Currency Movements in Count Down To The Interest Rate Decisions

Sterling has been continuing its early week rally fuelled by positive services and construction data although has began retreating this morning as manufacturing production data came in showing no growth at 0.0 percent for February. Prior to this, Sterling neared a fourteen month high on the US Dollar. It had also grown against the Euro but in relative terms is still at around a five month low on the single currency. Interest rate decisions tomorrow morning are expected to see Europe raise rates whilst UK rates are most likely to be held once more by the Bank of England. It is generally expected that this would consolidate the strong Euro and weaker Pound that we have seen of late but any other result could cause a shift in the rates. Speak to your broker today or register an enquiry if you are concerned about the potential impact that interest rate movements may have on your transfer.

Pound Sterling – UK Markets

Sterling, which performed very poorly last week, has surprisingly been making headway this week responding to better services, construction and house price data in fact nearing a fourteen month high on the US Dollar. Poor manufacturing data at 9.30am this morning however has knocked the currency downwards – whether this will last throughout the day remains to be seen, in the run up to tomorrow’s interest rate decision. The manufacturing production figure for February this morning showed flat growth at 0.0 percent whereas a rise of 0.6 percent was expected. Industrial production also fell short of expectations. Tomorrow morning will bring much more clarity to which way exchange rates might move depending on the interest rate decision in Europe and the UK. UK interest rates are expected to be held but should they rise, it is likely we would see Sterling strengthen.

US Dollar – US Markets

The US Dollar has dropped against other major currencies over the past twenty four hours although has been picking up against Sterling following poor UK data this morning. Minutes from the last Federal Reserve meeting revealed discussions that took place surrounding the withdrawal of monetary stimulus in the US. Although there has been speculation that the US may take this move, the minutes revealed that some policy makers thought this might not be appropriate until beyond 2011. Continuing and initial jobless claims data is due later today.

Euro – European Markets

The Euro has been gaining on the US Dollar but fell against Sterling over the past day. It has been a mixed week so far with a rating downgrade on Portugal and lower retail sales data, coming before an interest rate rise is expected tomorrow. The Euro’s gains on the Dollar can be attributed to support ahead of the expected European rate hike tomorrow morning. European GDP figures for the fourth quarter were confirmed as 2.0 percent this morning.

Other Currencies – Highlights

The Japanese Yen has tumbled to the lowest levels in six months against the US Dollar. The Bank of Japan is said to be making plans to encourage banks to lend money to cash-strapped companies struggling after the earthquake. Japan’s central bank is expected to keep interest rates at 0.1 percent at its meeting tomorrow.