Posted by Allison on 24 March 2009, 10:16
So here we are with another week's worth of news and data on the currency markets. This is also our first full look at how things are shaping up for the New Year, so it will be interesting to see what happens.
We've had two weeks with only a few days worth of trading in each one, thanks to the Christmas and New Year breaks, so now we are back to a full five day review. Last time we saw that the excitement of seeing out the old year was not mirrored in the currency markets as far as the pound was concerned. It finished off the year with a raft of poor exchange rates. And even though there must surely be a rock bottom point to reach as far as these poor rates are concerned, there is some doubt as to whether we have reached it yet.
There are continually negative reports coming from all quarters – and indeed many countries – as far as the credit crunch is concerned, and this is not helping anyone with regard to their exchange rates. With many people taking a look at the figures they are getting on their currency converter, there is a definite tightening of the purse strings going on all over the place.
And as we get ready to review another week's figures, there is definitely no real sign of an upturn in sight just yet.
So here we go with our first proper look at the currency markets for 2009. How will the pound fare against the US dollar as the year goes on? Will it regain its previous $2 to the pound level at some point during the year? At the moment it seems unlikely, but let's see how things got started.
Last week we were left staring at an exchange rate of 1.4428 US dollars to the British pound – dipping well below that fabled $1.50 mark. Perhaps the predicted $1.25 to the pound isn't so far away after all?
Well Monday did at least start off on the right foot, because by the day's end the exchange rate had pushed ever so slightly in our favour. We weren't exactly looking at a revitalised pound – the closing rate stood at 1.4513 – but we were headed in the right direction. The real question was whether this was a slight increase that would be wiped out in the very next day, or whether it was the start of a minor comeback.
There certainly wasn't any really good news coming out of the UK to make people feel more confident in the strength of the pound, so it would remain to be seen how this would proceed.
Tuesday didn't see much action at all, but what little change there was once again went in our direction. By the close of play on that day, the pound had pushed up ever so slightly to claim an exchange rate of 1.4529. Could this be a sign of a better week than we have seen of late?
Whatever answer you may have had in mind for that particular question, it is unlikely that you would have predicted the actual figure that we ended up with the very next day.
By the end of trading on Wednesday, the pound was claiming an amazing 1.5033 US dollars per pound. That is a full five cents (plus a fraction) more than the day before. That was quite amazing, and not something that anyone could really have predicted. The real question now was whether it would last, or whether we would end the week on a figure that was back down to the level that we had started on.
Thursday brought an interesting addition to the situation, with a closing exchange rate of 1.5243. Could this get better still? We could surely not have predicted such a rise at the start of the week, so it was fascinating to see what would happen next.
And as it was, the pound was indeed able to hang on to the impressive gains it had made during the week. What's more, it even managed to add a little more to the gains by the time everyone went home for the weekend on Friday night. By then the final exchange rate was pegged at 1.5292. That means we had gained a total of 0.0864 over the course of the week – a truly sterling start to the New Year.
But could we replicate this result anywhere else? Sterling was certainly having something of a battle against the Euro as 2008 drew to a close, fighting off the possibility of parity. So how did it do last week?
Our starting point against the Euro last time was 1.0405, so we were looking to push that figure higher and away from the prospect of parity with it. And we were off to a good start on Monday; by the end of the day the figure had gone up to 1.0686. That's over two and a half Eurocents more than the beginning of the day. Could we indeed get a similar result to the one we'd had against the US dollar?
Tuesday brought more good news as the figure moved even further away from that daunting 1:1 exchange rate. By the close of play on the second day of the week the rate had gone up to 1.0897. Could we indeed push that even higher and enjoy an even better start to the New Year than we had been hoping for?
It seemed that we could. The midweek point scored another rise for the pound, and Wednesday's closing figure was pegged at 1.1058. Considering the fact that last week we were worrying about getting closer and closer to parity, was it really true that we were moving ever further away from it so soon afterwards?
Something was clearly afoot, because Thursday's closing figure was even better, at 1.1194. And even though we saw a slight drop to close out the week on Friday at 1.1175, that still gave us plenty more to celebrate by the time the markets closed. We had gained a total of 0.077 over the Euro during the course of the week – a great result and another one to add to the success we'd had over the US dollar for once.
