Outlook for the pound, and the weeks data.

Good Morning. Today as usual, we'll take a detailed look at the weeks data and how this may affect exchange rates. Let's have a quick look at where rates stand this morning:

• GBP/EUR 1.0971
• GBP/USD 1.6502
• GBP/AUD 1.8020
• GBP/NZD 2.3000
• GBP/CAD 1.7408
• GBP/CHF 1.6526
• GBP/ZAR 12.185
• GBP/JPY 142.10
• EUR/USD 1.5036
  

The main news to kick off the week is the debt crisis in Dubai. The main stock markets in Dubai and Abu Dhabi have dived at least 6%. The falls came after Dubai's property developer, Nakheel, asked for trading of some of its Islamic bonds to be suspended.

Shares are trading for the first time since the state-owned property company Dubai World asked for an extension on repaying its debts. The central bank of the United Arab Emirates said on Sunday it would provide banks with extra liquidity.

While shares in the Middle East dropped sharply, Asian shares rebounded on Monday on hopes the Dubai debt crisis will not spread to other financial markets after the UAE central bank decision. The yen rose against the dollar after the announcement from Nakheel, paring earlier declines.

The fear for Sterling, is that many UK banks are heavily exposed to this, as they have lent Billions of pounds into this market. As I've said here before, finance and banking is one of the biggest parts of our economy, and one of our biggest exports. So, any exposure could be negative for the pound.

"The UK has the biggest loan exposure to Dubai among the G7, which should ensure sterling underperformance against the forex majors," said Lena Komileva, head of G7 market economics at Tullett Prebon.

This Weeks Data
For the UK, we have already had Consumer Confidence data today, that measures the level of consumer confidence in economic activity. The figures were much worse than expected, and the pound has fallen as a result. We also have some inflationary measures later in the week. The main driver for the pound is likely to be the developing news from Dubai; as UK banks have lots of exposure to this market, it doesn't bode well for Sterling.

In the Eurozone we also have inflationary measures, along with Gross Domestic Product and an interest rate decision. It's likely that rates will be left on hold, so the main news to watch is Gross Domestic Product. This a measure of the total value of all goods and services produced by the Eurozone. It's considered as a broad measure of the Eurozone economic activity and health, and can therfore have a big impact on the Euros value, and thus GBP/EUR rates.

In the USA, we have various measures of employment, and Nonfarm payrolls on Friday. The report presents the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile, and therfore hard to predict. So, any difference to the predicted figure can cause USD volatility.

Elsewhere, we have GDP for Canada and Switzerland, retail sales for Australia, and Commodity prices for New Zealand. This is is considered as an early indicator of export price changes. The price changes influence GDP and exchange rates. An increase in prices may indicate strength of the NZD, while a decrease in prices may indicate weakness of the NZD.

Monday
UK - Consumer Confidence
UK - Money Supply
UK - Mortgage Approvals
EU - Consumer Price Index
Can - Gross Domestic Product

Tuesday
Aus - Building Permits
Aus - Interest Rate Decision
Swi - Gross Domestic Product
Ger - Retail Sales
Ger - Purchasing Managers Index
EU - Purchasing Managers Index
EU - Unemployment

Wednesday
UK - PMI Construction
EU - Producer Price Index
US - Employment

Thursday
Aus - Retail Sales
NZ - Commodity Prices
EU - Purchasing Managers Index
UK - Purchasing Managers Index
EU - Gross Domestic Product
EU - Retail Sales
EU - Interest Rate Decision
US - Jobless Claims

Friday
Swi - Consumer Price Index
Can - Unemployment
US - Nonfarm Payrolls
US - Unemployment

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Pound falls again on Dubai news

Good Morning. The pound has remained under pressure after concerns over exposure of UK Banks to the debt crisis in Dubai. Rates @ 08:30am are as follows:

• GBP/EUR 1.0988
• GBP/USD 1.6325
• GBP/AUD 1.8207
• GBP/NZD 2.3175
• GBP/CAD 1.7521
• GBP/CHF 1.6578
• GBP/ZAR 12.350
• GBP/JPY 140.77
• EUR/USD 1.4853

Reuters have reported that Dubai's shock move earlier in the week to restructure Dubai World, and delay repayment on some of the company's $59 billion of liabilities, sent ripples through financial markets, denting equities and riskier currencies.

Some analysts said the pound was underperforming because of concerns that some UK banks may be affected, although no exposure was confirmed.

"There are concerns regarding the extent of the exposure of the UK banks to Dubai, hence sterling is coming under pressure," said Ian Stannard, currency strategist at BNP Paribas.

The pound is particularly sensitive to any banking sector problems, given the fact that the financial sector makes a large contribution to the UK economy. This is in addition to the news earlier in the week that the Bank of England gave a £60bn loan to some UK banks.

Lack of confidence in the Banking sector is one of the main drivers for Sterling weakness at the moment. As yesterday was a market holiday in the US for thanksgiving, trade was fairly thin. Most investors chose to sell riskier currencies such as the pound, helping to dent the currency.

Strong Yen harming Japanese Eeconomy

Japan's finance minister has said the strength of the yen is harmful to the country's economy.
In trading the currency has touched 84 to the dollar, the US currency's lowest level since the mid-1990s.

A high yen damages the competitiveness of Japanese exports, which have been the engine of the country's growth.With much of the relative strength caused by dollar selling rather than yen buying, there may be little the government can do alone.

Enjoy your weekend.

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Why has pound fallen November '09

Good Morning. The pound has fallen quite a bit overnight, after yesterdays GDP data showed that the UK is the only major economy still in recession. At 08:30am pound exchange rates are as follows:

• GBP/EUR 1.0971
• GBP/USD 1.6556
• GBP/AUD 1.7971
• GBP/NZD 2.2914
• GBP/CAD 1.7407
• GBP/CHF 1.6560
• GBP/ZAR 12.197
• GBP/JPY 143.72
• EUR/USD 1.508

Sterling Falls again
Sterling fell this morning, losing more than 1% against the US Dollar while the pound also fel against the Euro, hitting a 1 month low as it remained under pressure in the wake of Wednesday's gross domestic product data.

The data showed the British economy shrank by 0.3 percent in the third quarter compared with the initial estimate of a 0.4 percent contraction. This came as a disappointment to some who were looking for a bigger revision and it exacerbated concerns that the UK economic recovery is lagging that of other major economies. So, the figures were not as good as some analysts had expected, and so this is the main reason for the dip in exchange rates.

The new figures confirm the economy has contracted for six consecutive quarters - the longest unbroken stretch of since records began in 1955. The UK is lagging many of its rivals. France, Germany Japan and the US have all already exited recession.

Earlier on Wednesday, Bank of England monetary policy committee member Andrew Sentance said there were signs the UK economy had returned to growth in the second half of this year, however the markets have reacted and Sterling has lost a significant amount of it's value.

Given our huge debt levels, and concerns over the banking sector mean there's little hope the pound will rebound any time soon. Many analysts are expecting the pound to remaind weak until at least the General Election next year. If you have a requirement to purchase a Foreign Currency with Sterling, then you should consider fixing rates now. Even if your currency is not needed for some time, you can pay a 10% deposit and lock in a rate for the full amount you need, for up to 2 years into the future.

