Posted by Allison on 24 March 2009, 09:51
It seemed as if last week's report was filled with nothing but bad news for the pound. With plummeting exchange rates not going anywhere in our favour, we were left wondering whether the pound could sink any lower against the major currencies around the world.
It seems like an age ago that we were gleefully tapping the figures into a currency converter and working out how many US dollars our pounds could get us. With an exchange rate then which just tipped the scales at two dollars to a pound, it seemed like the British pound was in charge.
How times can change, given the fact that this scene took place only a few weeks ago. Let's see how things have changed in the past week on the currency markets.
The British pound stood at 1.8627 against the US dollar at the end of last week – a far cry from the two dollar pound of a few short weeks ago. But the bad news was that we weren't sure how things were going to progress from there. It seemed as if the figures we saw last week were only the beginning of a further slide into doom and gloom.
So how did things progress? Well on the Monday we actually saw a slight increase on the side of the pound, as the exchange rate crept up to 1.8657. Better than nothing, and at least it was heading in the right direction.
But would Tuesday continue the slight push back or would we see a further slide?
The answer soon came and it wasn't in our favour, as the US dollar regained a bit of ground and ended the day ahead, as the pound claimed 1.8613 US dollars – a slight decrease on the figure from the day before.
Things got worse on Wednesday as the pound fell to 1.8576, leaving us wondering where the week would go from here. Would the pound fall still further, pointing to a struggling economy or would it find some strength from somewhere – from anywhere in fact?
Well it was nice in the event to know that the pound still had some fight in it, as it pushed back to finish on 1.8666 with one day left to go in trading for that week. At this stage it was slightly up on where it had started on Monday, so we were hoping that we could at least finish on a par with that, if not higher.
But unfortunately the US dollar had other ideas in mind. Perhaps not surprisingly it finished as the stronger of the two currencies by the close of play on Friday, and the exchange rate stood at 1.8589 – lower than it had started the week and at one of the lowest exchange rates we have seen in quite some time.
There has been speculation that the exchange rate could go a lot lower yet, so we will have to keep our eyes on what is going on to see whether there is good news or more bad news to report next week.
So how did things progress against the Euro last week? The last exchange rate we saw was 1.2647 to close out the previous week, so did things go up or down from there? That week was a real problem in the end because the Euro took control and did better in the head to head than the pound did, but we should not assume that the Euro is stronger than the pound because they are going through their own problems as far as the economy is concerned.
By the end of trading in the currency markets on Monday, the exchange rate stood at 1.2688. This was slightly up on the closing figure of the previous week, but we have seen that an initial rise in the exchange rate doesn't count for anything and can be wiped out very quickly once the week gets underway.
The figure dropped slightly on Tuesday but not by much – the pound was clearly hanging on at 1.2682, although it would have been presumptuous to assume that the exchange rate was going to go up by a significant amount in our favour that week.
That was borne out by the fact that the Euro swung back into control on Wednesday, as it closed out the day on 1.2607. Was it going to claim the better exchange rate in the second half of the week, or did the pound have something in reserve to battle back with?
Unfortunately (although perhaps predictably) for us, the Euro did manage to stay in the driving seat for the remainder of the week. Thursday saw an exchange rate of 1.2600, and by the close of trading on the currency markets on Friday, the pound could only claim 1.2553 against the Euro. Not the best news for anyone who was planning to go on holiday to Europe in the near future, although it has to be said that waiting for a better exchange rate may also be in vain. How long will it be until the exchange rate is more in the favour of Britain, one wonders?
The difference over the course of the week was only a drop of 0.0094, but that was enough to make us wonder if there was more to come next week. We shall see.
On to Hong Kong next, where we saw the pound go on a downward slide last week. Would that slide continue or would the pound find something in reserve to test the Hong Kong dollar with?
As it turned out it was something of an up and down week, which we have seen happen before between these two currencies. 14.555 was the exchange rate we were left with against the Hong Kong dollar last week, and by the end of the first day of the week that rate had jumped up marginally to 14.576. Not a big rise, but in these times of exchange rates against the pound going in the wrong direction, any rise was a good one.
