Euro Pound Exchange Rate Report – 12th April 2010
April 16, 2010 Leave a comment
The markets re-opened on Tuesday after the long Easter weekend to Gordon Brown’s announcement to fix the date of the general election for the 6th May. GBP/EUR immediately came under major influence from the opinion polls, not in favour of a particular party, but in speculation of either party achieving a strong majority. Due to the British first-past-the-post electoral system, if neither party can obtain a strong enough majority the outcome results in a Hung Parliament. It’s feared that this scenario will result in a Government that lacks the power to take the tough actions needed to tackle the UK’s mounting debt problems and ultimately provide a strong enough platform for Sterling to make any long-term gains. Although the polls generally showed a mixed outcome, those showing a Conservative majority had the greatest influence and GBP/EUR steadily moved through the 1.13 barrier further encouraged by reoccurring concerns over the Greek economy.
By Thursday morning the opinion polls began to take a negative effect on Sterling and investors looked ahead to two of the week’s most influential data releases, UK Industrial Output and House Pricing Index. Industrial output rose 1.0 percent on the month in February, reversing a 0.5 percent fall in January. Output rose twice as fast as expected in February and posted its biggest monthly rise since September. Likewise the House Pricing Index showed a general rise in the value of UK housing and as a result GBP/EUR climbed to a 7 week high. Finally Thursday also saw the Bank of England keep interest rates on hold at 0.5% and freeze its asset purchasing scheme as expected.
Looking ahead it is likely that Sterling will come under further political influence and suggested that it may weaken as the election draws nearer. If you are looking to buy Euros you can safeguard your rate of exchange from any adverse movement and take advantage of today’s highs by locking in to a rate of exchange for up to two years into the future through a Forward Contract. However, with the saga in Greece continuing to threaten the Euro and the latest batch of UK data possibly marking a turning point for the UK economy, those selling Euros should consider the possible threat that Sterling may continue to make gains.
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