This will protect you against further losses, and give you peace of mind knowing what your currency will cost you.

Dollar Falls
The US dollar has hit a 14-year low against the Japanese yen with low interest rates in the US making the greenback less attractive to investors. The dollar slipped to 86.5 yen, its lowest level since July 1995.

The US has indicated it is unconcerned about the dollar's slide, and will not intervene to strengthen it. Many traders are swapping dollar holdings for gold as a safer investment in the current uncertain economic climate.

Usually the pound benefits from this type of news, but for the reasons already listed above, not many people are interested in investing in Sterling right now.

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Pound falls after secret £60bn loans revealed.

Good Morning. Sterling fell yesterday as concerns about the Banking sector dented appetite for riskier currencies, while Bank of England policymakers offered little insight into the outlook for monetary policy. At 08:30am rates stand as follows:

• GBP/EUR 1.1127
• GBP/USD 1.6710
• GBP/AUD 1.8019
• GBP/NZD 2.2841
• GBP/CAD 1.7598
• GBP/CHF 1.6792
• GBP/JPY 147.50
• GBP/ZAR 12.373
• EUR/USD 1.5012

UK Banking Sector
The Bank of England yesterday revealed secret loans to UK banks last year of more than £60 Billion pounds. It was also revealed that Chancellor Alistair Darling had agreed to underwrite any losses which the Bank may have made on the loans.

It's headline news, and rather than repeat it all here, you can see a detailed report on the BBC website here. In terms of the effect on the currency markets, finance forms a huge part of our conomy, and is also our biggest export. This news will do little to spur confidence in the economy, and the pound has fallen as a result.

The big question is what else is there that we don't know? There is already talk of the UK's credit rating being downgraded, and this will fuel that speculation, and will hurt the pound. The governor of the BoE, Mervyn King, again said a weak pound was needed to help the ecomomy, which is not what clients needint to buy foreign currency need to hear!

Analysts said King's comments offered limited new direction in terms of policy outlook, while underlining differences among members of the bank's interest rate-setting committee who recognise the economy has been slowly improving and those who are cautious about normalising monetary policy.

"There's a fair amount of division in the committee and this is holding sterling back," said Phyllis Papadavid, currency strategist at Societe Generale in London. "The lack of certainty around policy is a big driver of sterling today."

US Economic Growth
The US economy grew by far less than originally forecast between July and September, according to revised official figures. The latest estimate said the economy grew at an annual pace of 2.8%. That compared with the 3.5% the Department of Commerce initially forecast earlier this month.

The change in the gross domestic product figure came partly because imports, which count as negative, were higher than thought. Imports increased at an annual rate of 21%, the biggest gain since the second quarter of 1985, and a big jump on the 16% first thought. US GDP is expressed as an annualised rate, or annual pace, which shows what the annual rate would be if the latest change continued for the rest of the year.

Usually, good data from the USA would strengthen the dollar, and we would see GBPUSD rates fall. However, as USD is a safe haven currency, good news spurs investors into riskier currencies. Unfortunately the pound is not very attractive, and so other currencies such as AUD benefited. As investors pull out of the USD, it actually weakens it and GBPUSD rates have gone up despite the bad news from the UK, however this is purely dollar driven.

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Pound Euro & Pound Dollar Forecast

Good Morning. Today we'll take a detailed look at GBP/EUR and GBP/USD. First as usual, we'll have a quick look at where rates stand @ 08:30am:

• GBP/EUR 1.1079
• GBP/USD 1.6525
• GBP/AUD 1.8013
• GBP/NZD 2.2785
• GBP/CAD 1.7553
• GBP/CHF 1.6744
• GBP/JPY 146.45
• GBP/ZAR 12.406
• EUR/USD 1.4910

Euro
Last week began with the release of monthly trade balance data for the Euro zone on Tuesday. This revealed a larger than expected surplus, easing some concerns that a strong Euro is hindering the economy's export performance. As a result this limited the chances of official intervention to stop the Euro rising and ultimately contributed to the GBP/EUR rate dropping towards the end of the week.

Further through the week an absence of any further major Euro zone economic data left the Pound's weakness as the primary source of any Euro gains, particularly after Wednesday’s surprise Bank of England minutes showing a split vote for QE.

However, by Friday GBP/EUR took a further downfall as the Euro gained strength after the surprise comments by the European Central Bank President Jean-Claude Trichet. In brief his comments warned that the banks should prepare for the unwinding of stimulus measures, which could be taken away promptly if the threat of inflation awakens.

As a result GBP/EUR closed down 0.83% at 1.1101, from 1.1194 a week earlier, continuing to improve market conditions for those converting Euro’s into Sterling further.

This week sees the release of German business conditions data on Tuesday and consumer confidence on Wednesday, both of which will help shape economic growth expectations for the coming months depending upon their positivity.

Friday will also see the release of Euro zone business, consumer, and industrial confidence data which could support the Euro if stronger than expected. As for the UK, this week sees the release of Private Consumption, Government Spending, Imports and Exports and most importantly GDP figures all on Wednesday.

With the recent array of disappointing data releases from the UK and increasingly optimistic figures from the Euro Zone, it may be a wise to consider buying Euros before the market possibly falls.

US Dollar
Sterling fell sharply on Friday, falling more than 1 percent to a two-week low against the dollar at $1.6460, this erased all of the gains made on Monday when it hit a three-month high just shy of $1.69 on concerns over the UK public finances deteriorating almost twice as fast as expected and waning investor appetite for perceived risky currencies.

It is likely that public finances data will be weak in the months to come, and each time we get that it will be negative for sterling.

The highlight for UK data this week will be Wednesday's second estimate of UK Q3 GDP, which many analysts expect to be revised up slightly from a first estimate reading of a 0.4 percent decline. If revised as expected GBP is likely to respond in a positive way.

Across the pond the American Thanksgiving holiday means that markets will likely become illiquid through later-week trade, but earlier-week price action could produce big US Dollar moves on several important reports. Tuesdays second release for Q3 GDP figures, Conference Board Consumer Confidence survey results, and the minutes from the Fed Committee’s most recent policy-setting meeting have been known to force considerable moves in the US Dollar, and it remains important to watch for surprises from each.

What this means for those wishing to repatriate their funds is that the early part of the coming week could prove critical if the widely expected UK Q3 GDP data is revised positively and the sentiment from the Fed Policy meeting is deemed dovish, it could elevate Sterling to undesirable levels resulting in losses.

On the flip side this could also prove critical for those buying Dollar as the latter part of the week could see flat exchange rates due to the US holidays.

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Currency Forecast 23rd November 2009

Good Morning, and welcome to a new week in the currency markets. Sterling fell sharply on Friday, falling more than 1% to a 2 week low against the dollar, on concerns over the UK's fiscal health and waning investor appetite for perceived risky currencies. The debt levels were the main news of last week, and caused the pound to fall. At 09:00am Monday 23rd November, rates are as follows:

• GBP/EUR 1.1070
• GBP/USD 1.6584
• GBP/CAD 1.7591
• GBP/AUD 1.7970
• GBP/NZD 2.2665
• GBP/JPY 147.46
• GBP/CHF 1.6723
• GBP/ZAR 12.405
• GBP/NOK 9.2668
• EUR/USD 1.4977

Sterling also fell against the Euro, falling to a 1 week low as it slid further in the wake of data on Thursday showing UK public finances deteriorated almost twice as fast as expected last month.

