Sultans of spin
Sterling exchange rates have been testing key support levels this week, falling to 1.60 against the US dollar and 1.15 against the euro following weak economic figures and ahead of the Bank of England interest rate decision.
Industrial production and manufacturing levels fell by -0.5% and -0.6% in the UK, in contrast to the 0.2% rise markets were expecting, and this caused drop in UK confidence early in the week. Halifax house prices also fell 0.5% in June, reversing some of May's 2.6% gain. The Bank of England voted to leave interest rates unchanged, and opted not to increase QE levels as recommended by the BCC. The UK trade deficit narrowed to a three-year low as the weak pound and reduced demand has lowered import levels.
This week euro currency exchange rates have benefitted from news that German factory orders rose by 4.4% and consumer inflation rose by 0.4% on the month. Eurozone GDP also fell by -2.5% in the first quarter and as this was roughly expected by markets, it failed to dent euro support too much. In Eastern Europe the Polish zloty gained its most in a week against the euro after the Polish finance minister commented that Poland may be stable enough to join the euro adoption process in the latter half of 2009.
US markets have been relatively flat this week, although risk aversion has pushed the US dollar to the top end of ranges against its currency partners. The G8 summit has been the focus of international media and the dollar's reserve status is likely to be debated here.
More good news has come from the Australian economy with consumer confidence rising a whopping 9% in July. The unemployment rate also came in better than expected and the RBA voted to leave interest rates on hold, making the Aussie attractive on the basis of rate differential when confidence returns to the market.
There is growing debate at present over whether more government support is needed and what form this should take. Economists are also coming up with ever more elaborate shapes to describe the recession. Is it a V, U, W, saxophone, or small child standing with balloon? The truth is that no-one knows and this uncertainty is favouring the US dollar and yen at present, at the expense of the higher yielding currencies.
For currency transfer, your safest bet is still to have the right information. This will provide an insight into what the markets might do and could help you take advantage of peaks in the market. Personal currency brokers are a brilliant source of this information, so if you haven't already got one, get registered with Currency Solutions today.
Have a good weekend.