Pound Knocked For Six As It Tumbles To A 15% Low Against The Euro

If you were one of the many British investors waiting for the euro to fall…I am afraid the wait is going to have to continue. The question now is…is the wait worth it? And will the pound resurgence actually happen any time soon?

Pound Sterling – UK Markets

The underlying factor in the decline of sterling is a view shared by many investors that Britain’s economy is again faltering. British manufacturing data released this morning was the lowest in a year and half last month, coming in it at 52.3 compared with 52.1 in May. This will undoubtedly lead to the BoE keeping interest rates unchanged on Thursday next week. The pound lost 0.4% against the euro this morning after a very poor days trading yesterday.

US Dollar – US Markets

The US Dollar is the years worse performing currency among the 10 developed-markets and there are signs that this trend may be set to continue. As stated in yesterdays news President Obama is deep into debt-limit talks in order to increase the already incredible $14.3 trillion line of credit. Any agreement needs to be reached no later than July 22nd in order for the bill to comply with congressional rules. The pressure is mounting on the first term President to such a level that the annual 4th of July Senate recess was cancelled yesterday as the deadline grows ever closer. The reason for the increase in debit is to allow the US to meet the next round of debt repayments, akin to the recent well documented Greek crisis. Republicans in congress are demanding large spending cuts before they agree to any deal. If a deal is not reached and the US default on their loan payment, Standard & Poor’s would downgrade US debt to junk status. This would surely lead to further US Dollar declines….the market awaits.

Euro – European Markets

Wednesday sees the release of quarter on quarter European Gross Domestic product data, which will be a good indication of how the euro is really fairing after a high pressure week for the single currency. A view shared by many economists is that the euro is being hyper inflated on the back of higher interest rate yields. If the difference between the BoE and ECB base rates grow wider on Thursday after rate decisions, we may see the euro make even greater gains against the pound.

Other Currencies – Highlights

Household and government spending is fuelling the economic recovery in South Africa, whilst increased disposable income is allowing consumers to cut back on debt. The lower interest rates in South Africa have allowed increased spending in durable goods such as motor vehicles. Gross domestic spending has climbed 8.3% in the first quarter, mainly lead by a large increase in government expenditure. These factors have contributed to some solid rand strength in recent months. The strong rand is however having a negative effect on South African exports as goods are becoming more expensive for foreign purchasers. One of the most dramatic examples of this is the rand has seen a strengthening of 39 % against the US Dollar since 2008.