The UK government faces mounting pressure to spell out how it will curb public borrowing as it prepares to fight an election due by June 2010. In the Queen's speech, they said it would be halved within 4 years, but didn't spell out any plan at all on how this would be achieved.

It's believed that that record debt levels will threaten Britain's triple-A sovereign debt rating, which would no doubt cause further falls for the pound. Concerns about mounting government debt and the belief that interest rates will stay very low for many months to come have ensured sterling has remained weak throughout this year, and this is unlikely to change.

"The pressure on sterling will not abate. The Bank of England is in no rush to change its very loose monetary policy and sterling should stay weak against the euro," Bank of New York Mellon currency strategist Neil Mellor said.

Below is a full breakdown of the weeks data, and what will be the main drivers for exchange rate movements this week.

This Weeks Data
The main data this week is Gross Domestic Product (GDP) data for the UK, Germany and the USA. This is a measure of the total value of all goods and services produced by the various economnic zones. The GDP is considered as a broad measure of the UK economic activity and health. A rising trend has a positive effect on the GBP, while a falling trend is seen as negative.

The UK's release is on Wednesday, and we expect the figures to show an annual decline of -5.2% and a monthly decline of -0.4%. This will confirm tthat the UK is the only major economy still in recession, and so will likely be negative for the pound.

For the EU, Germany's GDP will be important as it is the EU's largest economy, and so Germany's performance can have a big impact on the value of the Euro.

For the US there's also a lot to watch out for. On Tuesday we see GDP, Consumer Confidence, and also the FOMC minutes. FOMC stands for The Federal Open Market Committee that organizes 8 meetings in a year and reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. FOMC Minutes give a good idea where interest rates will go in the states.

Monday
Ger - Purchasing Managers Index
EU - Purchasing Managers Index
EU - ECB Speech
Can - Retail Sales
US - Home Sales

Tuesday
Ger - Gross Domestic Product
UK - Mortgage Approvals
UK - Business Investment
EU - Industrial Orders
US - Gross Domestic Product
US - Consumer Confidence
US - FOMC Minutes

Wednesday
Ger - Consumer Price Index
UK - Gross Domestic Product
US - Jobless Claims
US - Homes Sales

Thursday
Ger - Consumer Price Index
UK - Distributive Trade Survey

Friday
EU - Business Climate Indicator
EU - Consumer Confidence
EU - Economic Confidence

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Pound falls on debt fears.

Good Morning. Sterling slipped on Thursday as UK borrowing data underlined Britain's deteriorating finances, while a sell-off in high-risk currencies also kept the pound under pressure. At 08:30am the snapshot of pound rates are as follows:

• GBP/EUR 1.1141
• GBP/USD 1.6610
• GBP/AUD 1.8068
• GBP/NZD 2.2744
• GBP/CAD 1.7675
• GBP/CHF 1.6849
• GBP/ZAR 12.452
• GBP/JPY 147.53
• EUR/USD 149.05

Pound Falls
Sterling fell after data showing that the UKs public finances deteriorated at a much faster pace than expected in October, taking public borrowing to its highest on record. There was also a rise in Retail Sales for the UK, but the borrowing data overshadowed that and caused rates to fall.

Ratings agencies have said Britain may face a possible cut in its sovereign rating if its fiscal position gets worse. This would ruin the appeal of UK government debt and probably prompt investors to pull funds out of the country into other currencies percieved as safer. This will hurt Sterling in the Short to Medium term .

Analysts said the data highlighted the need for Britain to rein in borrowing or face the possibility of a ratings downgrade. Such measures, coupled with ongoing low interest rates would keep sterling weak in the medium to longer term. Despite this, the government continue to borrow more and more money, still trying to spend their way out of the problem.

In the Queens speech, the government stated it would pass law to ensure the deficit was halved within 4 years, however they did not mention how they were planning to do this. At all. Not even a hint (!). This is worrying, as it seems that it is adopting the Emu's policy of dealing with problems, sticking it's head in the sand and hoping it will go away. Excellent policy...

Many in the market say Wednesday's Bank of England minutes did little to change the view among investors that UK rates will stay low into next year, which is seen as negative for sterling as other central banks begin to raise rates.

Elsewhere, the Nationwide also delivered a gloomy forecast for the UK economy, which you can read on the BBC here.

Summary
As the world exits recession, our governments policies mean that we are lagging behind in a big way, and there's no sign of this changing in the near future. Rates are low, debt is high, unemployment is rising still, and all of this means that the UK is not an attractive place for investors. Other currencies such as the Euro and Dollar are more attractive, and this doesn't bode well for those hoping exchange rates will rise.

Sorry for the gloomy outlook that seems to be mirroring our weather before the weekend, but that's the state of play at the moment.

Todays Data
A quiet Friday. We've already had consumer price index for Germany. This was worse than expected, but GBPEUR rates still fell due to the reasons already outlined above.

Later we have a speech by the European Central Bank.

Whatever you're doing over the weekend, have a good one!

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Inflation, BoE and effect on Pound exchange rates.

Good Morning. The pound fell from it's recent highs yesterday after the Bank of England minutes showed a split in the decision to increase the Quantitative Easing measures. At 08:30am this morning, rates are as follows:

• GBP/EUR 1.1210
• GBP/USD 1.6675
• GBP/AUD 1.8088
• GBP/NZD 2.2716
• GBP/CAD 1.7680
• GBP/JPY 148.34
• GBP/CHF 1.6956
• GBP/ZAR 125162
• EUR/USD 1.4868

Bank of England Minutes
The Bank of England’s Monetary Policy Committee (MPC) was split three ways in November over whether to increase its quantitative easing (QE) scheme - the first time members have voted in three different directions since the controversial policy began in March.

Spencer Dale, the Bank's chief economist, in his first dissent from the majority since QE began in March, voted for no increase at all, arguing that pumping more money into the economy might fuel “unwarranted increases in some asset prices that could prove costly to rectify."

In contrast, David Miles, who joined the MPC in June this year, called for QE to be increased by £40 billion in “order to provide greater insurance to the downside risks to growth and inflation”.
The split highlights a growing concern that the programme, where the Bank "prints money" and uses it to buy assets such as bonds, was stoking inflation.

What does this mean?
The door is clearly not shut on further quantitative easing. Nevertheless, with the economy almost certainly returning to growth in the fourth quarter, we suspect that November marked the final extension to the quantitative easing programme. The committee also discussed whether to cut the interest the central bank pays private banks for holding their cash deposits, in a bid to encourage them to lend the money rather than sitting on it, but decided that they did not want to do this at the present time.

So, inflation is rising, and this usually signals that interest rates will go up. If interest rates go up, Sterling becomes more attractive to investors, more people buy Sterling and the currency strengthens and exchange rates rise.

It's not that simple however. Despite inflation rising, most analysts expect our interest rates to stay at record lows well into nex year. As mentioned above the BoE are actually considering cutting the rate for banks, and so the rise in inflation is unlikely to cause rates to rise as it usually would.

