Posted by Allison on 22 December 2009, 15:52
Welcome back to our latest currency report. This is the last full week of trading before the festivities get underway and that means we have plenty to go through as we see how the British pound did against five other currencies.
And we have some ground to make up after the poor showing we saw last time. If you remember rightly our currency converter showed a loss against every single one of the other five currencies we go head to head with each week:
• US dollar – a loss of 3.5 cents
• Euro – a marginal loss of 0.0005 cents
• Hong Kong dollar – a bigger loss of 0.271 overall
• New Zealand dollar – a loss of 0.0563 against the Kiwi dollar
• Australian dollar – another loss of 0.02 cents here
So we have a lot of ground to make up for this time and with this being the last proper week of trading until the New Year, how will the pound fare as it tries to garner some better results to round off 2009 with? We will still have some trading going on over the holiday period of course, but not as much as we would see in the typical week.
We are cautious at present and it doesn’t look hugely positive that we will end the year on a great note. But who knows – we may do well and we may end up in a stronger position than we started the year in. When you look back to where we were twelve months ago, we should at least achieve this if nothing else.
So let’s focus on what happened during the last week of trading then, as we look ahead to a New Year just around the corner. Are you ready?
As usual our first task is to see how the British pound performed against the US dollar. Last time we saw it experience a sustained loss of three and a half cents, which left it on 1.6303 at the close of play on the previous Friday evening. Could it hope to improve on that to any degree this time around?
If we were hoping for a good strong start to the week our prayers went unanswered. The first blood went to the US dollar in the end, and the pound sank back to 1.6263 as a result. Did this mean the week would turn out to run along much the same lines as the week before, or would we be able to pull our socks up and end the week in much better fashion to how we had started it?
Let’s see what happened next. We saw another drop on Tuesday, this time down to 1.6228. This slowed the rate of losses ever so slightly, but not enough to give us hope that we might actually add something on to the exchange rate on Wednesday instead of losing it.
So how did the midweek point pan out in the end?
Well as it turned out Wednesday’s activities did give us a little cause for hope. By the time the day’s trading on the currency markets was over, the pound had made its first gain of the week, leaving it on 1.6369 at the end of the day. That was the equivalent of nearly a cent and a half’s increase since the day before, so that at least was good news.
But as always it is never too soon to settle into feeling confident about the way trading is going. And we learned this lesson on the following day, as the pound’s exchange rate with the US dollar dropped back to 1.6116.
So at this point the new exchange rate with just one day to go was nearly two cents lower than it had started the week on. So unless something drastic happened on Friday it didn’t look very hopeful that we would have the successful week we would have liked.
And indeed this turned out to be the case. On Friday night the pound stood at 1.6163 against the US dollar. That meant we had dropped another 0.014 against the American currency, resulting in total losses approaching five cents in just two weeks.
Clearly this wasn’t good news and it does point to the possibility of ending the year on a lower exchange rate than we thought we might. There are some trading days left yet though, and while the holiday periods can always be a little unpredictable we wouldn’t expect too much activity to go on until next year now.
So after that sobering event let’s move on and see whether we could expect any better news from our battle against the Euro. We were left on 1.1047 after a very tiny loss of a fraction of a cent last time, so hopefully after that stalemate we will be able to take the upper hand now.
But did it really happen that way in reality?
Here at least we did make a positive start. After the events of Monday were brought to a close we finished up on 1.1103 – a healthy half a cent or so up on the starting point for the week. The question now was whether or not we could improve on that throughout the remaining four days of trading that were left to us.
The following day repeated the pattern positively enough, elevating the pound once again to a better exchange rate. This time we finished the day on 1.1160, indicating that for now at least the pound was in charge of the Euro.
And on Wednesday we propelled ourselves up to an even better rate, going into territory we hadn’t touched in a while – the 1.12 rate. The final figure for the day was an impressive 1.1242, so with just two more days to go it looked as though we might actually get a good result here for once.
And indeed that is what happened on Thursday. The pound kept on putting on the pressure and managed to up things to 1.1236 by the time the day was out. We obviously had a rhythm going here that didn’t want to be broken, and it didn’t look like it was going to be either.
