The FairFX Foreign Currency Exchange Blog

Disclaimer: THIS MATERIAL IS NOT INVESTMENT RESEARCH AS DEFINED BY THE FINANCIAL CONDUCT AUTHORITY

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As the week draws to a close market sentiment remains poor. The US dollar has been sold to an 8 week low against sterling on speculation that the US economic recovery is slowing. Both Sterling and Euro have gained against the US dollar. US economic data is not helping the situation, the pressure is back on manufacturing whilst jobless claims remain buoyant.

Payrolls in the US fell 125,000 in June for the first time this year. The pace of hiring indicates it will take years for the US to recover the more than 8 million jobs lost during the recession. This will clearly have a knock on effect in spending.

Clearly, post-election sterling is looking bullish. Political uncertainly and fiscal issues are off the radar. The new government has made clear intentions to take control of the deficit and the FX markets have rewards their decision to do so. On Tuesday, the pound traded within touching distance of 1.24 against the Euro. Since then we have seen some profit taking and the Euro looking slightly firmer against other major currencies.

Friday 02 July 2010, 04:20pm

The budget report was widely accepted in a positive manner, Sterling has been rallying since the announcement. The bond markets have also been pushing up and rating agencies gave the report a warm welcome.

Moody’s Investor Services said the UK budget announced yesterday is “supportive” of the country’s AAA credit rating. Market participants are beginning to feel confident the government is taking rapid steps to tackle the UK budget deficit.

It seems that the new chancellors determined actions are supporting UK credibility in financial markets. Against the Euro, sterling is currently trading within touching distance to this year’s high at 1.2177. Cable has also perked up, trading at the highs for the month. It is possible we will see a retest of the 1.5000 level in the coming days.

However, from a longer term perspective, it is likely that the significant fiscal cuts on growth in the UK economy will hinder support for sterling.

Wednesday 23 June 2010, 02:41pm

The sterling rally against the Euro is beginning to feel the pressure around the 1.1800-1.1850 level. Last week the pound opened close the highs around the 1.1750 regions and was sold down to the 1.14 level at one point before finishing the week at 1.15.

Against the dollar, last week was the first positive finish for the Euro after 4 weeks of continuous aggressive selling. After trading below the 2008 low, the Euro found support around 1.2150.

In the UK the major news was the CPI figures, inflation at 3.7% well above the 2% target. The Bank of England is convinced the move is temporary and inflation will come back into line. Last week was a fairly range bound week for cable, trading between 1.4250 and 1.45. Uncertainty remains in the UK economy and traders will be examining plans by the coalition government to cut the initial £6bn of deficit.

Monday 24 May 2010, 11:13am

This morning uncertainty in the UK and the Euro-zone will be the topic of discussions in the FX markets.

The pound was sold on Friday as the election results were released confirming a hung parliament. Politicians have been working over the weekend to trash out a deal and stabilise financial markets. The media has reported that the talks have been positive and productive but until a formal arrangement is agreed, Sterling will continue to be fragile.

Over in the Euro-zone, the European debt crisis continues to shatter confidence in the single currency. Officials have announced an emergency fund of €720 billion which has been set up to hopefully act as a buffer for any country that may experience similar problems to Greece. The Euro has been brought on the back of the news but traders are still not convinced that this is a long term solution. Although the single currency will see some temporary support, traders should be cautious entering into Euro long positions

Monday 10 May 2010, 11:28am

The Euro continues to suffer despite a €110 billion bailout package on concern Greece will not be able to cut its debt sufficiently to avoid default. Euro zone finance officials are hoping the package will be sufficient to prevent the problems flowing over to Portugal and Spain.

This afternoon the Euro has traded below $1.31 for the first time since April last year. Sterling is on the verge of breaking above the 1.1621 level against the Euro.

From a technical standpoint the Euro continues to look weak, the selling continues. Volatility in the Euro zone has spiked enormously and the selling is now moving into the Equity market. The European banking sector being the hardest hit.