This is reflected in the drop in rates after the minutes were released yesterday.

Todays Data
For the UK, we have Retail Sales, Money Supply, and Public Sector Borrowing. The Retail Sales are the figures to watch. Expect a monthly rise of 0.6% and an annual rise of 2.9%. And different, and the pound will likely change in value.

We also have a speech by the European Central Bank President.He gives a press conference as to how the ECB observes the current European economy and the value of EUR.

His comments may determine a short-term positive or negative trend. If he shows a hawkish outlook, that is seen as positive (or bullish) for the EUR, while a dovish is seen as negative (or bearish).

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Pound vs US Dolllar

Good Morning. The pound rose yesterday after figures showed inflation in the UK rose. Rates @ 08:30am stand as follows:

• GBP/EUR 1.1274
• GBP/USD 1.6801
• GBP/AUD 1.8046
• GBP/NZD 2.2534
• GBP/CAD 1.7681
• GBP/ZAR 12.510
• GBP/JPY 149.78
• EUR/USD

UK Inflation
A key measure of UK inflation has risen for the first time since February, official figures have shown. The Consumer Prices Index (CPI) climbed to 1.5% in October, up from 1.1% in September. Meanwhile the Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments and housing costs, rose to -0.8% from -1.4%.

Inflation accelerated mainly because fuel prices fell by a lot less than they did in the same period a year ago. Analysts had expected the rate of inflation to rise, so the figures came as no surprise to the City. "I don't think this is anything that will worry the Monetary Policy Committee [of the Bank of England] too much," said Amit Kara at UBS.

"The MPC has highlighted that inflation is going to be very volatile in the near term." Given the serious risks facing the UK economy and the dangers of a double-dip recession in 2010, it is important for the MPC to persevere with an aggressive QE programme, and to consider special measures aimed at boosting bank lending to businesses," said David Kern, chief economist at the British Chambers of Commerce.

So, with little chance of interest rate hikes, and more QE likely, we've seen yesterdays gains already pull back, as the pound is likely to remain weak well into 2010.

US Dollar
As global stockmarkets generally performed strongly, improving investor sentiment undermined some support for the US Dollar. However, the University of Michigan consumer confidence index, released on Friday, was weaker than expected and fell to the lowest level for three months, adding to US Dollar weakness late in the week.

This was balanced by earlier employment data showing that US jobless claims in the latest week fell to the lowest level since January, boosting some expectations that the US labour market could be stabilising.

Consumer price inflation data on Wednesday will be closely watched for signs that inflationary pressures are building (Inflationary pressure is when the price of goods and services in general increase at a higher rate than wages, thus causing a financial strain). A larger than expected rise could potentially offer support to the US Dollar on expectations that the Federal Reserve will eventually need to raise interest rates as the inflation risks intensify. However, global trends in investors' risk appetite levels are likely to remain an important influence on the US Dollar's overall performance.

The potential threat of Inflationary Pressure on both GBP and USD could force both the BoE and the Fed to take action sooner than expected. Taking advantage of the current gains made by GBP against USD should be considered as the potential to increase interest rates by the FED to counter inflationary effects would make USD a more attractive investment. On the flip side this would also affect those wishing to sell their Dollars as Dollar strength is undesirable.

Queens Speech Today
Written by the government and delivered by the reigning monarch, it sets out the legislative agenda for the year ahead and is the centrepiece of the state opening of Parliament. The government will promise a bill obliging it to halve its budget deficit within four years when it announces its planned new laws in the Queen's Speech.

This will be interesting to see how they plan to do this, as the huge deficit the UK has is one of the reasons the pound is so weak. Analysts have no clue as to how the government plan to reduce this, so this may give clues as to the plan. Wooly comments will simply cause further Sterling weakness.

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Pound vs Euro

Good Morning. Rates @ 08:30am Tuesday 17th November are as follows:

• GBP/EUR 1.1257
• GBP/USD 1.6831
• GBP/AUD 1.8081
• GBP/NZD 2.2561
• GBP/CAD 1.7679
• GBP/CHF 1.6997
• GBP/ZAR 12.446
• GBP/JPY 149.46
• EUR/USD 1.4948

GBP vs EUR
On Friday morning the Euro zone officially announced it had come out of recession with a growth in GDP of 0.4% just under expectation for a growth of 0.5%. The currency markets had priced in the figures and so we saw little movement in exchange rates between Sterling and Euro.

The German ZEW think-tank's business survey showed that confidence levels in the Euro zone's largest economy weakened in November, raising some concerns that the economy's recovery could be more tentative in the coming months.

One of the reasons why the Euro zone has recovered quicker than the UK is because their financial sectors account for a smaller proportion of their economies. Stronger exports driven in Germany particularly by the car market has contributed hugely to the Euro zone’s recovery.

Only Spain and Ireland remain in recession. These announcements have potential to affect GBP/EUR exchange rates so if you are looking to purchase any of these currencies now maybe the time to contact your account executive to discuss the options available to you.

What you can do
With not much movement on the Market at the moment one may look into a Stop/Limit order, this gives you the option to look at prices which are not quite available on the market at present and also but putting a stop in this protects you against any reverse spikes against you.

For example if you are looking for a better price than is currently available one could put a limit order in to the market place at a price which is above or below interbank. However, on the flip side you may wish to protect your purchase from a market downturn and place a lower stop in case the market fluctuates the wrong way. (This is reversed if selling a currency)

This Week’s Data
This week is a much quieter week in terms of data releases, with nothing to note from the Eurozone aside from any un-announced press releases from European Central Bank officials which may occur.

In the UK, we have Bank of England minutes released on Wednesday. However, these are unlikely to reveal any big surprises, as Mervyn King outlined his view of the economy in last week’s quarterly inflation report. Looking to the USA, we have more data coming out, with Retail Sales, inflation and the leading indicators index as the week goes on.

Please find a full calendar below:

Monday
US – Retail Sales
UK – Rightmove House Prices

Tuesday
UK – CPI & RPI Inflation
US – October PPI Inflation

Wednesday
UK – Bank of England Minues
US – CPI & Real Earnings

Thursday
UK – M4 Money Supply
UK – Retail Sales

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EU GDP figures today. Outlook for GBP/EUR

Sterling hit a 1 week low against the dollar yesterday, staying weak after comments from the Bank of England earlier in the week. Also disappointing U.S. data propped up the safe haven US Dollar. The pound rose against the Euro however, coming off an earlier 2 week low, with traders citing selling of euros versus sterling by corporate accounts. Rates @ 08:30am are as follows:

• GBP/EUR 1.1190
• GBP/USD 1.6663
• GBP/AUD 1.7942
• GBP/NZD 2.2653
• GBP/CAD 1.7512
• GBP/ZAR 12.384
• GBP/JPY 150.18
• EUR/USD 1.4886

Analysts said sentiment towards the pound remained negative after comments on Wednesday by BoE chief Mervyn King that suggested the BoE was leaving the door open to more Quantitative Easing, and he highlighted the benefits of a weak currency (again!). Of course a weak pound is good for exports, but the fact is we are not a nation of exporters; we import much more, and so a weak pound is worse for most people.

