Posted by Allison on 24 March 2009, 09:49
It almost seems as if we are reporting the same news every week, but while there are many similarities from week to week there are also subtle differences which tell us a lot about what is going on in the world of currency from day to day.
There is no doubt that the global situation is still a cause for concern, as the ever present threat of recession is hanging over many countries heads. But it is the effect that this has on currency exchange rates – and indeed on the figures you will see on your currency converter if you want to know how far your holiday money will go at the moment – that we are particularly interested in.
So with that in mind let's see how the pound has been doing in the last week against many other major currencies all round the world.
It's always interesting to see whether the British pound can put up a reasonable fight against the US dollar, and in recent weeks it has certainly had its moments. The dollar has long been seen as just about the strongest currency in the world, and it is the world's foremost reserve currency, but in recent times it has certainly shown its frailty.
The question now is whether the pound can exert a little more pressure on the dollar, as it has occasionally managed to do over the past few weeks.
We started well on the 4th August with a closing exchange rate of 1.9662 US dollars to the British pound. Now that is some way below the two dollar mark that tourists would hope for, and indeed this is only a couple of weeks after we did manage to break through that barrier. The big question was whether we could exert a little more pressure and get back towards that target again, or whether we would have to cling on and hope that the exchange rate didn't take another swing back in the favour of the US dollar.
Tuesday brought the kind of news we didn't really want to hear. The exchange rate had dropped to 1.9533, and while a drop of 0.0129 from the previous day may not sound like much, it was pointing towards a dollar which looked as though it had some renewed strength. With that said however, the news coming from Britain wasn't too good and that certainly didn't help the pound's cause. Interest rates were gaining a lot of attention, the housing market was slowing down, and people were wondering whether we were already in the early stages of a recession.
We needed a better exchange rate by the end of Wednesday if our hopes were going to be lifted at all of a renewed battle with the dollar, but although it did manage to climb slightly – to a figure of 1.9541 – it hardly did the trick.
And by the end of Thursday it looked as if the rot had started to set in once again. We slipped towards the end of the week on an exchange rate of 1.9520, and the US dollar certainly did look as if it was going to be a force to be reckoned with once again. That was confirmed on Friday as the Brits limped home with an exchange rate against the dollar that was worth 1.9224 – a real plummet from Thursday's figure and creating a huge question mark over what would happen the following week.
Clearly the pound wasn't having a good week at all against the US dollar, but could it do any better against the Euro? Surely it couldn't do much worse?
The pound ended trading on Monday 4th August with an exchange rate against the Euro of 1.2631. Any kind of upward movement would be good here, since the Euro has also had a tough time of it of late. We did indeed see a slight improvement on Tuesday – but unfortunately for us it was in favour of the Euro, as the pound slipped back to claim 1.2612 Euros per pound. Was it going to be another week where we would have to look elsewhere to get a good value holiday?
Wednesday held better news as the pound came back to end on an exchange rate of 1.2625 for the day, but it would turn out to be a choppy kind of week where any gains were short lived for both sides. We saw this on Thursday as the Euro put in a final spurt before trading closed for the day, ending with an exchange rate of 1.2617 Euros against the pound.
The only question left now was whether or not we could repeat the up and down pattern of the previous days, and manage to fight back on the last day of trading for the week. Fortunately for us we could, and it was an impressive fight back as well; the closing exchange rate for the week went in our favour as we claimed 1.2753 Euros to the pound.
So not exactly the biggest gains we have ever seen and only a marginal gain in effect, but we broke through the 1.27 barrier and while that may in reality be just a small victory we are definitely in a climate where even the smallest victories should be celebrated, as anything could happen next.
Let's go elsewhere now, and see whether we could perform better still in Hong Kong. Recent weeks have seen the pound put in a reasonably good performance against the Hong Kong dollar, so it would be lovely to get an equally good result here.
The closing exchange rate on Monday was 15.345 Hong Kong dollars to the British pound. Now that in itself is rather lower than the kind of figures we were seeing just a week or two ago, so would this turn into a week of low figures or could we pull something better out of the bag for the remaining days?