Tuesday 04 May 2010, 04:12pm

A shock rise in the cost of living is potentially a cause for concern as it likely interest rate rises may take place sooner rather than later. High petrol prices pushed UK inflation from the key 3% percent mark to 3.4%. Sterling saw a small spike against the US dollar and retracing back to lower levels.

Against the Euro, Sterling continued its recent rally. The pound is currently trading at levels seen back in February after breaking above the high of 1.1484 this morning. The next significant target on the upside is the late January high of 1.1621.

A 20 member team from the EU and IMF is due to start their delayed negotiations today on activating the 45 billion Euro emergency package for Greece. Greek bonds are now trading over a 450 basis point spread to the German bunds. The Greek government needs to raise 10 billion in May to meet its commitments.

The Euro continues to carry a heavy weight, traders are trying to filter between the positive economic fundamental data and the concerns over macro fiscal debt issues. If the Euro is sold back above the 1.16 level against the pound, technically this will be a good indication of higher prices to come in the second half of the year.

Wednesday 21 April 2010, 12:03pm

Once the markets received confirmation the EU will support Greece, the Euro staged a 2% rally. However the FX markets are still concerned about the debt package, it is possible that Greece may not accept the package and therefore questions will still remain.

From a macro perspective, the financial package agreed by the EU does little to change the fact that the Euro Zone is likely to underperform other economies. Spain, Portugal and Italy are sinking toward the same crisis and this will weigh on the single currency.

Against the US dollar, Sterling is not comfortable below the 1.50 level. In the recent weeks Sterling buyers have been entering the market, but clearly the recent rally has not been a smooth one. Many traders will be keen to keep the pressure on sterling until they can see some clear economic shift in data. The coming elections will also be a key factor.

Wednesday 14 April 2010, 12:00pm

Sterling has continued to surge against the single currency as Greece struggles to finalise the bailout agreement with the EU. Greece has been forced to deny allegations that it was seeking to restructure the rescue package constructed by the EU last month. Borrowing costs have again soared and investors are again questioning the ability of the country to refinance its debt.

The UK election is underway and the next month is expected to be volatile for sterling. Travellers planning a holiday abroad to the Euro-zone in the coming months are advised to consider taking advantage of the recent rally in the sterling by loading their FairFX Euro Cards at the preferential rates.

The 1.48 level is significant for cable as this is a key longer term support level; the pound seems fairly content trading between the 1.48-1.54 region. A clean break of 1.48 would be concerning for sterling.

Wednesday 07 April 2010, 11:35am

South African Rand has strengthened significantly in value against the UK pound since February of 2009, meaning that UK visitors now get a lot less when they convert to the South African currency compared with this time last year.

Planning on a visit to South Africa?

If you’re planning on a visit to South Africa then don’t let poorer Rand rates put you off – we’ve just published some South Africa travel tips to try to help you get the most out of your trip.

Friday 26 March 2010, 10:40am

Tags: south africa rand

The single currency traded close to a 10 month low against the US dollar yesterday, traders are concerned the EU leaders meeting today will not yield any economic progress for Greece.

Early morning the Euro was sold through the 1.3433 support, the selling continued all day down to 1.33. As a result of the abundance of Euro seller in the FX markets the GBP/EUR cross remains fairly buoyant.

The EU uncertainties continue to be a dominant theme in the currency markets; the Portuguese downgrade is adding fuel to the fire and will maintain the pressure on the single currency.

The concern here is there are still other countries like Italy and Ireland that are feeling the strain. It is now likely the IMF will be considering an injection rather than the ECB. If this is the case, this could have damaging consequences for the stability of the Euro.

The tension in the Euro Zone are the most serious they have ever been since the single currency was established. The time has come for the Euro to be tested. Financial markets do not like uncertainty, the longer they have to wait for a decision the less confidence markets will have.

Thursday 25 March 2010, 12:28pm

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