"The market's still reading Mervyn King's comments to be on the dovish side," said Paul Mackel, director of currency strategy at HSBC. "At the end of the day the Bank of England is still dovish, it is still expanding QE, and although sterling is undervalued versus the euro I can't see it's at the key turning point where it's going to correct just yet."

So, expect the pound to stay weak against the euro as monetary policy interest rates in the UK are seen staying at very low levels for much longer than rates in the euro zone, as they are expected to raise rates as the exit recession.

Euro zone GDP
Euro zone preliminary data due today is expected to show the Eurozone came out of recession in the third quarter. This would contrast sharply with the UK, where recent data showed GDP unexpectedly still contracting.

We have GDP data today for Germany, by far the largest economy in the Eurozone, as well as GDP for the whole EU. It is a measure of the total value of all goods and services produced by Germany & the EU. The GDP is considered as a broad measure of economic activity and health.

A high reading or a better than expected number has a positive effect on the EUR, while a falling trend is seen as negative.

The German data has already come in lower than expected, boosting the GBPEUR rate due to a weakening of the Euro. The EU figures are out at 10am, and is expected to be +0.5%. Any different, and expect volatility in pound to euro rates.

Other Data Today
Ger - Gross Domestic Product
Swi - Producer Prices
EU - Consumer Price Index
EU - Gross Domestic Product
US - Import Prices
US - Trade Balance
US - Consumer Sentiment

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Pound falls on BoE Comments

Sterling fell sharply against the euro and the dollar on Wednesday after Governor Mervyn King said the Bank of England was open-minded about pumping more money into the economy and highlighted the benefits of a weak pound. Rates @ 08:30am are as follows:

• GBP/EUR 1.1038
• GBP/USD 1.6537
• GBP/AUD 1.7719
• GBP/NZD 2.2341
• GBP/CAD 1.7281
• GBP/CHF 1.6672
• GBP/ZAR 12.201
• GBP/JPY 148.30
• EUR/USD 1.4979

Governor Mervyn King said the UK economic recovery was under way, and signalled that interest rates will remain low at least another year, in a boost to mortgage payers.

But he warned the country has 'only just started along the road' towards getting the economy back to business as usual, in the wake of the worst financial crisis in modern history.

Traders pointed out that the outlook was marginally more optimistic than previous projections, while others focused on downbeat comments from Mr King as he released the Bank's latest Inflation Report. The net result for the pound was a weakening of the currency, and exchange rates fell.

UK Unemployment
The number of people unemployed in the UK rose again in the three months to September, although the 30,000 increase was the smallest since May 2008. The jobless rate edged up to 7.8% from 7.7%, but the youth unemployment rate rose to 19.8%, a record high. Ross Walker, UK economist at RBS Financial Markets, said the latest official figures were "better than expected".

However, he added: "There is some evidence of stabilisation but it remains to be seen just how durable this proves to be. "It feels both too soon to expect any sustainable increase in total employment and certainly the GDP data suggest that we should still be, under normal circumstances, six or maybe nine months away from that." The government welcomed the fact that the rise in unemployment had slowed.

"The fact that unemployment is significantly lower than everyone forecast at the beginning of the year shows the support for the economy is making a real difference," said Work and Pensions Secretary Yvette Cooper.

However, shadow work and pensions secretary Theresa May said the latest unemployment statistics were yet more grim figures for Britain. David Kern, chief economist at the British Chambers of Commerce, said the latest unemployment data indicated the need for the Bank to continue with the QE programme and in conjunction with the government, supplement this with specific measures aimed at stimulating bank lending to credit-worthy businesses.

Summary
So, despite good recovery for the pound over the last 4 weeks, yesterday shows that Sterling is still very fraglie and any negative news can quickly affect exchange rates. As unemployment is up, and the governor of the BoE warning that the government have no plan at all to repay the huge levels of government debt, the outlook is still poor. Couple this with the fact that interest rates are likely to remain low for at least a year, and we are unlikely to see any significant recovery for the pound for some time.

Todays Data
Aus - Unemployment
EU - ECB Monthly Report
EU - Industrial Production
US - Jobless Claims

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UK at risk of losing AAA rating

Good Morning. The pound fell yesterday after the ratings agency said Britain, due to its huge levles of government debt which we've talked about here before, was the major economy most at risk of losing its triple-A rating. It hurt the pound, and rates @ 08:30am stand as follows:

• GBP/EUR 1.1144
• GBP/USD 1.6755
• GBP/AUD 1.7948
• GBP/NZD 2.2545
• GBP/CAD 1.7510
• GBP/CHF 1.6828
• GBP/ZAR 12.272
• GBP/JPY 150.45
• EUR/USD 1.5031

UK Rating
As the UK has been borrowing heavily to try and pull the economy out of recession, its weak financial position has hurt the pound, and investors and speculative traders often sell Sterling on any suggestion Britain may lose its top-notch rating.

Only Britain, the US, Germany and France are among the major economies are rated AAA and any change could affect the cost of government borrowing.

Today's Bank of England's quarterly Inflation Report could well also negatively affect the pound.

Inflation Report & Unemployment
The Bank of England quarterly publishes a report of the detailed economic analysis and inflation projections on which the Bank's Monetary Policy Committee bases its interest rate decisions, and presents an assessment of the prospects for UK inflation over the following two years. Watch this closely as it's the most important data release of the day.

We also have some important unemployment data today. Various measures of unemployment are a leading indicator for the UK Economy. If the rate is up, it indicates a lack of expansion within the U.K. labor market. As a result, a rise leads to weaken the U.K. economy. A decrease of the figure is positive (or bullish) for the GBP, while an increase is negative.

UK Trade Gap
In more poor news yesterday, the UK trade deficit widened more than expected in September, led by a jump in car imports as Britain's scrappage scheme helped foreign carmakers. The difference between what the UK exports and what it imports was £7.2bn in September, well above analyst expectations of a £6.1bn deficit.

We are a trading nation and this reflects a return to growth for the global economy. The competitive value of the pound makes the UK well-placed to benefit from increased global demand, however it's also to remember that we import much more than we export, and so the weak pound is bad news for most.

New Zealand
We have Retail Sales from NZ today. This measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. An upward swing would help strenghten the NZD and cause GBP/NZD rates to fall.

Economic Growth
Major economies across the world are showing strong signs of recovery, the Organisation for Economic Co-operation and Development (OECD) has said. The OECD's leading indicators "point strongly" to growth in Italy, France, the UK and China.

The Canadian and German economies are also displaying "tentative signals of expansion", the organisation said. The report will provide some cheer for the UK, which is still stuck in its longest recorded recession.

While other major economies such as the US, France, Germany and Japan have all started growing again, the UK economy contracted by 0.4% between July and September. But the OECD rates the UK as one of just four major economies indicating expansion.

However, the fact remains that we are the only major economy still in recession, and despite the fact that forecasts suggest we will recover, it's important to remember that the other major economies such as the EU and US are likely to recover faster. This will reflect itself in rates, as other currencies begin to strengthen before us, Sterling exchange rates are likely to struggle for some time to come.

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Pound starts to fall - gains over.