And by the time the markets closed on the last proper week before Christmas, the final exchange rate for the British pound against the Euro stood at an impressive 1.1273. So this was probably one of the best weeks we had experienced against the Euro for a while now, giving us an increase of well over two Euro cents all in all. That gives us something worth thinking about for the next couple of weeks, doesn’t it?
We lost 0.271 against the Hong Kong dollar last time around, leaving us on 12.635 at the week’s end. But could we add any of that back on this time or would we end up with an even lower exchange rate by the end of the week? With one good result so far and one bad one, anything could happen.
Well unfortunately we were stuck with a drop to cope with on day one. By the time the markets closed for the day we were left with 12.606 to think about overnight. Did that mean we were in for a bad week?
Tuesday certainly seemed to confirm it as the Hong Kong dollar stepped up the pace and resulted in the pound finishing on 12.582 as the markets quit for the day. Two days down and three to go, and so far there was no sign of any good news for the pound.
Everything changed on Wednesday though as the pound put on a surge of strength and managed to challenge the Hong Kong dollar in a new way. It saw the pound finish on 12.692 so we were filled with renewed enthusiasm and hope that we might just manage to make this a good week all in all.
Unfortunately the celebrations didn’t last long as the Hong Kong dollar came back with a vengeance and pushed the pound back down to 12.501 on Thursday night. With one day to go it didn’t look good for the pound, and although it ended up finishing the day on 12.537 it wasn’t enough to transform this into a memorable week against the Hong Kong dollar. Our losses totalled 0.098 in all.
So we have achieved just one good result out of three so far. And now we move on to the New Zealand dollar and the Australian dollar – two currencies whose results tend to mirror each other quite often as far as other currencies are concerned.
We lost a whopping five and a half cents against the Kiwi dollar last time, leaving us on 2.2398 over the weekend. But at least here we got off to a good start and managed to improve the exchange rate to 2.2426 by the time Monday was at a close. Did this point to a positive week ahead or was it simply a good start to what could be another bad week?
Let’s find out. The signs on Tuesday were quite positive as we managed to add on almost another whole cent. This left us on 2.2525 at the end of the day, so we were starting to feel cautiously optimistic that we were in for a good week.
And indeed we did get better still through the next day, as we managed to add on a much bigger chunk. By Wednesday evening we were settled on an exchange rate of 2.2734 – adding on more than two cents all in all.
So we had two days to go still and we desperately needed another good result to report back on. Would we get it?
We did give ourselves a fright on Thursday as we dropped back to 2.2691 by the close of play, but luckily it turned out to be no more than a blip. By Friday night the exchange rate stood at 2.2803 – meaning we had added on just over four cents across the whole week. This was a great result – but would we do something similar in Australia?
This was the final currency to look at, with a closing rate of 1.7760 last time. And once again we had a good start, leaving us on 1.7844 on Monday night. Was this to be the start of another good week that would end in a good result for the pound?
Tuesday seemed to confirm that it could be a positive answer, as we went up further to 1.7910. And there was even more in store for the day after, when we managed to claim a higher exchange rate of 1.8189. The question now was whether we could hang on to that or whether we would lose the lead we had built up.
There was a marginal increase on Thursday to 1.8197, but we managed to leave a little something in the bag until the last minute, bringing us to 1.8214 at the end of the day.
So that gave us an increase of four and a half cents overall – which was an excellent result to close out the week with.
From a starting rate of 0.7929, the Kiwi dollar went up to 0.8019 before finishing the week on 0.7987.
It clearly wasn’t a good week for the Aussie dollar. The US dollar started on 1.0893 before raising its game to finish on an impressive 1.1268.
Despite some drama midweek, the Canadian dollar went from 0.9770 to just 0.9779 at the end of the week.
To finish with this week, this news story from the FT.com website illustrates how the US dollar has benefited from some incidences in the market. Read more here.
So there we have it for the pre-Christmas report. We shall be back next week to tell you what happened in those last few trading days before the big day itself. Until then, happy holidays!