The rise wasn't going to last long however, as by the end of trading on the following day the exchange rate had fallen to 14.538. Was this going to be the start of another fall in rates that would keep on going, much as it had against the US dollar?
Wednesday saw another fall to 14.508 and it was looking increasingly likely that this was going to be another bad week for the pound. Thursday brought slightly better news though, as the pound fought back marginally to end on an exchange rate of 14.573 for the day.
The only question now was whether or not the pound could claim another small victory to end up slightly for the last day of the week. So far it was looking like another up and down week for the pound against the Hong Kong dollar, and as it turned out it was going to go down again on the final day of trading that week – yet no one knew by just how much.
As it happened we were looking at an exchange rate of 14.512 at the close of play on Friday, marking a drop of 0.043 from the end of the previous week. It seems as if the up and down nature of the British pound versus the Hong Kong dollar looks set to continue.
So how did things go in New Zealand? Did the pound look any stronger over there, or was the pattern of weakness about to be repeated there as well?
2.6614 was the exchange rate we were carrying over from the previous week, which dropped down to 2.6142 by the close of play on Monday. This was starting to look like a very familiar pattern.
The pound managed to claw back some ground by the end of Tuesday's trading, where it stood at 2.6237 against the New Zealand dollar. But as we have seen so many times before, that didn't last. By the close of play on Wednesday we had an exchange rate of 2.6104, and while that improved slightly to 2.6131 the following day, the final exchange rate for the week stood at 2.6088 by the time everyone went home for the day on Friday. That is a drop of 0.0526 over the course of a single week, and it gives everyone something to think about as time goes on.
Not too far away in Australia it was a similar picture, and it revealed that we weren't going to enjoy any real upward movement last week as far as the exchange rates were concerned. 2.1364 was the closing rate on Monday, and although that went up to 2.1472 the following day, that gain was very short lived.
Wednesday's closing exchange rate between the British pound and the Australian dollar stood at 2.1337, but once again the pound showed a bit of the grit that is always present by fighting back to 2.1435 the next day. But the gain was once again short lived and it closed out the week on 2.1365, leaving us wondering whether the pound had any real strength at all at the moment.
It seems as if the answer is no, particularly in a week where there was nothing to celebrate at all.
At one point it seemed as if nothing could shake the strength of the Eurozone, but now that is very far from being the case.
Not only is the Eurozone struggling with the economy and the value of the Euro at the moment, it is also clear that there is no end in sight to its woes. Even though the pound didn't come out of its head to head against the Euro very well last week, it's clear that neither currency is doing particularly well at the moment.
While the Australian dollar may have held its own against the pound, it is at the lowest ebb it has been at for seven months against the US dollar.
Just a few weeks ago we were reporting on the weakness of the US dollar, but now things have very much swung back in the opposite direction. The Australian dollar could suffer still more in the weeks to come.
In a bad week for the pound, it didn't have anything to celebrate against the Canadian dollar either.
From a position of 1.9741 on Monday, it fell to 1.9460 by the end of the week – a drop of 0.0281 over the five day period, and further evidence of the pound's continuing struggles.
The struggles of the Euro at the moment are a long way from its golden times. It may yet return there, but in the meantime if you want to know more about this currency and how it came into being, make sure you visit http://ec.europa.eu/economy_finance/the_euro/index_en.htm?cs_mid=2946 to find out more. It's packed with information and useful facts and figures.
This weekly review of the currency markets changes every week, of course. Sometimes we have good news to report and sometimes the news is bad, but usually it's a mixture of the two. This week however there is really nothing good to say about the situation the British pound finds itself in.
The worry is that it will still continue to get worse, and although a lot of countries are struggling with their economies at the moment, the pound seems particularly weak on the world stage, and one wonders how much further it can fall before things start to improve once again.
Of all the currencies we have looked at this week, it's clear that the US dollar is the strongest of them all at the moment. And that shows no sign of giving up its grip on the good end of the exchange rate against the UK.
But let's see what we have to report next week before making any more suggestions as to what may happen next. See you then.