Good Morning. Yesterday the pound hit 8 week highs against the Euro, and 3 month highs against the US Dollar. However the takeover bid for Cadburys along with continued worry about the UK economic recovery caused the pound to fall back in afternoon trading. Rates at 08:30am this morning stand as follows:

• GBP/EUR 1.1110
• GBP/USD 1.6649
• GBP/AUD 1.7966
• GBP/NZD 2.2524
• GBP/CAD 1.7635
• GBP/CHF 1.6788
• GBP/ZAR 12.353
• GBP/JPY 149.31
• EUR/USD 1.4980

Pound/Euro
Following a hugely important week for the Pound last week, much focus will now be placed on determining what will happen next for the GBP/EUR cross. Surprisingly, following the Bank of England’s decision to increase its Asset Purchase Scheme by £25 Billion, Sterling has held relatively strong, actually gaining strength against the Euro by Monday morning.

This has been attributed to the wide spread anticipation within the market that this £25 Billion will bring to an end the UK’s Quantitative Easing cycle. Confirmation of this could come later this month when the minutes of the Bank of England’s most recent meeting are published, this will be vital for anyone with an upcoming requirement to buy or sell Euros. While for now an end to QE is being viewed as Pound positive news, the long-term effect of £200 Billion of additional government debt remains to be seen.

Looking forward, this week is a relatively busy week in terms of data from both the UK and our European trading partners. From the UK we have Retail Sales data, Unemployment figures and on Thursday a speech by Mervyn King (Governor of the Bank of England) which will give indications as to the bank’s future economic stimulus plans.

From the Euro-Zone key data includes the ZEW economic sentiment on Tuesday but most importantly the week climaxes with EU GDP figures for Quarter 3. Last quarter The Europeans narrowly remained in recession with a quarterly decline of just 0.2% and all eyes will be firmly focused on this release. A positive figure would bode badly for Sterling which presumably is still fundamentally fragile given the poor GDP figures for the UK at the tail end of last month and additional QE last week.

Early forecasts suggest that the EU will officially exit recession and therefore it would probably be sensible to consider booking an exchange rate in advance of the release for anyone looking to buy Euros in foreseeable future. Contact us today about the benefits of Forward contracts to protect against any pitfalls in the market.

For those bringing Euros back to the UK it would also be extremely wise to pay close attention the this release as it could well create some fantastic opportunities to fix a price at unnaturally good levels. Your account manager will be able to explain how Limit and Stop-loss orders will help you to achieve this.

Overall, despite some substantial data releases recently the direction of the cross appears unclear. This week could well help to determine the short-medium term future of GBP/EUR. As always in the currency markets expect the unexpected and be aware that the recent flat trading on the Euro could be replaced by a volatile market creating ideal buying and selling opportunities.

Pound/US Dollar
Last weeks data releases saw the US Federal Reserve maintain interest rates at 0-0.25%, and indicating that it is likely to leave interest rates low for an extended period. As a result the US Dollar was the weakest of all the major currencies last week causing GBP/USD to close 1.02% up at 1.6612, from 1.6445 a week earlier, benefiting those converting Sterling into US Dollars. In fact, yesterday saw a 3 month high for GBP/USD, but has already started to fall this morning.

This was in whole due to improving investor’s risk appetite and stronger global stock markets. The US Federal Reserve expressed greater confidence about the US economic recovery, which was generally supported by the economic data last week. This was also coupled with monthly increases in construction spending, pending home sales, manufacturing activity, service sector activity and factory orders which all rose throughout last month.

The only negative data this week came from the US Non-farm payrolls report which revealed a slightly larger than expected number of job losses for October, coming just after revised data for the previous two months had shown that 91,000 fewer jobs were cut than had been initially reported.

Counter to the dollar, Sterling benefitted this week from positive economic releases. This included Thursday’s Bank of England’s decision to only add a further £25 Billion in to the economy through the Governments Quantitative Easing scheme, instead of the anticipated £50 Billion. With the possibility of early signs of a Sterling recovery, the market is perhaps set to continue to become more hostile for those selling Dollars and perhaps suggests an earlier sale may be more favorable.

After a large number of data releases last week, this coming week is particularly quiet, with only a consumer confidence survey from The University of Michigan on Friday. In light of its safe haven status, this could leave trends in investors' risk appetite levels to play a major role in determining the US Dollar's performance.

In conclusion with such an unstable and volatile market it may be beneficial to discuss the possibility of locking into a forward contract with you Account Manager to enable you to take a greater control of finances and protect yourself from any loss.

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Pound outlook week commencing 9th November

Good Morning. The pound rose slightly towards the end of last week, helped by the fact the Bank of England didn't extend the Quantitative Easing measures as much as some had forecast. At 08:30am Monday morning, rates stand as follows:

• GBP/EUR 1.1203
• GBP/USD 1.6772
• GBP/AUD 1.8088
• GBP/NZD 2.2761
• GBP/CAD 1.7830
• GBP/CHF 1.6919
• GBP/ZAR 12.451
• GBP/JPY 151.08
• EUR/USD 1.4966

Sterlings gains
Sterling pared gains against the US Dollar at the ends of last week as a weaker US jobs report left investors more averse to risk and offset the boost to the UK currency from the previous days Bank of England decision.

However, the pound stayed not far from a two-week high against the dollar hit after the central bank on Thursday increased its quantitative easing programme by £25bn , less than the £50bn rise many had forecast.

The top-up to QE broadly supported sterling, particularly as many in the market believe this will be the last time the bank has to pump money in. With the BoE meeting over, analysts said the market would focus on the bank's quarterly inflation report this week.

Under its QE programme, the BoE has since March been buying assets to inject liquidity into the economy. This contributed to recent sterling weakness which saw the pound touch a five-month low against the dollar in October.

However, the overall view that the BoE will maintain economic stimulus and keep interest rates low perhaps for longer than other central banks is seen limiting further gains. As other economies recover faster and start raising rates, their currencies will strengthen. The pound is likely to lag behind given that our rates are not likely to be raised until well into next year.

This Weeks Data
We have lots of data from the UK, EU and US this week that will no doubt cause volatility in exchange rates. Let's take a look at each zone, and the key pieces of data to watch out for.

UK
We have various house price measures on Tuesday. Recently prices have been rising helping to strengthen the pound, but many analysts are saying this will not last. Any decline in the recent rise could cause the pound to weaken and exchange rates to fall.

There is some unemployment data on Wednesday, along with a speech from the Bank of England where a press conference will show how the BoE observes the current UK economy and the value of the GBP. His comments may determine a short-term positive or negative trend.

EU
We have inflationary measures, and also the Gross Domestic Product data on Friday. The GDP is considered as a broad measure of the Eurozone economic activity and health. A rising trend has a positive effect on the EUR, while a falling trend is seen as negative.

US
Thursday sees Jobless Claims, and Friday we have Import Prices, Trade Balance, and consumer sentiment which is a survey of personal consumer confidence in economic activity. It shows a picture of whether or not consumers are willing to spend money.

