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 overnight, to put you in the best position for when you exchange currencies.
No more quantitative easing? Sterling gained ground across the board overnight, as the foreign exchange market judged it unlikely the Bank of England will expand its asset purchase program, when it meets again next Thursday. This helped the pound because, the less sterling there is available on the market, the more valuable it becomes.
Consistently strong economic data is responsible for this upbeat assessment of UK prospects. Most importantly, the UK expanded 1.0% in the third quarter, beating out even the most optimistic forecasts. In addition, this week the CBI’s Distributive Trades Survey jumped to a four-month high, hitting 30.0 compared to 6.0 in September.
Hence, as one economist notes “while the UK economy is showing signs of a recovery, growth in the euro zone, especially Germany, looks to be in a downtrend.” That makes it a good time to exchange currencies, especially if you intend to buy euros, as the pound nears a five-week high against the common currency.
Looking ahead, whether the pound continues to climb depends entirely on whether the UK economy continues with these signs of recovery. In the near time, the latest UK manufacturing PMI will give us insight into this, when it’s released this morning. If manufacturing climbs in the UK, and bucks the international trend, that will surely support sterling.
Turning to the euro, the common currency meanwhile lost out to both the pound and euro yesterday, as Eurozone finance ministers put off deciding whether Greece should receive its next bailout tranche.
In a video conference call yesterday, Eurozone finmins (as they’re known) looked at Greece economic progress to date, and whether it deserves the next €30.0bn bailout tranche it needs to avoid bankruptcy. In typical European fashion however, rather than reach a decision there and then, the ministers put it off to November 12th, just four days before Greece is due to run out of funds.
That hit the euro, because of course it looks like a return to the bad old days, when Europe’s politicians got to foot-dragging over the crisis whenever possible.
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