.6160 (Monday) – 1.6025 (Monday)
Variance of the week on £10k = $135

Major news or data for the week so far:

Very little to report from the U.S this week, with the exception of a key speech expected today by Ben Bernanke (FED Chairman).
Investors will be eyeing his comments and his tone when discussing the current economic situation, views on future growth and whether Mr Bernanke has confidence in the Asset Purchasing Programme already in its second stage. This could prove very volatile for the FX markets. Client buying Dollars now, should consider the near 12 month highs we still see, and decide whether it is worth the risk of losing this should the speech boost confidence in the U.S.

Summary
Near 12 month highs! Says it all really. We’re currently some 11.5% from the low of 1.42 back in 2010 and only a whisker off a psychological 12 month high of 1.6292.

GBP/AUD
Range of the week: 1.5927 (Monday) – 1.5775 (Monday)
Variance of the week on £10k = AUS 152

Gold prices have again risen to record levels $1364oz. Despite this constant but gradual rise in Gold price, (Usually attributed to AUD strength) retail sales figures released Monday showed a negative reading with an expected figure of 0.4% coming in lower at 0.2%. With the threat of inflationary pressure to the downside many are wondering whether the current headline rate of 4.75% is the summit for savers for the time being. If it becomes more likely that interest rate rises are coming to their end in Australia then we could expect the Dollar to slow down.

Big Story: Japan and Australia to talk trade amid farm sector row

GBP/NZD
Range of the week: 2.0926 (Monday) – 2.0638 (Monday)
Variance of the week: on £10k = NZD 288

As with the AUD, the NZD has possibly come to the end of its interest rate rises with eyes now on stumbling inflation. But with Gold prices still on the rise, don’t be surprised to see this still have an influence on the FX markets as well.

GBP/ZAR
Range of the week: 11.69 (Monday) – 11.5031 (Monday)
Variance of the week: on £10k = ZAR 1869

GBP/CAD
Range of the week: 1.59 (Monday) – 1.6028 (Tuesday)
Variance of the week: on £10k = CAD 128