Posted by Allison on 8 February 2010, 13:49
So here we are into a new month already, with plenty to report on for the previous week’s action in the currency markets. But first of all let us remind ourselves what happened last time, so we can see how things will start this week.
We had a reasonable result last time with three out of the five main currency pairings we look at coming out in favour of the British pound. The US dollar wasn’t one of our successes though, as the pound dropped its exchange rate by 0.0014. At least it was a small loss though, so the figures on the currency converter weren’t too frightening at the week’s end.
We did better elsewhere against the Euro however, and indeed the British pound finally seems to be doing well on a continued basis against the European single currency. Last time it managed to increase its status by 0.0129 Euro cents, so it was a week worth celebrating in Europe at least.
The Hong Kong dollar turned out to be the other currency that we couldn’t make headway against. Just as with the US dollar the British pound came off worst here, with a total loss for the week of 0.018.
But there was better news waiting for us further round the world in New Zealand and Australia. Last week was one of those times where the two currencies were mirroring each other. As we did well against one, we managed to replicate that result with the other as well. We added on over a cent against the New Zealand dollar and it was nearer two cents against the Aussie dollar.
As you can see we had plenty to be proud of back then. But a week can be a long time in the currency markets, and there is no telling what those results could lead to next. Shall we find out whether the pound could match those results for another week?
The closing rate for the British pound against the US dollar last time was 1.6116, after having lost out on just 0.0014. While that was a small loss it did make us wonder what the new week would have in store, so let’s see what actually did happen.
The idea of a new month might bring forth romantic ideas of a new broom sweeping out bad results and ushering in new ones. But if we were thinking along those lines the romantic idea didn’t last long. By the time the first day of the month was over, the pound was standing on an exchange rate against the US dollar of 1.5903. This equated to a loss of over two cents in a single day – and it didn’t bode well for the rest of the week.
There was slightly better news the following day as the pound managed to climb back up slightly, but it was only by a marginal amount to 1.5950. Another marginal increase occurred on Wednesday which left the pound on 1.5959, but it wasn’t enough to make us feel confident that this week was going to go in our favour.
The US dollar certainly had the best position so far, and it made us wonder whether there were other losses in the offing. It was certainly the case that we had lost enough in a single day to put the pound on the back foot, and even those miniscule increases since then had shown the dollar was in charge.
There was a bigger shock in store on Thursday of that week as the pound fought hard during the day only to end it on 1.5859. So that meant another cent lost and just one day remained in which we could try and reverse the negative events the week had started with.
It seemed too late to hope for a good result this time, and indeed we were right. But that didn’t prepare us for the fact that there was another shock in store as Friday came to a close. If we thought the week had started on a bad note it seemed as if it would end in the same way.
By Friday night the story was told and the happy ending was one that went to the US dollar. The final exchange rate saw the pound grabbing just 1.5678 against the US dollar, in a tussle that put the dollar firmly in charge. This meant the pound had lost out on a total of nearly four and a half cents in just one week. This did not bode well for the coming days either, but we will have to wait to see whether the pound started a quick recovery or whether there was more in store.
One of the good results we had seen the previous week for the pound was against the Euro. We had managed to add on well over a Euro cent against the single currency back then, leaving us on a starting rate of 1.1540 this time around. Could we do better than we had against the dollar, or was there more bad news in store?
Well the first day of the week made things look just as worrying as they had been with the US dollar. By the end of the day the exchange rate sat on 1.1430. So already we had lost out on a Euro cent, and we still had four days to go until the end of the week. What would happen next?
There was a slight increase the following day as the pound fought back and rallied on 1.1444, but it wasn’t enough to make us feel confident of a great result overall for the week. And that seemed to be borne out by the fall we experienced again the next day, which saw the pound finish up on 1.1412.
So where would we go now? We had just two days to go until the end of the week, and with the momentum firmly in favour of the Euro it looked like another bad result for the British pound.
