Posted by Allison on 24 March 2009, 09:46
Here we are again with our weekly look at what is going on in the currency markets. As we saw last time the results we something of a mixed bag as far as the British pound was concerned; it did reasonably well against some currencies but struggling when it went up against some of the others, such as the Euro for example.
If you have been tapping away on your currency converter to see which countries offer the best value for money when it comes to this year's summer holiday, the jury was still out on the whole last time, so it will be interesting to see whether we have any better news this week.
The pound has always had something of a struggle against the US dollar, and that has certainly been true of late – but what did last week bring us?
The pound had ended the previous week by claiming 1.9814 US dollars for every pound, but anyone heading to the US on holiday in the near future would be delighted if the pound could improve still more on that and reach the heady heights of the $2 pound again.
Monday 14th July finished trading with the pound claiming 1.9870 US dollars – a slight climb on where it had finished the previous week. But it looked like it was going to be a good week because the following day saw the pound break through that two dollar barrier, with the exchange rate at 2.0099 at close of play on Tuesday.
The real question now was whether or not the British pound could keep up the pressure and stay in the two dollar range for the rest of the week. Wednesday was promising even though the pound did slip back slightly to an exchange rate of 2.0011 US dollars. But that slide was not only halted, it was reversed the very next day as it pushed back up to 2.0026 US dollars.
So how would the week end? Could the pound stay in that zone or would the US dollar find something to fight back with, pushing the exchange rate back down below that fabled two dollar barrier?
In answer, it was the US dollar that managed to regain a little ground. At the close of play for the week, the British pound was worth 1.9940 US dollars, representing a fall from the previous few days but still 0.0126 higher than it was the previous week. So is this a trend that we can expect to see more of, or will the mighty dollar find something to fight back with? Only time will tell, and we will of course be back here next week to find out what the next chapter holds in store.
So it was a good week against the dollar, but elsewhere in the world the pound had some ground to make up against the Euro. It was clearly struggling so it would be good to report an upward trend now.
The previous week saw a closing exchange rate of 1.2513 Euros to the pound, so a good start to the week would certainly do something to raise the spirits of those watching closely to see how the pound would perform.
And Monday did bring good news, even if it wasn't much of a rise, as the pound crept up to claim 1.2539 Euros. And there was better to come as well, as the pound sought to capitalise on this good start to the week. It was almost as if it wanted to quickly erase the downward trend of the week before, and it certainly seemed to work as the pound came back strongly on Tuesday with a closing exchange rate of 1.2569 Euros.
Now in all fairness we have seen the pound starting to perform better against the Euro in the past, only for the Euro to come back and re-establish itself at a later stage. But it didn't look as though that was going to happen on this occasion. Wednesday finished with the Euro looking even more battered as the pound exerted even more pressure, finishing on 1.2595 and looking ever more likely to break through the 1.26 barrier – which would surely be a great success as far as the British were concerned.
So what would Thursday bring? As it turned out the pound got what it wanted – a figure which was more than 1.26 and finished the day by claiming 1.2635 Euros to the pound. Even though it lost a little ground on Friday it still managed to stay in that heady 1.26 territory and finished the week on an impressive 1.2607.
So this was certainly a week to celebrate as far as the pound was concerned, and a week when the Euro needed to regroup and wonder what the future would hold. While the Eurozone looked somewhat immune from the rising interest rates and inflation that were troubling many other major countries in the world, it seems that it is now being affected by those very same issues, and this is often reflected in the exchange rates we are seeing from week to week when it goes up against other major currencies.
It was a similar picture over in Hong Kong the week before, as the pound came out on top in its battle against their dollar, so it was going to be interesting to see if it could hold on to that power for another week.
And did it? Well, 15.462 was the closing figure for the previous week and by the end of trade on Monday that figure stood at 15.505, representing an early burst of energy from the British pound.
There was more to come as well, because by close of play on Tuesday the pound was claiming 15.674 Hong Kong dollars – a marked leap from the previous day and showing that even though the pound struggles from time to time (especially given the current climate around the world) it is also capable of exerting pressure and coming back out on top as well.
