Egyptian Protests Cause A Stir In The Exchange Rates

Tensions in Egypt have spread influence throughout the currency markets as tens of thousands of protestors have defied curfews and the Egyptian President has met with military commanders to plan how to control the situation. Political uncertainty in the nation, and the possible subsequent rise in commodity prices due to Egypt’s control of the Suez Canal have pushed up safe-haven currencies whilst investors have becoming wary of riskier currencies including the Euro. Currencies that have strengthened include the Yen, Swiss Franc and US Dollar. This may continue throughout the week should the protests continue with economic data and central bank meetings also playing their usual part in currency movements. If you have any transfers in the coming months where you need to exchange the Euro, Japanese Yen or Swiss Franc into another currency, now could be a good time to speak to your broker about the rates and whether you would like to fix a rate for your future trade.

Pound Sterling – UK Markets

The Pound is in a better position against the Euro than it was before the weekend. However it has lost some ground against the Dollar as traders became nervous about tensions in Egypt and referred back to the Dollar as safe haven currency. Still recovering from last week’s shock fall in fourth quarter GDP, the Pound may respond to the result of this week’s PMI construction data for December on Wednesday. The figures may help to clarify whether the fourth quarter GDP figure was accurate and whether this PMI reading will be similarly dire for the last month of 2010.

US Dollar – US Markets

The Dollar index, which measures the Dollar against a basket of other currencies, has strengthened as the currency has been shored up by investors using it as a safe haven for funds whilst the situation in Egypt plays out. US GDP on Friday had the effect of giving the Dollar some strength. Although the figure came in at 3.2 percent, slightly less than the 3.5 percent forecast, this was still seen as a robust figure growing from 2.6 percent in the previous quarter and glowing in respect to the negative UK GDP. Friday’s US payrolls report will be the key event to watch for the US Dollar this week although broader market themes are likely to continue to cast their influence.

Euro – European Markets

The Euro slipped on Friday as risky assets became less appealing for investors. This morning however has seen some Euro strengthening but the currency is still fragile given risk-aversion. There are some reports suggesting that the Euro’s advance on the Dollar over the past month was excessive given ongoing sovereign debt issues and that there may be some correction over the coming weeks. This is of course also dependent on data releases and events on a daily and weekly basis – Thursday’s speech by Trichet will be closely scrutinised by markets.

Other Currencies – Highlights

The Japanese Yen has come into the limelight fuelled by the crisis in Egypt. It has surged against the Euro, the Australian and New Zealand Dollars. The Swiss Franc is also at a two week high against the Euro. For a live quote or to tell us about your foreign exchange requirements, please call us on +44 (0)20 7740 0000.