Euro Pound Exchange Rate – 5th July 2010
July 17, 2010 Leave a comment
Last week we saw the Euro reach a high of 1.2356 for the first time in more than 18 months. This as investors shunned the single currency on funding concerns in the Euro zone ahead of bank repayments to the European Central Bank as well as more debt auctions. The Pound extended gains after Bank of England policymaker Andrew Sentance stated that drastic tax hikes and spending cuts outlined in the new coalition government’s budget last week would not remove the need to start raising interest rates. As we have often seen in the past, with Sterling strength often comes some retraction. This as funding concerns in the Euro zone eased with Spain’s auction of 3.5 billion of five-year bonds having seen a lower bid-to-cover ratio but yields were only a touch higher than those at an auction in early May, easing concerns after a downbeat signal on ratings from Moody’s the previous day.
With the current volatility in the market placing Stop loss and Limit orders on a rate may prove be useful. When markets are volatile, placing an upper and lower limit allows you to still aim for a higher rate should markets move in your favour, while protecting you from loss should the markets move against you. These contracts are suitable whether you are buying or selling foreign currency. Contact your currency broker today to discuss these types of contract further
Looking forward to the week ahead the most important news coming from the UK may be the MPC (monetary policy committee) Rate Statement and the official bank rate both of which are set to be released on Thursday 8th July. The rate statement measures the Interest rate at which banks lend balances held at the BOE to other banks. With Short term interest rates being the paramount factor in currency valuation this tends to be significant. The official bank rate most importantly discusses the economic outlook and offers clues on the outcome of future votes and is released with Official Bank Rate. Although only issued if the bank rate changes it is among the primary tools the MPC uses to communicate with investors about monetary policy.
In Europe the most crucial news could be the minimum bid rate and the ECB press conference. The minimum bid rate is the Interest rate on the main refinancing operations that provide the bulk of liquidity to the banking system and is usually delivered about 45 minutes before the ECB press conference. The ECB interest rate statement like the UK official bank rate is the primary method that the ECB uses to communicate with investors regarding monetary policy. It covers in detail the factors that affected the most recent interest rate and other policy decisions, such as the overall economic outlook and inflation. Most importantly, it provides clues regarding future monetary policy. With all this in mind it could prove to be a crucial week for the Sterling/single currency pairing.
With the statements on the interest rate in both the UK and Europe and the growing financial crisis in the Euro zone this week is likely to be another volatile one. See the relevant data releases below for a concise round up of volatile market movers; however it is well worth taking the time for a consultation with your currency broker.
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