Tuesday's closing figure proved to be the peak for the week however, although Wednesday's drop in the exchange rate was only minor, as it slipped back to 15.606. The pound re-exerted itself on Thursday and finished with an exchange rate of 15.615 against the Hong Kong dollar, and even though there was a further drop to 15.550 on Friday, this was still a huge leap forwards from the closing rate of the previous week. Only time will tell whether this upward trend will continue, or whether the Hong Kong dollar will find some renewed energy and start to fight back.
Elsewhere the pound had an interesting week against the New Zealand dollar, where it started on an exchange rate of 2.6119, before slipping slightly to claim a rate of 2.6014 the following day. The previous week had seen the dollar come out on top so it would have been reassuring to see a better performance from the pound last week.
Wednesday finished with the pound falling back further however, and limping home with an exchange rate of only 2.5934. Could it pull things back somewhat and improve the situation before the week was out?
As it happens, it could. The pound seemed to exhibit some renewed vigour on Thursday, claiming a rather more impressive 2.6106 by the close of play. And Friday got even better still, as the week ended with the pound on an exchange rate of 2.6122 with the New Zealand dollar. Finally it seemed we had some good news compared to the week before, and if we can continue that into another week it would certainly be warmly welcomed.
Over in Australia it also got quite interesting, because although there was clearly a dip in the fortunes of the pound during the course of the week, it managed to recover there as well. On Monday the pound finished on 2.0525 Australian dollars, which wasn't a bad start but things would get worse before they got better.
The following day that rate had slipped to 2.0463, although this dip was short lived. The exchange rate by the end of Wednesday was 2.0492, representing a slight improvement but not by very much. By the end of Thursday however we were back into healthier 2.05 territory, and the exchange rate swung slightly more in favour of the pound by the end of the week, as the pound finished by claiming 2.0535 Australian dollars.
So all in all it was a satisfactory week for the British pound; while it didn't make any hugely notable gains it did gain ground against several currencies and didn't slip badly against any of the main ones that could cause damage, even though it certainly had its struggles. The only question is, can we keep it up?
The state of inflation in the UK looks set to keep rising as the country struggles to come to terms with the current financial situation that many people are finding themselves in.
With the costs for basic items such as food still rising, there doesn't look to be an end in sight anytime soon, and this is something that will clearly continue to affect the currency markets in future weeks and months. If you are a Forex trader then you will certainly need to keep a very close eye on future developments.
Mark down the 15th July 2008 in your calendar – because it was the day that the US dollar fell to its lowest ever exchange rate against the Euro.
It managed to regain some ground the very next day but Americans wouldn't have been pleased to learn that their currency had fallen to such a low. They will certainly be hoping that the balance will swing back markedly in their favour very soon.
While talk of a worldwide recession is still on people's lips, it seems as though New Zealand may already be in the throes of one anyway.
It's clear that some economies and countries are struggling more than others at the moment, and although times are tough everywhere New Zealand could be one of the first to succumb.
This is clearly a time when it pays to keep up with what is going on in the world of currency, and this is particularly true if you are involved with foreign exchange trading.
This is why you need a good and reliable website to help you keep up to date with what's going on, and there is no better site than the Financial Times website, which has a specific section that concentrates on the currency markets and what is going on around the globe.
You can find this section at www.ft.com/markets/currencies and you will find a selection of the latest events in the currency markets are added to the site every single day. The Financial Times is known as being a reliable and efficient source of information on this subject, so if you need to keep up with things in between our weekly guide to the currency markets you should definitely pay this website a visit. The website also has reviews of the day and the week depending on what is going on, so it's worth keeping up with it as it is an entertaining read.
So after a reasonable week last week (nothing spectacular to write home about but nothing too disastrous either) we can now look ahead to the next chapter in the life of the British pound and how it is performing all around the world. It's clear that we shouldn't expect any major gains for some time and even if they do happen they aren't likely to last very long.
But we will be here again next week to see whether that prediction is true – or whether we have something altogether more dramatic to report.