Was there more to come? Let's move on to Hong Kong next, where we finished on 11.183 the previous Friday. Could we expect more successful results here too?
Monday certainly seemed to indicate that we might expect that, since we finished slightly higher on 11.252. A small jump but a jump in the right direction nonetheless. Tuesday brought another small increase to 11.265, giving us more reason to suspect that this might be another good result for the pound once the week was out.
Wednesday saw a much bigger leap to 11.655, as things improved still more. Could we keep going in the same vein and get better and better results towards the end of the week?
Thursday certainly gave us more reason to suspect the answer to this question would be a 'yes'. By the close of play the exchange rate against the Hong Kong dollar stood at 11.819. And once the markets had closed for the week on Friday night, we were claiming 11.862 Hong Kong dollars to the pound. That means we had increased the exchange rate by 0.679 over the course of the past week.
Next up is New Zealand. We finished on 2.4941 New Zealand dollars to the pound the week before, after something of a disastrous week, but given the great results we have seen so far this time around, could we repair some of the damage?
Monday didn't get us off to the best start, as we finished on 2.4899 for the day. That was only a tiny loss though, and it certainly didn't give us an accurate picture of the rest of the week.
There was another loss on Tuesday, but once more it was a relatively small one, giving us a finishing rate of 2.4738 by the end of the day. The following day was when things started to turn though – and as trading finally came to a close we were able to claim 2.5121 New Zealand dollars to the pound. Was this the best we could hope for, or was there more to come?
No one could have expected what happened next – but we certainly weren't complaining. By the end of Thursday the rate had gone up again… this time to 2.5862. And with another albeit minor increase to 2.5882 on Friday, this was clearly a week to celebrate as far as the British pound was concerned. This meant we had gained an incredible 0.0941 over the New Zealand dollar in the course of a single week.
Finally we move on to Australia, where things are quite often mirrored to the results we get in New Zealand. Did this mean we were heading for a great increase there as well?
Well the week before we finished by claiming 2.0690 Australian dollars to the pound, so we were certainly looking to improve on that. Monday's figures finished up on 2.0505, so we were heading down to begin with, but things weren't going to continue on that path.
Tuesday closed with a figure of 2.0408 though, so were we getting too confident about a rise? It would be understandable, but as it happened we had every right to be confident that things would turn themselves around.
By the end of the following day things had indeed taken a turn for the better. The closing exchange rate there was an amazing 2.0823 – and that was just the beginning of an amazing fight back by the British pound. Thursday saw an even better closing figure of 2.1669, and even though that dipped back slightly the following day to 2.1648, we had still made amazing gains. In total, the pound had gained a whopping 0.0958 over the course of a week, slightly beating the increases seen against the New Zealand dollar.
It's certainly been a while since we have seen such results worth celebrating, and we hope that they continue or at least stabilise to give us better results than we have had before.
Last time we saw that the Euro was putting pressure on the US dollar. And even though the dollar pushed back to earn a better exchange rate of 0.7500 on Tuesday, it was back down to 0.7307 by the end of the week.
Is the Euro starting to prove a force to be reckoned with as far as the US dollar is concerned?
Currencies are forever changing, but last week the Japanese yen got the upper hand over the Euro.
From a starting point of 0.0078, it finished on 0.0080 on Friday night. But will this continue into the future?
As a country which said no to the Euro when it started, Switzerland perhaps has more to prove than some other countries.
But it is standing up well to the Euro at the moment. On Monday it claimed 0.6640 as the exchange rate, but it crept up steadily to 0.6667 by Friday night. Only a small increase, but it is standing its ground.
Sometimes a particular blog or website will stand out for a particular reason. The IndexMundi blog is one such site. It gives you exchange rate graphs that can be extremely useful over the course of time, and they also give you the code so you can put them on your website if you wish.
So we close on a great week for the British pound for once. The question is whether this is something that we can build on, or just a pleasant blip in a long struggle to get back the kind of exchange rates we were seeing at the beginning of last year.
We'll see you next time.