Well if we were going to turn things around we were certainly going to make life hard for ourselves, because the exchange rate dipped even lower on Tuesday, sinking to 15.245 – a full 0.100 difference in just one day. Could we hope to recover any of that deficit?
Wednesday saw a marginally better rate of 15.253, but there was clearly still a lot of work to be done. Unfortunately it seemed to be work that the British pound wasn't capable of doing last week, because by the very next day the Hong Kong dollar had fought back still further to claim an exchange rate of 15.236. The only question left now was whether the pound could do anything to stop the decline it had experienced over the previous days. And the news at the close of play on Friday was not good.
Any kind of increase would have been wonderful news, and even the tiniest loss could have been coped with, but we were facing an exchange rate which had dropped to 15.021 in just twenty four hours. This was clearly a week where we needed to just forget about the results we had got and hope for something better in the week ahead.
This was turning into a memorable week for the British pound – but for all the wrong reasons. Could it redeem itself in any way over in New Zealand?
Well we ended the first day of the week with an exchange rate of 2.6927, which was certainly higher than we have seen on occasion recently. It was a good base to start from – all we needed now was some upward movement to give us something to celebrate after the downward trend we were experiencing elsewhere in the world.
There was some upward movement on Tuesday but the pound certainly had to fight for it as it could only manage a small improvement to 2.6976. At least we were seeing better figures though, and luckily for us this was a trend that looked set to continue.
The situation improved still further on Wednesday as the pound finished by claiming an exchange rate of 2.7015 against the New Zealand dollar, and there was more good news to come on Thursday with a further improved rate of 2.7174.
The only question now was whether the pound could keep up this inspired performance long enough to maintain its position on Friday. The answer wasn't long in coming – not only did it manage to keep up the pressure on the New Zealand dollar, it also went one better and carved out another rise to end the week on 2.7284.
So it seems it wasn't all bad last week. The pound did well in New Zealand, but how would it do not too far away in Australia?
As things turned out it was another good performance for the British pound. The head to head ended trading on Monday with an exchange rate of 2.1091 Australian dollars to the British pound, which was a good start to the week.
Tuesday brought even better news as the exchange rate shot up in our favour, to an impressive 2.1302. That was a pretty good performance but could we do even better?
The answer was yes. By the close of play on Wednesday the pound had exerted a little more pressure to keep things ticking along and claimed another small victory with a closing rate of 2.1362. The next day brought more good news and another movement in the right direction as the pound could then be exchanged for 2.1432 Australian dollars.
And as we saw before, a similar situation to New Zealand was going to happen in Australia as well. The closing exchange rate for the week was an impressive 2.1534, representing a big success for the pound in what was otherwise something of a worrying week.
We've seen recently that the US dollar seems to be regaining some of its old strength, and a large part of that has to do with the downturn that is continuing to happen in the Eurozone.
A while back it was the Euro that was the strong one while the dollar plummeted, but it looks as if things are turning back in the opposite direction now, and it will be interesting to see if that continues.
We've seen already that the British pound is struggling when it comes to its performance against many currencies, but the exchange rate we need to look at in particular is that of the pound against the US dollar.
The bad news for the UK is that we can expect this rate to continue getting worse; the state of the economy at the moment means that we must take each day as it comes. It could be that the two dollar pound is about to become a memory.
The US dollar had a good week against pretty much everyone last week it seemed. The Japanese yen was also struggling to put up a good performance against the spirited currency and like many others it too failed to come up with the goods.
If you are interested in keeping up with currency matters with the help of different websites, then check out www.interchangefx.co.uk. As the title would suggest it is concerned with the foreign exchange market, but it grabs headlines from reliable sources and as such provides a one stop shop for everything to do with currency.
And so we arrive at the end of another week. It's hard to believe that just a few weeks ago we were talking about the weakness of the US dollar, and yet here we are now looking at that exact same currency with a new spring in its step. These days it is the British pound and the Euro that are struggling, and sadly for us it may be the case that our reports stay the same for some time to come on that matter.