Foreign Currency Exchange Report 02 August 2010

02 August 2010

 

Sterling

 

The Pound exchange rate enjoyed a positive week with second quarter GDP and July CBI retail sales the recent standout releases which helped to buoy the UK Currency. The news was not all positive for Sterling after a survey showed UK consumer confidence hit an 11 month low in July as the prospect of government spending cuts undermined optimism that the economic recovery will gather momentum. Also the latest round of housing data and mortgage approvals disappointed investors and all but diminished the prospect of an increase in UK interest rates.  The Pound exchange rate also gained Friday on M&A news, with billionaire Li Ka-Shing offering to buy UK power grids from France's EDF for 5.8 billion Pounds.

 

Euro

 

Last week on Thursday the Euro exchange rate advanced early in the session after a jump in Euro-zone economic sentiment to a 28-month high and a decline in German unemployment. The supportive European data prompted investors to bet the European economy is on a better track compared with the US and the Euro managed to reach a 12 week high against the broadly weaker US Dollar.

 

The Euro-zone is still fundamentally flawed but the latest market movements have shown that the FX markets are acting on the short term and the recent short term data has been favouring the single currency. The sovereign debt issues and bank liquidity concerns will eventually return, the fact that we are no longer hearing about Greece & Co does not mean they have magically reduced their debt. So be prepared for the next negative headline to send the Euro plummeting.

 

Despite the recent stress tests failing to give us a real look into the state of the European banks due to their leniency we may get more of an insight as we approach a busy period in the financial reporting season. Most of the US banks have reported already but many of the European big guns are due to report in the coming weeks. Reports are due in the near future from HSBC, Standard Chartered, BNP Paribas, Barclays, Societe Generale, Commerzbank, Lloyds Banking Group and RBS. 

 

US Dollar

 

The US Dollar exchange rate hit a multi-month lows against the Yen and Swiss Franc on Friday as US economic growth data showed growth in the world's largest economy is slowing and reinforced the view interest rates will remain low well into the next year. This is showing a major shift in sentiment for the Dollar which could spell further weakness for the Greenback in the remainder of 2010.

 

Monday kicks off an important week for data releases with the highlights being Interest rate decisions from the UK, Euro-zone and Australia and finally US jobless data capping off the week on Friday.

 

Please contact Foreign Currency Exchange on +44 (0) 20 7989 0000 to discuss your currency exchange requirements.