Tag Archives: US Dollar

Currency Matters

Last week the Pound appreciated strongly against the Euro rising from 1.15 on Monday 3rd January to 1.20 by close on Friday the 7th January.

Today GBPEUR continues to trade near 1.20 on the interbank market, the best rate since September 2010 and only 3 cents below the 2010 high of 1.23 seen in June. Against the US Dollar the Pound continues to trade between 1.53-1.55.

 If you have any currency exchange requirements in 2011, please do not hesitate to contact the dealing team to discuss how best to manage your currency exchange and international payments.

 The exchange rates mentioned in the above blog are based on the  interbank rate at the time of writing. Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.

Currency Matters

 The US Dollar has continued to fall following Tuesday’s meeting of the Federal Reserve. At the meeting the Federal Reserve kept interest rates on hold at 0.00-0.25% and kept quantitative easing at current levels. However, the Federal Reserve opened the door to the possibility of additional quantitative easing indicating that it would be prepared to provide additional accommodation if needed to support a fragile economic recovery.

 On the interbank market GBPUSD currently trades above 1.56 whilst EURUSD trades at 1.33.

 In the UK, Sterling has come under some downward pressure following the release of recent disappointing economic data including poor retail sales and higher than expected government borrowing, which totalled £15.3 billion in August. The Bank of England Minutes released this week showed that the Monetary Policy Committee voted to keep both interest rates on hold at 0.5% and its Quantitative Easing Asset Purchase Scheme at £200 billion. The minutes made no clear indication that further Quantitative Easing (Q.E.) would be needed however many analysts interpreted that the chances of further Q.E. had increased since the previous meeting. The Bank of England remains torn between trying to support a fragile economic recovery, whilst trying to anchor inflation which remains stubbornly above the 2% target.

 As a result of the above, extreme volatility has been seen in the GBPEUR exchange rate, yesterday hitting its lowest level since May before recovering slightly today. The current GBPEUR interbank rate trades at 1.17.

 Given current market volatility, please do not hesitate to contact Currency Matters to discuss any foreign currency exchange requirement. Currency Matters can provide a number of products including Forward Contracts and Stop Loss/Limit Orders which can help you manage your foreign currency exchange risk. The exchange rates mentioned in the above blog are based on the current interbank rate. Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.

US Dollar

The US Dollar has fallen sharply late this afternoon (14/09/10) following a report from Goldman Sachs suggesting that the Federal Reserve could announce a new program of asset purchases (quantitative easing) in order to support the weak economy and to try and avoid a double dip recession.

The Euro has made strong gains against the US Dollar, forcing EURUSD nearly two cents higher to a high so far of 1.3021. This has caused some volatility in EURGBP which currently trades at 0.8360 (1.1962) on the interbank market.

The Pound has also made gains against the USD pushing the interbank rate through 1.55.

Given current market volatility, please do not hesitate to contact Currency Matters to discuss any foreign currency exchange requirement.

Bank of England

The Bank of England has today kept UK interest rates on hold at 0.5% and the Bank’s current asset purchase scheme known as quantitative easing also remains on hold at £200 billion.

The Pound continues to look firm against the US Dollar trading above 1.58 on the interbank market and against the Euro the pound trades near 1.20.

The market will now await the European Central Bank announcement later today and on Friday the latest US employment data will be released.

Please do not hesitate to contact Currency Matters for a live quote. Please note the exchange rate you are able to achieve will depend on the amount being exchanged.

Currency Matters – Euro

The Euro was boosted last week by the successful bond auctions by a number of Eurozone states.  The demand was sufficient enough to ease concerns that Eurozone states would struggle to raise funds on the international markets.

As a result the Euro appreciated against the US Dollar pushing EURUSD through 1.30, and EURGBP through 0.84p. This morning EURGBP trades at interbank 0.8475, forcing the pound below 1.18.

Many analysts are now predicting that the Euro could continue to recover. However, the sustainability of the Euro’s rebound remains uncertain. The Euro will face a number of significant tests including the European bank stress test results which are due to be published on June 23rd.

Elsewhere the Federal Reserve minutes hit a rather dovish tone noting that the economic outlook had softened somewhat. Interest rates in the US are therefore expected to remain at their historic lows for some time. After hitting a high above 1.54, the pound has since settled around 1.52 on the interbank market.

Currency Update – Sterling pressured

Sterling has started March under significant pressure. Monday morning saw a dramatic fall in the value of Sterling with the Pound falling as low as 1.0930 against the Euro and 1.4780 against the US Dollar. There are currently a number of factors contributing to Sterling’s sharp fall in value.

Firstly, the latest opinion polls are suggesting that following the UK general election, it is likely that we could see a hung parliament with no single party holding a workable majority. This political uncertainty has troubled investors as they are concerned that any new government may not be able to implement the measures needed to cut UK debt and revive the economy.

Secondly, the Bank of England has hinted recently that we could see further expansion of its asset purchase scheme known as quantitative easing (QE). Any increase in QE would likely depreciate Sterling further.

