Last week we witnessed a positive week for Sterling against the euro currency with a 2.25% increase from the start of the week. The high point of 1.1619 was the highest level seen since January of this year and represented some excellent buying opportunities. The peak however was short lived after GDP figures for the UK on Friday showed a small increase of 0.2% for the first quarter of 2010 from 0.4% in Q4 2009, and the exchange rate fell by around 1.25%.
Prior to Friday the main news that caused the markets to move last week were the Bank of England minutes where it showed all 9 of the committee members voted for a hold on the record base rate low of 0.5% and the continued pause to its Quantitative Easing program. This was followed by mixed results for the UK unemployment levels where it showed although unemployment rose to 8% the new claimant count was better than expected with a reading of -32.9k from a predicted -7.6k people claiming for unemployment benefit.
News from the Eurozone helped the spike for Sterling where it was announced that ratings agency Moody’s cut the Greek credit rating to A3 from A2. This makes the Greek economy now just one rating cut away from being uninvestible. There was also an upward revision to the Greek 2010 budget deficit to 13.6% of GDP by the European commission.
With so much seemingly pointing to continued Sterling strength the dip on Friday shows Sterling is still fragile and those with a requirement may wish to act on it now to protect from a potential downward trend. With the UK being at the mercy of opinion polls with the election drawing nearer, volatility is expected as uncertainty surrounding who, if anyone will take power come May 6th. The best way to protect your funds from market fluctuation whether buying or selling Euros would be with the use of a forward contract. This is a contract set up to buy your currency today for anything up to two years in the future with a small deposit.
This week sees a limited amount of data releases with the main highlights being CBI realized sales for the UK on Tuesday and unemployment figures for Germany and the Eurozone as a whole on Thursday and Friday respectively. To get yourself in the best position to trade when the markets present an opportunity open a foreign currency account and one of our partners' dedicated brokers will be in touch to give you a consultation for your particular requirement.