Markets have opened this week with the Euro still holding out in a strong position against other major currencies, with the Pound trading around the level of 1.176 against the Euro on Monday. Conversely, the Pound, in a weak state itself, has actually hit a six week high against the even weaker US Dollar. This general picture may have the potential to change shape over the week with news from Ireland having the potential to knock the Euro and a wealth of UK and US economic data due.
To start with Sterling, news on the UK economy has not inspired much confidence in investors. Although a new report has suggested that the UK banking sector is growing at its fastest rate since before the financial crisis, the long term potential is unclear as new regulations may hinder growth. The housing market remains the vulnerable sector at the heart of the economy, with a new Rightmove survey suggesting that UK home prices dropped the most in eighteen months in September. Tomorrow sees revised second quarter GDP figures which will be scrutinised for the latest insight into the economy as a whole and may bring market movement should the reading either disappoint or exceed expectations. If you have a transfer involving Sterling it is best to speak with a broker today to gain advice.
The Euro has stayed strong following better than expected German business sentiment and more data is due from Germany tomorrow which may help support the Euro should it follow trend. There are some question marks over how long the Euro’s strength will last however as there are several issues the currency would have to weather this week. One of the largest threats to Euro strength is the gathering concern over the situation of Ireland. Speculation has heightened that the nation may need European rescue funds and this week the Government is due to announce the total cost of bailing out Anglo Irish Bank Corp. Whilst the state has pledged 22 billion Euros, one rating agency, Standard and Poor’s, has predicted that the final bill may actually total 35 billion Euros which is 20 percent of GDP. Some economists believe that the Euro is experiencing only temporary strength although the currency has remained hardy last week and into the start of this week. If you have Euros to transfer into another currency, it may be worth strongly thinking about booking either the actual transfer or the rate in advance now whilst the Euro is strong.
What will happen with the US Dollar this week is perhaps more predictable, with no obvious respite on the horizon for the weak currency. Investors are becoming increasingly fearful that the Federal Reserve will be forced to increase stimulus measures to save the slowing economy. Uninspiring durable goods orders and housing market data at the end of last week did little to help. News from the US itself therefore remains downbeat and the only factor likely to cause a pick-up in the US Dollar is if broader currency movements should swing - for example if the Euro topples and investors seek the Dollar as a risk-aversion strategy.