Monday
Aus - Investment Lending
Ger - Trade Balance
Ger - Industrial Production
Can - Housing Starts

Tuesday
UK - BRC Retail Sales
UK - RICS House Prices
Ger - Consumer Price Index
UK - DCLG House Prices
Ger - Economic Sentiment
US - Consumer Confidence

Wednesday
UK - Average Earnings
UK - Jobless Claims
UK - Unemployment
UK - BoE Speech
NZ - Retail Sales

Thursday
Aus - Unemployment
EU - ECB Monthly Report
EU - Industrial Production
US - Jobless Claims

Friday
Ger - Gross Domestic Product
Swi - Producer Prices
EU - Consumer Price Index
EU - Gross Domestic Product
US - Import Prices
US - Trade Balance
US - Consumer Sentiment


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Pound up after BoE, but GBPEUR rates unchanged

Good Morning. Sterling jumped to a 2 week high against the US Dollar on Thursday after the Bank of England expanded its quantitative easing programme by £25bn, confounding some analysts' expectations of a bigger increase. The pound rose slightly agains the Euro, but then fell back on news the Eurozone economy is set to recover. Rates at 08:30am are as follows:

GBP/EUR 1.1164
GBP/USD 1.6619
GBP/CAD 1.7650
GBP/AUD 1.8128
GBP/NZD 2.2847
GBP/CHF 1.6876
GBP/ZAR 12.549
GBP/JPY 150.38
EUR/USD 1.4884

Bank of England Decision
The bank left rates on hold, but increased the QE programme by £25bn. A poll had shown that two thirds of analysts had predicted the BoE would expand its asset-buying scheme, with the consensus being an increase of 25 billion pounds. Some in the market had forecast a 50 billion pound increase.

Analysts said the pound rallied as market participants were relieved the BoE did not take more drastic action on quantitative easing, and on the view that it may hold off from implementing aggressive stimulus through the end of the year.

"Some in the market expected 50 billion pounds, and so 25 billion was seen as less aggressive," said Chris Turner, currency strategist at ING in London.

So, as the move was widely predicted, and only £25bn was pumped in rather than £50b, this caused strength for the pound across the board. Some analysts said Thursday's top-up may be the last.

With the BoE meeting over, analysts said the market's next focus was on the bank's quarterly inflation report next week, which they said would shed more light on the medium-term outlook for inflation, the key driver of the BoE's monetary policy.

ECB Rate Decision
The European Central Bank (ECB) has kept interest rates on hold at a record low of 1% for the sixth month in a row.The ECB began cutting rates in October 2008, taking them from 4.25% to their current record low in May.

After the rates announcement was made the president of the European Central Bank, Jean-Claude Trichet, predicted the eurozone economy would recover gradually in 2010. Next week, the release of third quarter eurozone economic growth figures are expected to show the bloc exited recession, growing by around 0.5% from the second quarter.

This view that the EU will recover much faster than the UK economy helped trim any gains against the Euro. Rates initially climbed about half a point, but after the ECB decision, it fell back to roughly where we started the day, and indeed roughly where we are now at 1.1158.

Check back on Monday for a full breakdown of next weeks data, and the outlook on where exchange rates may go for the remainder of November.

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Pound in for volatile day - BoE decision due.

Good Morning. The pound rose against the Euro and US Dollar and other currencies yesterday after data showed a higher-than-expected increase in UK service sector activity and as a rebound in equity markets eased risk aversion ahead of a Bank of England policy decision today.

Rates @ 08:30am are as follows:

• GBP/EUR 1.1136
• GBP/USD 1.6513
• GBP/AUD 1.8231
• GBP/NZD 2.2972
• GBP/CAD 1.7603
• GBP/CHF 1.6807
• GBP/ZAR 12.644
• GBP/JPY 149.00
• EUR/USD 1.4825

Today we have Industrial and Manufacturing Production data for the UK, but the main news is the Interest Rate meetings for the European Central Bank and Bank of England.

Analysts expect the BoE to keep interest rates at their 0.5 % record low, but many see an extension of its quantitative easing programme to inject liquidity into the economy.

Two thirds of economists polled expect the Bank of England to top up its QE programme by at least £25bn in November after the economy unexpectedly contracted between July and September.

But recent stronger data for the manufacturing and service sectors have raised questions about the scale of increase. Analysts said the biggest risk to the market would be if the BoE decided to refrain from increasing its asset-buying scheme. This might push sterling higher on the view the excess liquidity which has kept the pound low was beginning to dry up.

So, today will be the most important for the future movements of Sterling over the next month. If they increase the measures, then I expect the pound to take a hit and exchange rates to fall. If they decide not to pump more money in, then the pound is likely to rise. Either way, I think we'll see some significant movement today.

As mentioned above, it's odds on that they will extend the measures, but the question is by how much.

If you have a requirement, you can fix rates in advance of this decision to protect against any adverse movement with a Forward Contract. Doing nothing means you may gain, or equally you may lose. If you do wish to wait to see what the BoE do, then consider placing Stop and Limit orders to make sure you can control any loss should markets not go your way.

Get in touch to discuss how these types of foreign exchange contracts work.

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Pound falls on UK Banking news.

Good Morning. Sterling dipped against the US Dollar yesterday after the UK Treasury announced a major shake up of British banks and investors braced for a possible extension of asset purchases by the Bank of England this week. The pound rose against a broadly weaker Euro. Rates @ 08:30am are as follows:

GBP/EUR 1.1165
GBP/USD 1.6479
GBP/AUD 1.8193
GBP/NZD 2.2770
GBP/CAD 1.7512
GBP/CHF 1.6872
GBP/JPY 149.46
GBP/ZAR 12.735
EUR/USD 1.4753

The news that the major banks that the government bailed out will be split up shook Sterling yesterday. You can read a report on the issue on the BBC website here: http://news.bbc.co.uk/1/hi/business/8340627.stm

As finance is one of the biggest parts of the UK economy, this will likely affect the pound. Indeed Sterling fell against the US Dollar yesterday, but due to weakness in the Euro, GBPEUR rates actually rose slightly despite the news.

"Clearly this is not good news for UK PLC, but it is not happening in isolation - the banking sector in general across the euro zone is under pressure too," said Jeremy Stretch, strategist at Rabobank. This explains why the news didn't affect GBPEUR as much as other currency pairs.

In other banking news, HSBC has announced a cut of 1,700 jobs in the UK. The job losses will come from retail banking, but will come from support services rather than branches. HSBC employs 40,000 people in its UK retail operations, and more than 300,000 employees worldwide.

The main news remains the BoE meeting, which starts today with the announcement tomorrow lunchtime. We expect rates to be left on hold at the record low, but most analysts do expect further Quantitative Easing measures. This will likely hold back any gains for the pound, and could in fact cause rates to fall. We await the announcment tomorrow and will look to see what the effect of further measures will have on exchange rates.

Those that are risk averse, and dont wish to take a gamble on rates falling should consider fixing a rate in advance with a Forward Contract, or place a Stop Loss order to protect against a fall, while still allowing you to aim for a higher rate should the BoE not announce QE.

Aussie Dollar
Australia has raised its main interest rate for the second month in a row, to 3.5% from 3.25%.
The move by its central bank was not unexpected as the Australian economy was the only one in the developed world to expand in the first half of 2009. In fact, Australia managed to avoid recession, only seeing its economy contract in the last quarter of 2008.

Also, the release of the lowest inflation figures in 10 years last week added to expectations of a modest rate rise. "With the risk of serious economic contraction in Australia now having passed, the board view is that it is prudent to lessen gradually the degree of monetary stimulus that was in place when the outlook appeared to be much weaker," he added.

