Bank of England Member Causes Severe Drop in Sterling

The Pound has dropped to the lowest levels against the Euro since May following an outspoken warning from Bank of England member Adam Posen that the economy needs stimulus. This is an ideal time to speak with your broker or register an enquiry if you have Euros to transfer to Pounds, or to discuss how to protect yourself from further losses if you have an upcoming Pound to Euro transfer. Sterling was trading at the mid-market rate of 1.1637 against the Euro and 1.5815 against the US Dollar at 10.30 am this morning.

Pound Sterling – UK Markets

Sterling has fallen to its weakest levels against the Euro since May. Bank of England policy maker, Adam Posen, burst the bubble surrounding the fact that second quarter GDP figures were confirmed at 1.2 percent yesterday, with a hard hitting speech on the lowly state of the UK economy. Posen declared his view that the Bank should re-start its asset purchasing programme seeing UK growth as far below its potential and suggesting that the UK needs to ensure it doesn’t follow suit with the post-recession patterns of other nations to avoid a situation such as the Japanese style ‘lost decade’. Posen’s speech caused investors to instantly sell Sterling causing today’s slump. The sentiment of Posen’s speech is also in conflict with the other outspoken Bank of England member Andrew Sentence’s calls for an interest rate rise. The debate therefore also suggests that there may be a three way split of the vote on monetary policy at the next Bank of England meeting on 7th October – the subsequent minutes from this meeting later in the month may therefore not bode well for Sterling if they reveal a non-united policy committee. The Bank of England has released mortgage approval data this morning with a shallow decline to 47,000 in August from 48, 300 in July. Sterling is still broadly maintaining its position against the US Dollar – with the US currency being even weaker.

US Dollar – US Markets

The Dollar Index which measures the US Dollar against a basket of other currencies has fallen to an eight month low as speculation continues to rise that the Federal Reserve may add to monetary easing measures to shore up the economy. Yesterday also saw dismal news on the US economy pushing investors to sell Dollars and pushing commodities such as gold to highs. Consumer confidence for September posted its worst reading since February, well below expectations and the Richmond Federal index pushed into the negatives at -2 far short of forecast reading of 6. Tomorrow sees final GDP figures for the second quarter which will be watched by investors and is expected to show growth of 1.8 percent. Today sees mortgage application data which will provide the latest snapshot of the housing market.

Euro – European Markets

The Euro is still widely benefiting from Sterling and Dollar weakness despite internal Eurozone debt fears making their way up the news agenda. The European Commission is going to unveil plans today to fine countries that incur big debts posing a potential risk to the Euro. Unrest is high, with tens of thousands set to take to the streets of Brussels and other European capitals to protest against the extent of Government cuts and the hit to public sector jobs. The Commission is also making a drive to prevent EU countries being able to massage their statistics and introducing punishments for countries with poor economic management. Economic confidence figures have come in this morning from the European Commission showing an improvement above forecasts.

Other Currencies – Highlights

Tensions over exchange-rate policies are likely to be addressed at the next G20 summit in November according to a South Korean official, after Brazil warned yesterday that they may intervene to weaken the Real following similar moves by other nations. Brazil yesterday referred to the situation as a ‘currency war’ after it was reported that several nations took moves to depreciate their currencies to bolster exports. This is against G20 policies with all members previously pledging to ‘refrain from competitive devaluation’. China, South Korea, Thailand, Japan, Switzerland and Brazil are nations thought to have sold their own currencies. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000