Foreign Exchange Midweek Market Update

GBP/EUR
Range of the week: 1.2250 – 1.2360
Variance of the week on £10k= €110

Sterling fell to a 5 ½ month low against the Euro as optimism continued over the stabilisation of the debt crisis.

It’s been a relatively quiet week on the data front from the UK so far. Overnight the Pound saw decent buying interest after Mervyn King was slightly more upbeat about the economy here and the only talk of monetary easing was to dismiss recent comments made by Lord Turner (current head of the FSA and a candidate to replace Mervyn as Governor of the BoE next year). This morning’s industrial trends survey indicated a sharp slowdown in manufacturing activity at the beginning of Q4, though Sterling showed little reaction to the release as the focus is on tomorrows 3^rd quarter GDP data.

The Euro fell sharply across the board this morning after weaker data from the euro zone shifted investors focus away from the recent positives on the debt crisis and back on to the economy. The services and manufacturing Purchasing Managers Indexes were both weaker than expected for September which, unless there’s a significant turnaround in the coming months, would seem to indicate the euro zone economy is still contracting. German manufacturing data was especially concerning giving the importance of this sector to Europe’s largest economy; it showed activity falling at a much sharper rate this month than in September.

This will likely add further fuel to those economists and politicians who have been have calling for an easing of austerity measures recently as unemployment rises and economies contract. Germany has yet to be swayed by any such argument and has consistently stuck by its position that deficits must be reduced in line with the fiscal pact agreed of no more than 3% of GDP. It will be interesting to see if they adjust their position if their economy begins to contract.  

Still to come this week:
Tomorrow we get the first estimate of 3^rd quarter UK GDP growth. Expectations are for growth of 0.6% in part due to the ticket sales and TV revenues from the Olympics.

Commentary provided courtesy of HIFX, any questions relating to transferring currency to or from Spain, then contact us here.