Pound In Volatile Drop Following Yesterday’s Surge

The Pound rose 0.9 percent against the Euro throughout yesterday to levels last seen in September. This was until a sudden swing this morning has set Sterling on a downward fall. Although Eurozone GDP figures this morning were weak, crucially new UK consumer confidence figures did not meet expectations for a positive rise but in fact registered a drop. This morning’s data has caused a sudden downwards slide against the Dollar. The G20 have committed to further guidelines to deal with the ‘currency war’ and trade imbalances but this remains a contentious issue.

Pound Sterling – UK Markets

The Pound strengthened further against the Euro yesterday, closing at €1.1777 a level not seen since late September and a gain of 0.9%. This was until this morning’s Nationwide consumer confidence figures were realised showing a drop in contrast to an anticipated increase. The reading fell to 52 in October following a reading of 53 in September and an expected rise to 54 this month. UK home repossessions have continued to fall with 8,900 homes being repossessed in the three months to October, a fall of 5% over the previous three months, according to the Council of Mortgage lenders. This positive news means that the rate of repossessions has now been declining for a year.

US Dollar – US Markets

The Dollar has strengthened against the Euro and Sterling, throughout yesterday’s trading. The Dollar rose by 0.5% against the Euro to close at $1.3700. The Euro is at a six week low against the Dollar as sovereign debt concerns reignite in Europe. The latest US consumer confidence report is due out today. It is believed that consumer confidence will have risen, following better news about US incomes and employment. It would be the first improvement in three months, if this is the case. Consumer spending in the US accounts for 70% of economic activity, so consumer confidence is a key index.

Euro – European Markets

The Euro drifted lower against Sterling until this morning when GBP weakened despite poor German, French and European third quarter GDP figures. The Euro is gaining on the Dollar so far this morning seemingly shrugging off the poor GDP figures. European GDP figures for the third quarter have dropped from 1 percent in the last quarter to 0.4 percent slightly below expectations. Germany, which typically has the strongest Eurozone economy, has also experienced a drop in third quarter GDP to 0.7% from 2.3% in Q2 – a fall was to be expected since the Q2 data was the fastest rate of growth seen since German reunification although this is still below the expectation of 0.8 percent. The French figure declined from 0.7% in Q2 to 0.4% for Q3. The French deficit for the year is 7.7% which is a record high. The government are introducing unpopular spending cuts and removing tax breaks in a bid to tackle it.

Other Currencies – Highlights

At the end of the G20 summit in South Korea, some accord has been reached to address the issues of trade imbalances and the need to avoid competitive currency devaluations. Guidelines will be devised to tackle trade imbalances which are perceived as an obstacle to global growth. President Obama said that exchange rates must reflect economic realities and that currencies in emerging economies must be market-driven. It seems that China is increasingly committed to allowing the Yuan to rise, but this will clearly be a gradual process. If you are concerned how “currency wars” will affect your exchange needs please contact your broker. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.