Pure FX Logo arrow Reviews On Feefo Pure FX Logo Exemplary Service In-Depth Knowledge We're Jargon Free Same-Day Transfers Better Exchange Rates Purefx_currency_exchange Personal Transfers Business Transfers FCA Authorized Personal Service Trusted Brokers Get A Quote Register With Us Make A Transfer Seller Transfers Contract Definitions Read Our Top Tips What Influences Exchange Rates Glossary Frequently Asked Questions Contact Us

Sterling struggles in Currency Exchange market

Market CommentarySterling struggles in Currency Exchange market

Sterling Overview

I think the best headline recently would have to go to Lloyds Group for “Ship ahoy. QE2!” relating to the possibility of another round of quantitative easing (QE) in the UK, after the Bank of England announces QE is still an option should the economy require further support. MPC member Mr. Posen went further calling for additional QE to begin now. A view shared by the Institute of Directors Chief Economist Graeme Leach “The Bank of England has held fire for another month, but we think the quantitative easing gun is about to be reloaded and the order to shoot given.” For the month of October interest rates remain on hold at 0.5% with no additional QE.

We have a theory that as soon as sterling becomes too strong BoE Governor Mervyn King announces some measures in order to weaken the pound (see above). Thus keeping to his strategy of ensuring the UK economy rebalances towards exports, stimulated by cheap sterling.

Away from QE headlines that have been dominating economic news recently Q2 GDP was confirmed at 1.2%. Retail sales disappointed in August dropping 0.5% from July (the first fall since January) which could be due to concerns of job prospects and the governments continued austerity drive making consumers more cautious.

Clearly there is a lot going on affecting sterling at the moment, so as always for a more in depth view on your particular currency please speak directly to your currency dealer at Pure FX.

GBPEUR

You would be forgiven for assuming that the euro would weaken following news about Anglo Irish Bank being downgraded by Moodys to just one above junk status. Along with the Irish Government announcing it needs €35bn to rescue the Irish banking system. However in contrast the euro has gained substantially against both the pound as US dollar. Why? Well clearly we cannot be sure but there is evidence that the euro is being used to fund carry trades (the process of buying one currency, then using it to purchase another higher yielding currency like the Australian dollar). Also China has been purchasing Greek debt, which would explain the recent rise in value of the euro against lacklustre economic performance.

GBPUSD (Cable)

Despite US economic data being a bit more positive, the Federal Reserve has hinted at further quantitative easing, thus weakening the US dollar. Whilst there is potential for QE the US dollar will struggle to gain value against currencies including sterling, which is currently trading around a 2010 high.

GBPCAD (Loonie)

According to the latest outlook by the International Monetary Fund (IMF) Canada will lead G7 in terms of economic recovery, forecasting 2.7% growth in 2011. That might be why the Canadian Central Bank increased interest rates to 1% surprising the markets which were expecting no change.

GBPAUD

Not to feel left out the Australian Central Bank (RBA) also surprised markets although unlike Canada they kept interest rates on hold at 4.5%, when the markets were expecting a rate rise. Since then very strong jobs data has put the November decision firmly in focus and Nomura Chief Economist Stephen Roberts said “This data confirms the RBA’s October decision was just a continuation of the pause, and the RBA will be back hiking in November,”

GBPNZD (New Zealand dollar)

New Zealand Central Bank keeps interest rates on hold at 3%. Central Bank Governor Alan Bollard revised down his growth forecasts saying households remain cautious. 2010 Q2 growth was 0.2% which was less than the 0.9% growth Bollard had forecasted.

We hope this newsletter has been useful and for further information please contact your Pure FX Currency Dealer on +44 (0) 1494 671800. Nothing in the newsletter should be construed as advice or guidance as to when to buy or sell currency.

Get a Quote
Feefo service

What Our Clients Say

Read all the reviews at Feefo.com

Why Us

FCA Authorised

Authorised by the UK's Financial Conduct Authority, so your money is highly secure.

Exceptional Service

We have received Feefo's Gold Trusted Service Award 3 years in a row

Same Day Transfers

Receive your money in your destination bank account the same day you send it, for most mainstream currencies.

Highly Competitive Exchange Rates

Get bigger savings, with highly competitive exchange rates guaranteed!

Dedicated Personal Service

To guide you through the transfer process, and keep you up-to-date with the changing exchange rates.

Trusted Foreign Exchange Broker

Since we were established in 2006, we've transferred money for thousands of satisfied clients.

How It Works

  • Quote

    Use our form to get a free exchange rate quote, and find out how much you could save with Pure FX.
  • Register

    We'll be in touch to give you your exchange rate quote, ask you any further questions and tell you how the transfer process works.
  • Transfer

    From buying a property abroad, to making business transfers, or online selling - we have you covered.