Sudden shock drop in Sterling

At the end of a week that has given strong signs of a slowing global recovery causing investors to lose their appetite for risk, the Pound has taken a sudden drop this morning against major counterparts. Speak with your broker today to discuss how to maximise profit or minimise your losses on any upcoming transfer.

Pound Sterling – UK Markets

The Pound has taken a sudden tumble against other major currencies since 9.30 am this morning and is still losing out. At 11.20 am the Pound was down to 1.8555 against the Euro. These volatile movements suggest that the Euro is benefiting from the weakening Dollar and that investors are collectively being cautious with risk due to signs from the US, China and Europe this week that the global recovery is slowing. Robust figures in the UK this week had previously added some strength to the Pound and the lower jobless claims and faster than forecast inflation were expected by some economists to continue providing the Pound with ongoing upwards momentum so markets will be watching how this morning’s extreme volatility will play out. George Osborne has suggested that British banks will not have any problems coming through next week’s European stress tests and are unlikely to need any Government help shoring up their financial position.

US Dollar – US Markets

Fresh US data has again been weak causing the currency to suffer. Falls in manufacturing and producer prices data have added to the current sentiments that the recovery is slowing with regional manufacturing indexes in New York and Philadelphia underachieving against expectations. Reports due today are expected to show a deterioration in household sentiment and consumer prices ending the week on the same negative note that has prevailed since Monday. Officials however have been keen to stress the focus on a slowing recovery rather than a return to recession. The amount of US jobless claims is the only significant piece of data to have come in slightly better than expected falling down to 429, 000 rather than the anticipated 450, 000. The House of Representatives have approved a landmark bill that will overhaul the financial system meeting President Obama’s commitment to revamp the banking system in response to the economic crisis. The bill which will now go to the Senate will create a new federal agency to outline new regulations.

Euro – European Markets

The Euro experienced some drops against the US Dollar in the last twenty-four hours but this morning is back to making strong gains on the currency whilst also surging back against the Pound. Economists are suggesting that the Euro is mainly benefiting from weakness in the US and investor response to a successful bond auction in Spain is also pushing up the Euro. The auction totaled 3 billion Euros of fifteen year Government bonds following those of Italy, Germany and Portugal earlier in the week.

Other Currencies – Highlights

The Yen is benefiting from weakness in the US economy by rising towards its strongest position this year against the US Dollar. Inflation in New Zealand has been slower than forecast causing the New Zealand Dollar to decline against the US Dollar as pressure on the central bank to raise interest rates subsides. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.