Finally, Prudential’s $35.5B bid for the Asian life insurance unit of AIG has caused large flows out of Sterling into the US Dollar.

Following Monday’s sharp falls, the pound has recovered some of its losses. This morning, the release of the latest Purchasing Manager Index (PMI) suggested that the UK service sector is recovering at a stronger rate than many analysts had expected. This has helped push Sterling back above the psychological level of 1.50 against the US Dollar and above1.10 against the Euro.

In the Eurozone, the Greek government has approved a fresh austerity package of tax rises and spending cuts worth €4.8B. This has gone a small way to help convince financial markets that Greece can pay off its massive debts. The Euro has risen against the US Dollar and currently trades above 1.36.

Elsewhere, The Reserve Bank of Australia has hiked their cash interest rate by 0.25% to 4%. The Bank of Canada left rates on hold at 0.25%. However, the Bank of Canada’s accompanying statement showed that the Bank was more upbeat on the economic outlook. This has forced Sterling to a low of 1.6491 against the Australian Dollar and 1.5387 against the Canadian Dollar.

Both the Bank of England and the European Central bank meet tomorrow at 12:00 and 12:45 respectively. The markets will eagerly await any announcement from the Bank of England regarding QE and the European Central Bank’s latest economic forecasts.

With all the uncertainty regarding the general election, the Bank of England’s QE programme and the UK’s ability to tackle the deficit, it is likely that Sterling will remain under pressure for some time.

If you have any upcoming foreign exchange requirements, please do not hesitate to contact the dealing team to discuss how best to manage your currency requirements and eliminate currency risk.

Currency Update

The US Dollar has continued to appreciate following last night’s unexpected announcement by the Federal Reserve to increase its Discount Rate by 0.25% to 0.75%. The Discount Rate is the rate US banks are charged at to borrow emergency funding from the Federal Reserve. The Target Rate that banks usually borrow at remains on hold at 0-0.25%. The move whilst largely symbolic, confirms that the Fed is starting to realise its exit strategy towards a return to more ‘traditional’ monetary policy. However, it is expected that the Fed may not tighten official monetary policy until the autumn.  Nonetheless, the US Dollar has appreciated strongly, pushing GBPUSD below 1.54, whilst EURUSD trades around 1.35 on the interbank market.

In the UK, the Pound took a fresh blow following this morning’s disappointing retail sales and yesterday’s public sector net borrowing figures, which showed that the UK government had to borrow £4.3B in January, a month which usually posts a surplus. UK tax receipts dropped by 11.8% compared with January last year. 

The debate also continues regarding the suitable timing of any UK government spending cuts. In an open letter to the Financial Times more than 60 senior economists backed Chancellor Alistair Darling’s decision to delay any government spending cuts until 2011, fearing that any earlier cuts could force the UK back into recession. This was as a direct riposte to a letter sent last weekend to The Sunday Times by a group of 20 leading economists supporting the argument that more rapid action to tackle Britain’s deficit was needed and that fiscal tightening should start this year.

Currency News

Last week the currency markets were firmly focused on the Euro with the fiscal problems of Greece and also Spain and Portugal taking the headlines. Speculation built throughout the week that the other European Monetary Union states, led by Germany, would come to Greece’s aid. However, markets were clearly disappointed that whilst a rescue package was agreed in principle, European leaders failed to set out a comprehensive package.

The Euro was also pressured following the release of disappointing Eurozone GDP data. Total Eurozone 4th quarter 2009 GDP expanded by a mere 0.1%, the market had been expecting growth of 0.3%. Noticeably, German GDP (the largest European economy) failed to expand at all, whilst Italian GDP slipped back into contraction. Spain, hit by a housing market collapse and official unemployment greater than 20% remained in recession.

As a result, the single currency fell to a low of 1.3531 against the US Dollar, its lowest level since May 2009. The US Dollar, viewed as a safe haven, appreciated across the board as investors took flight from risk as stocks and gold prices tumbled. The Pound fell to 1.5534 against the US Dollar but rose past 1.15 against the Euro.

 In the UK the Bank of England released its Quarterly Inflation Report. The report was markedly pessimistic about the UK economy, revising its growth forecasts down. UK Interest rates are expected to stay low for a protracted period of time as growth remains weak and inflation is expected to fall back below the 2% target after initially spiking higher to 3%. Moreover, the Bank of England failed to rule out the possibility of extending its asset purchase scheme know as Quantitative Easing. Consequently, the Pound is expected to stay weak for some time. However, some gains could be made against the Euro, depending on how the Greek bailout develops. Sterling’s 25% depreciation should eventually help the UK economy grow as our exports become more competitive.

 Elsewhere, the Australian Dollar rallied following better than expected employment data with GBPAUD falling to 1.76. In China concerns over potential asset bubbles, led officials to order banks to increase their levels of reserves in a bid to cool the amount of lending.