Welcome to the Pure FX account of the latest changes in the foreign exchange rates.
This is intended as a brief guide to movements in the exchange rates over the weekend, to put you in the best position for when you exchange currencies.
The Australian dollar lost a cent against the UK pound over the weekend, as a European Union summit last Friday failed to provide concrete solutions to the Eurozone debt crisis.
In spite of the fact that Eurozone leaders announced a timetable to create a banking union, the markets expected more, such as Spain applying for a bailout for instance, or growth measures to bring the continent out of recession. As Chris Tedder at Forex.com notes, “The rhetoric that came out of the EU summit is not what the market was looking for.”
This brought down the Australian dollar, because the antipode currency’s strength in part depends on global sentiment. If the worldwide outlook is less optimistic, the Australian dollar tends to lose out. Of course, if you intend to buy Australian dollars, then this change is certainly beneficial.
Elsewhere, the Canadian dollar has also fallen against the UK pound since Friday, as low inflation data in the country reduces the chance of the Reserve Bank of Canada raising interest rates.
Inflation in Canada reached 1.2% in September, well beneath the Reserve Bank’s 2-00% mandate. This suggests that, though RBA Governor Mark Carney has discussed raising interest rates for some time, he may now have less incentive to do so.
High interest rates favour the Canadian dollar, because they increase the returns available from Canadian bonds and equities, hence driving demand for the currency. But if the markets think the RBA now won’t raise rates, the Canadian dollar understandably falls. This of course is of benefit if you plan to buy the currency however.
Without a doubt, the most important release this week will be third quarter growth figures for the UK. These are expected to reveal the UK exited recession between July and September and, depending on the jump in growth, should give the pound a sizeable boost. These figures are released this Thursday.
Find Out More
I do hope you’ve enjoyed reading this post. To find out more:
Read our Daily Market Commentary to find out what’s affecting the rates today.
Take a look at our Foreign Currency Exchange Advice articles.
Look through our Top Tips to maximise your foreign currency transfer.