Euro Pound Exchange Rate Report – 23rd August 2010
August 23, 2010 Leave a comment
Last week saw a relatively quiet trading range for Sterling/Euro which moved less than 1.5% between the high and the low of the week (1.2070-1.2238) with the rate finishing a mere 40pips higher than where it started on Monday morning. This was mainly due to a mix of data releases from both the UK and Eurozone which started with a 1.7% drop in UK house prices on Monday but was countered on Tuesday by poor Eurozone data; the EU current account figures were worse than expected (-€4.6bn) which shows less demand for Eurozone exports and therefore less demand for the Euro itself, and German economic sentiment from the ZEW was lower also.
The ZEW is a leading indicator of German economic health and outlook for the following 6 months and therefore gives a view to the Eurozone economy as a whole as Germany makes up over 25% of total Eurozone GDP. The reading was much worse than expected; 14 down from 21.2 the previous month (a reading of 0 & below shows pessimism from investors and analysts alike) and helped the rate hit it’s weekly high of 1.2238 that afternoon. This was supported later in the week by better than expected UK retail sales and also a falling reading of public sector net borrowing, sparking investor confidence in the Pound as it shows the UK government are making cuts as promised and trying to reduce our budget deficit.
The relative quiet of last week could all be forgotten this week if, and only if, data is released as it is currently expected to be. At the time of writing this report we are expecting to see a raft of Eurozone inflation, industry and business climate figures during Monday-Wednesday that are all expected to be worse than previous readings. Then, on Friday, we have the main release of the week which could spark quite a movement in GBP/EUR, especially when you consider it is a UK market holiday the following Monday. The reading is of course the revised UK GDP which on it’s first release (23rd July) helped the Pound gain nearly 2 cents against the Euro as it was much better than expected. If the reading is maintained or even revised upwards from the initial 1.1% then we could see further Sterling strength, but if it is revised down as we have seen in the 2nd reading in 2 of the last 3 quarters, the Pound may start to lose ground which could be exacerbated by the 3 day weekend as investors will be looking to limit their exposure to any downward trends.
If you would like to be kept abreast of the data releases and movements in the rate then please contact your Currency Broker. If you don’t yet have an account open, they will be able to explain all the options available to you with regards to taking advantage of any highs we may see whilst protecting yourself from the lows during what could be a rather volatile week.
If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today.