Posted by Allison on 24 March 2009, 10:15
Well the excesses of the traditional Christmas period are over, although the excesses which led to the credit crunch are still being firmly felt in the currency markets as well as elsewhere.
After a long four day weekend the currency markets started trading again as per usual on Monday 29th December, albeit for another shortened week. This time trading carried on through to Wednesday, before taking a break on Thursday for New Year's Day. There was then time to pop in the first day's trading for the New Year before the weekend took hold once more.
So what could we expect for those last few days of 2008? Healthier currencies all round might be a resolution for the New Year, but it seemed too much to hope for during the final days of 2008. But it will nonetheless be interesting to see whether the excitement of a new year (and perhaps the relief of saying goodbye to one that was memorable for all the wrong reasons) will have had an effect on the currency markets as a whole.
Are you ready to find out the answers? Then let's get going.
As always we start off our round up of the markets with a look at what happened between the US dollar and the British pound. We know how badly the pound has been battered by the dollar in recent months, and the days of the $2 pound are certainly long gone – at least for now. There must surely have been a reduction in the number of people using a currency converter to work out whether they can afford a holiday in the US anytime soon.
On Christmas Eve the markets closed with the pound claiming 1.4752 US dollars. At that point everything shut down for Christmas, and when we returned on the following Monday – the 29th – trading resulted in a closing rate for that day of 1.4582. Was this the first step in another bad week that would close out the year?
Tuesday certainly seemed to point in that direction. By the end of that day the exchange rate had slipped down even further to 1.4471. But perhaps in recognition of the fact that Wednesday was New Year's Eve, the pound rallied for the final finishing post of the year and managed to creep back up to 1.4611.
Thursday saw no trading of course, but we still had Friday to come. Would we see a surge of enthusiasm from the British pound on the 2nd January, or would it struggle to start the year with any energy at all? So far we were looking at a loss of nearly one and a half cents since Christmas Eve, so while we hadn't made a huge loss when compared to events we have seen in the past, we still needed to see an improvement if at all possible.
So what did we end up with at the close of trading on 2nd January? Unfortunately the figure we ended up with wasn't the one we were hoping for – what we got was 1.4428. That meant we had lost a total of 0.0324 over the course of that week, bringing the British pound even lower than we thought it could be. How much lower will it go in the New Year? Will this be the rock bottom stage, or will it go much lower still?
It seems hard to believe that we could have ended 2008 looking at exchange rates like these, but here we are. It will be interesting to see how those first few weeks of 2009 pan out.
So from America we move on to Europe, and the battle of the pound versus the Euro. Previously we saw the British currency creeping closer and closer towards being worth the same as the Euro – but would that continue into 2009? Let's find out.
At the close of play on Christmas Eve, the pound was worth 1.0534 Euros. Would it slide still further down once everyone was back from their Christmas break, or would we see the pound staging something of a comeback?
If you were merely looking at the data from that first Monday back on the job, you would have had a shock. By the end of that day the exchange rate stood at 1.0219 – unnervingly close to being one on one with the Euro. Who would have thought things would get that close?
Tuesday saw a slight improvement though in our favour, as the figures shifted to 1.0264 by the end of the day. Only a small change but anything was worth seeing considering the situation we are currently in. Would New Year's Eve bring any better news as we saw the final result for 2008?
As it turned out it could. As we got ready to see out the old year – no doubt one that many of us would rather forget in many respects – the pound surged back against the Euro and took it by surprise to claim an exchange rate of 1.0498. The question now was whether it could build on that improvement to see a good start to the New Year after the one day break.
Unfortunately the answer was no, although the downturn was not a major one and it did little to dent the improvement made on the last day of 2008. At the end of the week the exchange rate stood at 1.0405, meaning we had lost some ground since the previous week, although we had lost even more than it would appear and thankfully had made most of it back up again. It will be interesting to see where the pound's fight against the Euro goes from here.
Next up we take our usual trip to Hong Kong, where the exchange rate at the close of business on Christmas Eve stood at 11.433. Could we improve on that and make this a week to remember for the right reasons for once?
It is obvious to see that the pound had a bad day on the first day back after the Christmas break, since it was down against the Hong Kong dollar as well as the US dollar and the Euro. Here it sank down to 11.302, leaving us wondering whether this was going to be another bad result, or whether we could expect some improvements after this bad start.
