Tuesday, 31 March 2009 00:25

GBPEUR up, GBPUSD down.
The pound fell yesterday by 1% as the car industry in the U.S. faces problems, and also the banking sector concerns caused investors to become worried about risk. This benefited the US dollar, and weakened some other currencies which are perceived as higher risk.

Sterling is typically vulnerable to equity market falls and heightened level of percieved risk. This left it among the biggest losers of the major currencies as it failed to benefit from data showing an encouraging rise in UK mortgage approvals.

Having said that, Sterling Euro rates actually improved slightly as the Euro weakened. The pound is still very weak. A good example of this is the current house price situation in the UK.

House prices are falling ever faster in the UK, according to the Land Registry. Prices dropped by 2% in February, which means the annual rate of decline is now 16.5%. The average property is now worth £154,000 - a level not seen since 2004.

Below we have todays economic releases, and a view to how these may affect Sterling exchange rates. Of course the big story this week will be the G20 summit. World leaders gather in London this week for the crunch meeting on Thursday. There is unprecedented security for the summit, which aims to thrash out the economic crisis, and tidy up financial markets to restore stability.

South African Rand
The GBPZAR rate has actually fared very well. It is down on its highs for the last year, but still trading a little under 14 rand to the pound. The reason for this is the Rand has weakened to the same level of the pound.

Todays Economic Data Releases
UK, we have the Index of Services, which measures the monthly movements in gross value added for the service industries. A high reading would be positive for the pound, and may cause Sterling to continue to climb.

In the EU we have consumer price index, which is a good measure of inflation. Both monthly and yearly figures will be released. The annual figures are expected to show 0.7% - any lower than this and we may see an interest rate cut on Thursday from the ECB. Euro buyers will be hoping for this, as it would weaken the Euro making it cheaper to buy, and exchange rates may rise.

Elsewhere, we have Purchasing Managers Index data from the USA which measures business trends. Also consumer confidence data from the states which shows how the public view the economy. Expect volatility today for GBPUSD.

Canadian GDP will also be released at lunchtime. We"re expecting it to show a decline of 0.6% after last month showed a decline of 1%. If the figures are any different to this, expect a change in exchange rates.

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