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.
The US dollar has shot up against the pound and euro overnight, chiefly as a host of concerns from the Eurozone drag on foreign exchange sentiment. These range from fears that economic growth on the continent will stagnate for years to come, to more immediate doubts about Greece.
IMF Calls Eurozone Crisis A Global Threat
For one, yesterday the International Monetary Fund released a statement, arguing that the Eurozone crisis remains the biggest threat to global growth. It lambasted the continent for its slow action, saying, “Incremental policy making has been insufficient to fully allay market tensions.” In other words, Europe must do more, and do it faster!
ECB Head Calls For Government Action
Elsewhere, head of the European Central Bank Mario Draghi echoed these sentiments, suggesting that the onus to end the crisis lies with governments, not the central bank. He told the European parliament yesterday, “It’s too easy to think that the ECB can replace governments’ action or lack of it, printing money. That’s not going to happen.”
Merkel’s Greece Visit Disappoints
Lastly, the buck also gained as German chancellor Angela Merkel’s visit to Athens yesterday proved a damp squib. Though Mrs. Merkel said she had gained a better appreciation of Greece’s situation from the visit, her first since 2009, no concrete resolutions emerged. As Megan Greene of Roubini Global Economics notes: “Merkel’s political gesture won’t stop the economy from contracting further.”
Hence, all this served to weigh on foreign exchange confidence as I mention, causing the euro to fall and the greenback in particular to climb, as the global safe haven. That’s of benefit if you plan to sell US dollars, perhaps because you plan to buy euros or UK pounds, because you want to emigrate or buy a foreign property.
The greenback wasn’t the only beneficiary of these Eurozone woes yesterday, with the UK pound also gaining against the common currency, though sterling did lose to the US dollar. This, as Bank of England governor Mervn King warned that the UK’s own economic recovery looks set to be long and protracted.
BoE’s King Points to Slow UK Recovery
Speaking at a lecture at the LSE yesterday, Mr. King said that “Putting right our economic machine is proving a slow and difficult task.” In particular, he noted that, though the government’s plan to focus on growing exports was in theory a good one, it’s proving tough because lots of countries are attempting the same thing, and “not everyone can do [this] at the same time.”
He also noted that, though there are no obstructions to the Bank of England engaging in more quantitative easing in the near future, “I think there is a deeper question about whether there are limits to what monetary policy as such can do.” That’s likely to see the UK recovery on a slow footing for some time to come then.
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.