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.
What weight the German chancellor’s words carry! The euro gained against most major currencies yesterday including the pound, as Angela Merkel expressed her support for European Central Bank plans to shore up the euro, in a press conference with Canadian prime minister Steven Harper.
Speaking about the debt crisis, Mrs. Merkel said that she (as well as other EU policy makers) “feel committed to do everything we can to maintain the common currency.” That would seem to include supporting an ECB scheme to start buying Spanish and Italian bonds again.
Though these comments needn’t seem like much, they were enough for the foreign exchange market, which used them as an excuse to sell the pound and US dollar, and buy up comparatively risky assets like the euro and Australian dollar. As Andrew Salter, currency strategist at ANZ Banking Group notes: “We’re starting to see the early signs of some real progress being made in the euro area.”
In addition, risk appetite also jumped overnight as rumours circulated Spain would soon accept the first €30bn tranche of its €100bn bank bailout. A spokeswoman at Spain’s finance ministry said yesterday, Spain will “get the first portion of the country’s European Union cash imminently.”
This is needed to prevent heavily indebted bank Bankia collapsing, among other banks that have effectively been nationalised by the Spanish state. The news boosted the euro because, up until now, how Spain intends to keep Bankia propped up has been something of a grey area. This hence provided some reassurance to the market.
In Gran Britannia meanwhile, retail sales jumped +0.3% in July, against forecasts for a more meagre +0.1% climb. This sent an encouraging signal that the recent fall in inflation is beginning to let consumers shop again, which could in turn boost growth.
However, it’s worth noting that unfortunately this had very little effect on the markets yesterday, as Angela Merkel’s euro comments hogged the limelight. Instead, as a ‘risk haven,’ the pound fell against most currencies except the US dollar, as investors read Mrs. Merkel’s comments and bought up the Australian and New Zealand dollars in lieu of sterling.
How This Effects You
For people intending to buy UK pounds or US dollars, yesterday’s developments are good news. This is because, if sterling and the buck fall against the euro and Australian dollar, you can buy more of them when you exchange currencies. Hence, whether you’re emigrating to the UK or United States, or perhaps importing UK and US goods, they’re cheaper. Your savings, in short, will stretch further.
What’s Coming Up Next
The Eurozone trade balance is released today. This is normally in surplus and, providing this month’s figure is no exception, that could give the euro a further boost this morning.
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