So, higher rates strenghten the currency and make it more expensive to purchase. Rates in Australia have historically been high, and this could signal a return to higher rates in the near future. So, if you need to buy AUD, with the weak pound and the Aussie getting stronger, it's likely that rates may continue to struggle.

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Pound remains weak on speculation of more QE

Good Morning. The pound fell slightly yesterday despite good manufacturing data. Sterling's rally has stalled, pulling the UK currency back from its highest levels versus the dollar and the euro in more than a month hit in late October, and analysts said traders were unwilling to take on big bets before the BoE policy announcement on Thursday. Rates @ 08:30am are as follows:

• GBP/EUR 1.1056
• GBP/USD 1.6311
• GBP/AUD 1.8193
• GBP/NZD 2.2770
• GBP/CAD 1.7597
• GBP/CHF 1.6701
• GBP/JPY 146.71
• GBP/ZAR 11.654
• EUR/USD 1.4749

GBP/EUR
The Euro stabilised towards the end of last week after early losses against Sterling. Consumer prices in the Euro zone fell 0.1% during the year and combined with a slowdown in money supply growth, to 1.8% in September from 2.6%, made October the fifth consecutive month that the annual rate has remained negative.

In turn this raised fears that the European Central Bank (ECB) may need to keep interest rates low in order to maintain support for the economy. Finally, the week ended with the announcement of a 9.7% unemployment rate, the highest since the Euro's introduction.

The GBP/EUR rate closed up 2.66% last week at 1.1159, from 1.0870 a week earlier, benefiting those converting Sterling into Euros. Those looking to do so in the future should discuss the possibility of a forward contract in order to take advantage of today’s rates up to two years into the future.

This week sees the release of the latest interest rate decision by the European Central Bank on Thursday. With a no-change decision widely expected the Euro is likely to gain strength and with it weaken GBP/EUR exchange rates.

Finally, coupled with the prospect of further Quantative Easing by The Bank of England on Thursday those looking to purchase Euros should perhaps be considering the possibility of doing so before rates fall further. As mentioned above, despite much better than expected manufacturing data, the fact that more QE is expected overshadowed the good news, and is keeping the pound weak.

Many in the market expected further sterling downside as the BoE is seen keeping interest rates at a record low of 0.5 percent until at least mid-2010, while continuing to buy domestic assets to pump funds into the market.

"We expect to see considerable sterling-downside as Thursday's meeting approaches, and an extension to the QE programme is likely to be greeted with renewed sterling weakness," analysts at UBS said in a research note.

US Dollar (USD)
The US Dollar lost ground against Sterling last week, but finished higher relative to most other major currencies. As investor confidence in global economic recovery prospects waned, the US Dollar generally found support amid the weakness in global stock markets a characteristic relevant to its safe haven status. The GBP/USD rate closed up 0.85% at 1.6445, from 1.6306 a week earlier.

Brighter news came as the US economy exited recession, with US GDP expanding at a year on year rate of 3.5%. This was the first positive reading since the second quarter of 2008, but the US Dollar weakened slightly following an associated lift in investor risk appetite benefiting some major currencies such as Sterling.

Several key releases this week could induce greater volatility in foreign exchange markets. The US Federal Reserve's interest rate policy meeting is scheduled for Wednesday. Whilst no major policy changes are anticipated, changes in its assessment of economic conditions might impact on US Dollar exchange rates.

Finally Friday’s Non-Farm Payroll report which has played an important role in the past with exchange rate movement will clarify conditions in the US Employment Market.

Conclusion
Christmas could come early if you need to repatriate your funds from the Dollar or Euro as the majority of the financial industry is expecting further QE which will result in sterling weakness however, if risk appetite plays another role in the markets the initial weakness may well be short lived.

If, however you wish to buy a currency with Sterling, to avoid getting stung it would be wise to consider doing so before the BoE’s announcement on Thursday. Even if your currency is not needed for up to 2 years, you can still fix the current rate if you have a 10% deposit of the total. This then protects you from any downturn, and gives you peace of mind in knowing exactly what your currency will cost.

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Pound Outlook November 2009

Sterling was steady against the US Dollar and Euro on Friday, generally consolidating its recovery this week after data showed another rise in UK house prices this month and improving consumer confidence. However, with poor news expected from the BoE this week, these gains could be short lived, and have infact already started to fall. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1085
• GBP/USD 1.6377
• GBP/AUD 1.8044
• GBP/NZD 2.2652
• GBP/CHF 1.6728
• GBP/CAD 1.7680
• GBP/ZAR 12.849
• GBP/JPY 147.64
• EUR/USD 1.4771

The pound's rebound from a steep decline triggered by the surprise fall in 3rd quarter UK output announced a week ago has been strong. It is on track for its biggest weekly rise against the euro in nine months. Also, Figures from the Nationwide Building Society on Friday showed that British house prices rose for a sixth month running in October to register their first annual gain since early 2008.

The pound's bounce this week, also underpinned by solid U.S. growth figures on Thursday, has lifted trade-weighted sterling to its highest in six weeks, as sentiment toward currencies more closely correlated with global growth and rising asset markets has recovered.

But given the extent of the pound's rebound this week and lack of any major UK economic data or event on Friday, some analysts say the pound may give back some of those gains as attention turns to the Bank of England's policy on Thursday.

We will look to whether the MPC will expand its quantitative easing programme. Given the surprise third-quarter UK GDP contraction, speculation has grown the BoE may expand its 175 billion pound asset-buying programme. Quantitative easing, under which the central bank floods the market with cash, has stung sterling in past months.

If it's increased, expect the pound to take a nose dive.

This Weeks Data
We have interest rate decisions for both Australia the UK and the EU.

The Euro’s prospects are likely to be driven by any comments about its strength from European Central Bank President Jean-Claude Trichet following the interest-rate meeting. The BoE is expected to increase its current stance on asset purchases, and inject further funds into the economy, and also keep interest rates at a record low.

The European Central Bank expected to keep rates on hold but may make further talk on exiting its loose monetary policy. This could cause further Sterling weakness, so contact your account executive early to discuss the possibilities of locking in current rates before the market prices in these future movements.

Wednesday also sees various measures of the economy and inflation for the UK, while Friday sees US non Farm Payrolls. The report presents the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile, and so often affects the value of USD.

Monday
Ger - Purchasing Managers Index
EU - Purchasing Managers Index
UK - Purchasing Managers Index
US - Home Sales

Tuesday
Aus - Interest Rate Decision
UK - PMI Construction
US - Factory Orders
US - Consumer Confidence

Wednesday
UK - Nationwide Consumer Confidence
Aus - Retail Sales
Ger - Purchasing Managers Index
EU - Purchasing Managers Index
UK - Purchasing Managers Index
UK - BRC Shop Price Index
US - Fed Interest Rate Decision
US - Unemployment
NZ - Unemployment

Thursday
Aus - Trade Balance
Swi - Consumer Price Index
UK - Industrial and Manufacturing Production
EU - Retail Sales
EU - Interest Rate Decision
UK - Interest Rate Decision

Friday
US - Non Farm Payrolls

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