- Bureau de Change
- Transfers for individuals
- Transfers for businesses
- Bureau Opportunities
- Market News
December proved to be a mixed month for sterling as it gained over 3 cents (3%) on the euro but slipped almost 3 cents (1.7%) against a strengthening dollar. Over the course of the year, the pound produced relatively healthy results with a net 15 cent (10.5%) gain against the dollar and 8 cents (7.7%) against the euro. However, coming off multi-year lows against the dollar in January and historic lows against the euro at the end of 2008, these gains have to be taken in perspective.
Interest rate wise, no change again to the UK’s 0.5% base rates or for that matter the £200bn asset purchase program. The Bank of England was the first major central bank to meet in 2010 but once again there were no adjustments made to policy. Similarly, interest rates in Europe and the Sates remained steady at 1% and 0.25% respectively.
Unemployment actually fell in November against consensus, the first fall in unemployment since February 2008. Activity in both the manufacturing and service sectors remains buoyant although the construction sector continues to lag behind. Inflation picked up more than expected in November but retail sales were a disappointment as they fell by 0.3% in the month. Early indicators however point to a more profitable month in December for retailers although the outlook for the early part of this year is perhaps less rosy.
The final revision to the disappointing Q3 GDP figure saw another small improvement but the UK remained the only major economy in recession with negative growth of -0.2%. Already released last week were the latest mortgage approvals and lending figures, both of which showed encouraging rises.
Projections on currency outlook continue to be driven by relative interest rates, budget deficits and growth. In this regard, the situation in Europe is being closely monitored, specifically in the case of Greece with Portugal, Spain, Italy and Ireland all having potential to see their sovereign ratings downgraded. There have also been veiled warnings to both the UK and more recently the US to the same effect should they fail to bring budget deficits under control. The UK General Election due before June will be a huge event but provided the dreaded hung parliament can be avoided, the next government should provide the necessary measures to avoid such a scenario.
Technically, the pound remains entrenched in a broad 10 cent, 7-month range where the bulk of price action has been concentrated within $1.58-1.68. More immediately, this week has seen the pound turn positive for the year after last week’s slippage and we now need to clear congestion in the $1.6310/60 zone. If we can regain this area, the upper end of the range will come back into focus. Downside risk from current level is to $1.58/1.57 but if we were to break here, sterling could come under heavy pressure with little in the way of support until $1.5270.
Against the euro, the last couple of months have been similarly range bound with €1.0925/1.1325 providing the support/resistance. The €1.1050 level has been pivotal for some time and for sterling to break into a more bullish position we need to see it clear a tough area of resistance at €1.1265/1.1320 which would clear the way for gains towards €1.15 initially with potential to €1.18/1.19 further out. Risk from here is a break back below €1.1050/1.0925 which would put the pound back under pressure again targeting the €1.0625 low from last October.
Interest rates 0.50%
Unemployment Rate 7.9%
CPI Inflation +1.9 y/y to October ‘09
GDP -0.2% q/q to September ‘09
To speak to one of our currency specialists select your preferred route below:
We have been using The No1 Currency for the last five years to transfer funds to our various foreign suppliers... We have been extremely happy with the service received and would have no hesitation in recommending them to others.
Imaging Systems Limited