Pound slumps against Euro before interest rate decision by Max Johnson of Currency Solutions on 08-Jun-2011

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ife speculation around Greek debt throughout last week did not manage to damage the Euro against Sterling. On the contrary, dire figures from the manufacturing sector in the UK last week (the worst in twenty months) building on the weak confirmed GDP figures of the week before, showed their impact on the Pound which lost out a very significant 2.73 percent to the Euro over the course of the week. You won’t need me to tell you what a huge amount of money 2.73 percent is on a property purchase or sale. If you do happen to be selling Euros back into Sterling then now really is the time to make the transfer – even if the exchange will not happen for several months, brokers can forward book the exchange for you at the current rate with a small deposit of the total amount being exchanged. If however, you need to make a Sterling to Euro transfer you will be wanting to know if there is much news on the horizon that may help bring the Pound back up on the single currency. The big event of the week will be the clash of the European and UK interest rate decisions on Thursday. Should we see the Bank of England make a hike up from 0.5 percent or the European Central Bank raise interest rates from 1.25 percent, we could well see the respective currency gain ground. Before this, we have the producer price index and investor confidence out in Europe on Monday, retail sales on Tuesday and GDP figures on Wednesday. With UK industrial and manufacturing data on Friday this could well be a volatile week for this currency pairing with significant data out every day.

Against the Dollar, we are starting the week with the Pound sitting at the 1.64s. Although the currency has not managed to retain the levels of 1.65 seen two weeks ago against the Dollar, it is important to remember that it suddenly surged to these levels from 1.61 so despite losing out 0.51 percent to the US currency over the past week, we are still in a relatively strong position for the month as a whole. Although data from the UK, particularly in the area of manufacturing, has pulled the Pound down, the tail end of last week also bought some very bad data from the US economy so there is the potential for some volatility. In particular, the non-farm payroll figures which give a view into US employment patterns were much below forecasts with unemployment also creeping up. Moody’s ratings agency have also commented that they may put the US triple A credit rating on review for downgrade unless more is done to tackle debt by mid-July – this could be a real blow for the Dollar should the downgrade occur and confidence be lost. The best way to catch the spike in your favour (such as the 1.65 levels seen recently) is to speak to a broker who can watch the rate for you - and even set an automatic market-order on your behalf. It is important to remember however that we are still at fairly strong levels at the current rate of 1.64 so it may be worth you calling to get a quote on your exchange.

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For further advice or how to save thousands on overseas investments compared to the bank, protect yourself from currency movements or set up regular payments, get in touch with the dedicated Business Works Corporate Currency Broker:
Max Johnson of Currency Solutions on +44 (0) 207 740 0000 or by e-mail:
e: m.johnson@currencysolutions.com

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