Posted by Allison on 24 March 2009, 09:50
Last week we saw clear evidence that the British pound was struggling when it went up against a number of other currencies from all over the world. Whereas just a few short weeks ago we were talking about the weak dollar and celebrating a two dollar pound exchange rate (albeit for quite a short amount of time), it now seems that these events are firmly in the past.
So it's time once again to see how the pound has been doing for the past week – and whether or not we should be worrying or celebrating.
We suspect that last week will turn out to be one of those weeks to remember… but it won't be for the right reasons.
As we said it wasn't that long ago that the pound was claiming two dollars for an exchange rate, but if you were hoping to head off to the USA on holiday in the near future, your peak time for exchanging your currency and working out on your currency calculator just how far your money would go is long since over if the results from the last week are anything to go by.
1.9224 US dollars to the British pound was the exchange rate we finished on the week before, so it would have been nice to see even a slight push back up to two dollar territory. But this could be something we won't be seeing for quite some time to come.
Monday's closing exchange rate stood at 1.9205, only a slight drop from the previous week but enough to make you wonder whether the US dollar had got the power to start crushing the British pound, which was obviously in some trouble at this point.
Tuesday seemed to bring confirmation of this as the exchange rate went down to 1.9004, and unfortunately for us there was much worse to come. The following day saw an even bigger dip, and it turned out to be the biggest one of the week, as the exchange rate fell to 1.8764. It may have been good news for those trading in dollars and receiving the better exchange rate as a result, but for anyone else it was going to be a crushing week that would be better off forgotten.
Thursday didn't get any better and it seemed as though the pound was going into freefall. The exchange rate dropped further to 1.8743 and we were left wondering whether the pound could claw back even the tiniest amount to finish the week with at least a little hope.
But unfortunately the answer was no. By the close of play on Friday we were actually into 1.86 territory, finishing on 1.8627 – a drop of nearly six whole cents on the closing rate of the previous week. The real question now was how much worse it could get. Would the next week see even lower exchange rates, or would the pound be able to claw back some of its losses?
It seems hard to believe that it will bounce back very quickly, given the economic situation in the UK at the moment, but we can but hope that we see some encouraging upward movement next week.
So how did things go against the Euro? Was it any better or did the beleaguered pound have trouble in that arena too?
1.2753 Euros to the pound was the rate we were starting on first thing Monday morning, and by the close of play on that day the rate had edged up slightly to 1.2793. Not much of an improvement but the way things were going any upward movement was a good one. Would Tuesday continue the trend or was this the calm before the storm?
Unfortunately the latter was true because the pound slipped back and lost some ground on Tuesday, closing with an exchange rate of 1.2748. Now the big dip against the US dollar had come on the Wednesday, so would we see a similar event happen against the Euro as well? This is quite often easy to see when a particular event or piece of news damages a certain currency, and if the pound was having a bad day it would certainly be seen against more than one currency.
And that's exactly what happened in the end, as the end of trading on Wednesday left the pound bruised and battered and claiming just 1.2591 Euros to the pound – a drop of 0.0157 on the day before. Was there going to be a reprieve before the end of the week or would it continue to drop as it had against the dollar?
The exchange rate dipped still further by the end of Thursday, giving us a figure of 1.2573 and throwing the idea of a late summer holiday in Europe into disarray thanks to the adverse figures the currency converters were giving us. Luckily the pound did manage to claw back a little ground by the end of the week, closing on Friday on an exchange rate against the Euro of 1.2647. This is probably due more to the fact that the Euro is also struggling at the moment, compared to the US dollar which seems to be going through a revitalised period of activity.
So on to Hong Kong now and a look at how the pound could perform against the Hong Kong dollar. We generally see a reasonable amount of activity here, and it can also be quite an up and down affair – more like a roller coaster than anything else – but as it turned out last week would be something altogether different.
15.021 was the exchange rate we were left with at the end of the previous week, and by the end of the first day's trading we had gone below the 15.00 mark, dipping down to 14.998. Was this the start of a slide?