Well Tuesday certainly wasn't giving us anything else to cheer about, since the closing rate for that day was 11.215. Could this slide continue or would we start to see a resurgence to finish off 2008 with?
As it happened, the 31st did result in a nice finish as we managed to claim 11.323 Hong Kong dollars to the pound. That wasn't on a par with the amount we were claiming the week before, but at least we were heading back in the right direction. Could we carry on in this fashion to see in 2009's first day of trading in style?
Unfortunately this wasn't going to be any more than a pipe dream. Because when everyone came back to start trading again on the 2nd January, we finished up with an exchange rate of 11.183 at the close of play that Friday. That meant we had lost ground over the course of the week, losing 0.25 Hong Kong dollars in total. Let's hope this isn't the start of a bad year for the British pound.
Let us leave Hong Kong behind there for now and move across to New Zealand, where the final figure we had before the festive break was 2.5672 New Zealand dollars to the British pound. Now we usually expect some toing and froing here, but for once a nice calm week would be good, with perhaps a little upward movement for the pound. But was that too much to hope for? Let's find out.
When we checked the exchange rates for the first day of the week after Christmas, we actually had to triple check them on more than one occasion, to make sure they were correct. This is because the final figure for trading on that first Monday was 2.5097. That equates to a loss of nearly six cents over the course of a single day's trading. Could things get any worse than that? Well you never can tell with the extremes of trading that the New Zealand dollar and the British pound are sometimes faced with, so let's see what happened next.
There was actually very little change over the course of the next day, and the final figure for Tuesday ended up standing at 2.5095 – just 0.0002 different from the day before. New Year's Eve did see one final surge in the right direction though, as the pound closed out the year by claiming 2.5397 New Zealand dollars to the pound.
The only question now was whether we could improve on that when the markets re-opened on the 2nd January. But sadly the answer would prove to be a resounding 'no'. Not only did we lose ground but we lost it in spectacular fashion, as the exchange rate slumped to 2.4941. That means we lost over seven cents during the course of that week. Not the best way to kick off a New Year and it hardly provides us with something to celebrate.
So did we do any better in neighbouring Australia? The last figure we saw before the seasonal break there was 2.1637 Australian dollars to the pound – so what happened next?
Well the 29th saw a similarly catastrophic drop to the one that occurred in New Zealand, with the figure dropping to 2.1046 at the close of play on Monday. That slid further the very next day, giving an exchange rate of 2.0976. But once again New Year's Eve saw renewed strength from the pound, as it soared to the heady heights of 2.1285 before we closed for the year.
But as the good finish to 2008 was mirrored to the result gained in New Zealand, so was the lacklustre start to 2009. In fact it was more than lacklustre – the rate fell to 2.0690 on the 2nd January, leaving us nursing a loss of nearly nine and a half cents during that week as a whole.
This was certainly not the best way to begin a fresh year, so let's hope it is just a slow start on our part, and not the beginning of a prolonged spell in the doldrums.
December was an interesting month for the Euro. On the first of the month it was claiming 1.26 dollars to the Euro, but even though it peaked on the 18th by claiming an exchange rate of 1.46, it still finished in style on 1.39 for the month. The US dollar is certainly feeling the pressure here.
The poor performance of the British pound is due in part to the ongoing bad news being put out by the UK at present.
The gloomy picture of the foreseeable future certainly isn't helping sterling's performance against any currency, as we have seen in the results above.
The Japanese yen has struggled against the Euro during December. The Euro was claiming 118.42 when the month started, but by the time we said goodbye to 2008 that had improved to 126.64. Could we be seeing a real push forward for the European currency?
Some blogs are equally as good as websites when it comes to keeping an eye on what is going on with the Forex markets. One particularly good one is www.forexblog.org. This is regularly updated and is easily readable no matter how much or little you know, which is why we are including it here as a recommended source.
So that's it for 2008 as far as the currency markets are concerned. What will 2009 bring? There is no doubt that 2008 is a year that most of us will be glad to say goodbye to, but there is also no guarantee that 2009 will be much better.
All we can do is wait and see what will happen next… and to that end we will be here just as we always are, to let you know what happens when. See you next time… and Happy New Year.