US Dollar Weakens

Since our last blog, the doom and gloom surrounding the US economy has intensified. The spotlight therefore is on the weakening US Dollar this week as murmurs of the threat of a double dip recession once again start to circulate – in fact ‘murmers’ is perhaps a little too kind as the views are coming from several up high. The former chairman of the federal reserve, Alan Greenspan, for example, has thrown his hat in to the ring by mentioning the ‘double dip recession’ phrase. The latest GDP figures which were released on Friday are the main cause of this. The figures cast light over how the economic recovery in the US slowed down from 3.7 percent in the first quarter to 2.4 percent in the second quarter. There are as many data releases on the US economy as ever this week which may cause more movement – this starts with PMI and construction figures today. The Euro-region has been providing a mixed bag of data. Although the Euro has predominantly benefited from the weakness in the US Dollar, investors are continuing to get mixed messages from the region itself which is emerging in the volatility being seen in the single currency. Last week saw positive news such as a drop in German unemployment for the thirteenth month in a row and surprisingly healthy profits recorded by several large European firms such as Louis Vouitton SA. However, this has been counter-balanced by other news – the hedge fund FX Concepts LLC for example have begun to advise selling the single currency on expectation of a drop in growth as austerity measures take effect. The Euro is still therefore undergoing many fluctuations. For any transfers involving the Euro, its best to speak with a broker at Currency Solutions for advice on protecting yourself from this volatility. The Pound is fighting-fit and throughout the course of last week managed to fend off any negative news and maintain it’s upwards momentum. At the Bank of England meeting with the Treasury Select Committee last week Mervyn King the Bank of England Governer warned that nothing should be taken for granted in terms of how well the statistics suggest the UK is recovering, The Pound was virtually unscathed by King’s comments however and markets have opened this week reveling in the positive news from HSBC that their profits for the first six months of this year were more than double than in the same period in 2009. If you are UK-based and buying any foreign investments this is therefore good news – if your transfer is not immediate but you want to consider fixing a rate for a future transaction it’s advisable to speak with your dedicated Currency Solutions broker about forward-contracts.