Unfortunately for us it seemed like that was going to be the case. By the end of the following day the pound was only claiming 14.838 Hong Kong dollars, and we were now wondering if this was where the fight back would start. After all, previous weeks have seen that up and down trend and it was hard to believe that all we would see this week would be an exchange rate that simply carried on going down.
But that was exactly what we got. By the end of Wednesday we could only claim 14.651 Hong Kong dollars to the pound, and it was looking increasingly likely that the dollar would carry on getting stronger as the week went on. This was confirmed on Thursday with an exchange rate of 14.639, and by the end of the week it had fallen still further to end on 14.555 Hong Kong dollars to the pound. Fingers crossed it wouldn't get any worse in the next few days. We shall see.
The British pound had a reasonably good week over in New Zealand the week before, but given its performance elsewhere it seemed increasingly likely that things would go downhill over there too. Was this going to be the case?
2.7284 was the exchange rate we were left with from the previous week, and by the end of Monday that had already started sliding, finishing on 2.7269. This was becoming a familiar and uncomfortable pattern, although the damage was limited on Tuesday to just a slight drop, with the closing exchange rate being fixed at 2.7267.
Wednesday once again brought bad news, just as it had in many other regions. We finished that day by claiming just 2.6906 New Zealand dollars to the British pound, and once again it looked like being a week we would rather forget.
True to our rather disastrous form last week, that turned to reality as the exchange rate plummeted still further to 2.6652 on Thursday, before sliding a little more to close the week out on 2.6614.
Could it get any worse? We usually close out our look at the pound's performance by hot footing it over to Australia, and while it wasn't exactly a great result, if you had drawn a graph which plotted the daily exchange rates it would at least have looked more like a mountain range than a downhill ski slope.
Monday's rate finished at 2.1556, slightly up on the closing rate of the previous week, which had been 2.1534. When the pound exerted some authority at last and pushed up the exchange rate to 2.1733 on the following day, things started to look interesting.
But it almost seemed inevitable that things wouldn't last, because the very next day we were back down to 2.1556 again, and it was as if that momentous rise on Tuesday had never happened. Then it looked as if the rot had started to set in, because Thursday brought a poor performance from the pound to finish on 2.1388. Could we at least pull something out of the bag to make a final push for an upward movement for the end of the week?
Fortunately that is exactly what we did, as the exchange rate closed out the week on 2.1539 Australian dollars to the British pound, which was just slightly up on the closing rate of the week before.
So all in all we should probably count that as a notable victory from the whole of last week, given the fact that for the most part there was nothing but bad news. But the most intriguing thought that comes on the back of all those plummeting exchange rates is – what will happen next week? Will it get any worse?
Perhaps that is a thought that is better put aside for now.
What a week for the US dollar. We saw how it gave the British pound a hard time but it wasn't just us that felt the effects of the US dollar's return to its former glory.
Plenty of other currencies were also feeling the pinch including the Euro, which was now having an equally hard time of it. It also appears that this is more than just a momentary trend – it could continue for quite some time to come.
The pound's fall has meant that a lot of people have noticed their money isn't going as far as it used to. Now while a lot of countries have been having troubles of their own, the fall of the pound has meant that Britons in particular have really been struggling to get a holiday worth having of late – especially when it comes to going abroad.
And if the predictions of some people (namely that the pound could fall a lot lower than it is at present) come true, we're in for a tough time still to come as well.
The pound isn't the only currency to really struggle against the US dollar; the Australian dollar is at its lowest ebb in about six months.
Tune in again next week to see whether this trend is going to carry on for the foreseeable future.
If you are thinking about trading in currencies and dipping your toe into the water at this time of fluctuations in particular, then you could try getting a free account to experiment with from GFT UK. Their website can be found at http://www.gftuk.com and it's quick and easy to get your free account.
So there isn't too much to be positive about at the moment if you are looking at how far your pound will go in pretty much any other country abroad. If this is the year you were planning a holiday to the USA, you would have been better off exchanging your money about three weeks ago and taking advantage of that two dollar pound.
It seems a very long way off now, and it could be some time before we see those heady heights again. But we'll be back here next week to find out how the pound will perform in the days to come.