There was another boost on Thursday though as the pound did its best to rally and resulted in an exchange rate of 1.1453. But it didn’t seem enough to point to a good week all in all, and as the final day of the week approached we were wondering just what damage could potentially be caused in just one day.
As it turned out things could have been worse, as the pound finished up just slightly lower on 1.1451 as the week came to an end. This meant we had lost out on just under one Euro cent over the week as a whole. So it could have been a lot worse than it was, although we still didn’t get the result we wanted.
So how would we fare against the Hong Kong dollar, where we lost a total of 0.018 last week and finished up on 12.517?
Once again that first day of the week turned out to put us at an immediate disadvantage. We fought hard during the day but it didn’t stop the pound from closing on a lower rate of 12.352. Tuesday brought the fight back that we had seen against other currencies this week, with an increase exchange rate of 12.390 all in all. The question now was whether that slight increase could result in a similar pattern to the one we have seen already, or whether this would be different.
Wednesday was actually only marginally different to the day before as far as the currency rates were concerned. By the end of the day the pound had edged things up slightly to 12.392.
But if that made us feel positive it wouldn’t last long. Thursday saw another dip in the pound’s fortunes as the Hong Kong dollar got the better of it and forced it back down to 12.321. How would the week end with just one trading day left to go?
The answer was perhaps predictable as the pound dropped even more ground and finished up on 12.183. This gave us an overall loss of 0.334 over the week as a whole, which wasn’t exactly what we had wanted at the start of the week.
Let’s move on swiftly to see if there was better news waiting for us in New Zealand. Here we had added on over a cent the week before which left us on 2.2815 as the week came to a close. Could we do better than that now?
A positive start was what we needed here. But once again we got a similar start to the one we had seen against other currencies. And that meant that by the end of Monday we were on 2.2602. Was there anything we could do to stop the rot or was this going to continue against every currency this time around?
Things dropped even lower the following day as the pound finished up on 2.2553. And when a figure of 2.2437 was returned on the Wednesday it made us wonder whether an even lower figure was waiting for us by the end of the week. There certainly didn’t seem to be anything the pound could do to turn things around and make this into a successful week.
This was probably why Thursday came as such a shock. By the end of the day the pound had well and truly taken charge of matters and pushed the exchange rate up to an impressive 2.2768. But what would happen with the one remaining day left to go? Could we keep going and get an even better rate? Or would the week belong to the Kiwi dollar?
The final rate turned out to be marginally lower on 2.2744, so at least the pound managed to hang on to the big increase it had got on Thursday. It had still lost nearly a whole cent since the week before though, so things could have been better.
Finally let’s see what happened in Australia. We had finished on 1.8047 the week before after adding on nearly two cents, so another result like that this time would be very welcome.
But once again there was a drop in store on Monday as the pound finished on 1.8000. This didn’t bode well for the week as a whole, but Tuesday looked more promising as we managed to add on more and claim a rate of 1.8100 by the end of the day.
We couldn’t keep it up though and Wednesday saw a more pronounced drop to 1.7985 before the day was out. Luckily for us we managed to turn on the pressure again the following day and grab a rate of 1.8011 at closing time. And Friday turned out to be another surprise as the British pound claimed a final rate of 1.8118 against the Aussie dollar. This gave us a total increase for the week of 0.0071, so here at least we had a result worth celebrating.
From a rate of 1.0686 on Monday night, the US dollar went down to 1.0596 the next day before fighting back to finish the week on 1.0735.
It wasn’t such good news for the Euro though, which went from 1.4868 on Monday night to a lowly 1.4698 to finish the week with.
The dip wasn’t as pronounced as the Euro had experienced but it was certainly going in the same direction. It went from 1.0097 on Monday night to 1.0010 on Friday.
So there we have it for another week, and it wasn’t the best week for the British pound by any stretch. Will we manage to pull things back in our favour next time?
Other currencies have had a much worse week though, as is indicated by this story on the BBC website. It will be interesting to see how it plays out over the longer term.
So with that in mind we will see you next week.