Posted by Allison on 16 June 2009, 10:31
Welcome back to our weekly look at how the British pound is faring in the currency markets. No matter what is going on overall, there is always a lot to get to grips with – even if the results don’t always go in our favour.
Last week we saw quite clearly what can happen if events at large get the better of us. There were plenty of gripes and arguments going on in the government in this country, and that meant problems for the pound elsewhere. The European elections certainly didn’t do the pound much good either, and that meant a poor week all round for the British pound.
The second half of the week in particular showed quite clearly that the election results in the UK (votes were taken on Thursday) had a significant effect on the value of the pound the following day.
But where does that leave us this week? We know now that the results for Labour were far from being good, but how will that impact on the pound as a whole? Will it bounce back from the bad end to the previous week? Or will it continue to struggle as other currencies take advantage of it?
It can be difficult to predict what will happen next. But if one thing is for certain it is that the pound had been on a reasonably good run before the election week came along. The question now is whether it can get back on a good footing, or whether that was the start of a slippery slope back into obscurity again.
There is no better way to find out what the answer might be, than to take a look at what happened last week.
We had a real seesaw week against the US dollar last time around, with some really good and promising figures midweek. But after that peak we couldn’t hang on to the progress we had made, as those pesky elections saw off any improvements we could have made.
The final exchange rate we were left with was 1.6124, after having pared our losses back to just 0.0026. All things considered it could have been a lot worse, so perhaps we should be grateful for that at least.
So what did last week have in store for us? Let’s take a look at the figures and find out.
Unfortunately we didn’t get the start to the week that we really wanted. It seemed as if the negative connotations from the week before were still hanging around. By the time we got to the close of play on that all important first day of the week, the British pound was down to 1.5921 against the US dollar. That meant we had lost over two cents in a single day’s trading. That wasn’t too good for a start to the week, and it gave us a lot of ground to make up before we could even think of going ahead of the dollar.
Things did improve by leaps and bounds the next day though. By the end of trading on Tuesday we had managed to pull things back to 1.6171. That meant we were now ahead of where we had been at the end of the previous week. But where did we stand for the rest of the week? Would we be able to capitalise on that jump forward and move ahead even more in the days to come?
If Wednesday’s result was anything to go by, the answer would be yes. As hard as it may be to believe, by the time the markets closed at this midweek point, the exchange rate had climbed still more – up to 1.6430. That was a gain of over two and a half cents since the day before, which gave us a lot to celebrate. The question now was whether we could hang on to that gain for the remaining two days in the week.
Thursday brought a slight drop in the exchange rate, but if you were wondering whether the figures on your currency converter would be vastly different you had nothing to worry about. The closing rate for the day was 1.6420, just 0.001 down on the previous day.
So we had just one day to go. And we did see another drop in the rate against the US dollar – but it was only a relatively small one. The final exchange rate for the week was 1.6401. That meant we had managed to gain over the week as a whole, and add a total of 0.0277 onto our exchange rate. That came as quite a relief, with all things considered.
Now the question was whether or not we could produce a similar result against the Euro. Last time we were left with an exchange rate of 1.1373, having lost just short of a cent overall. Let’s see whether there was better news in store here too last week.
Monday started off bright and early and we did get off to a reasonable start here as well. By the time the day’s events came to a close and we looked at the final exchange rate for the day, we were pleased to see we had improved. The exchange rate was 1.1482 – adding just over a cent from the previous trading day.
The following day brought a similar result, much to our surprise and pleasure. Once again just over a cent was added on to the exchange rate, leaving the British pound grabbing a total of 1.1584 Euros per pound. Was this pattern going to be repeated throughout the remaining three days of the week, or was there going to be a different story to play out?
Wednesday definitely kept going in the right direction, even though the pace of acceleration slowed a bit. The closing rate for the midweek point was 1.1650, and we were pulling away from the starting point slowly but surely.
It was a pleasant surprise then to see that Thursday kept on going in the right direction. We were up to 1.1755 by the end of that day, and with just one more day to go even a similar rate on Friday would be enough for us to bag a nice success for the week.
As it turned out we dropped back slightly, but it really made very little difference that we finished up on 1.1712 by the close of the week. It was enough to ensure an increase of 0.0339 over the week as a whole, and that was really something to be proud of.
So, two good results so far and now we press on to take a look at how the pound did against the Hong Kong dollar. We lost just a small amount of ground last time which left us on 12.498. But after these two good results so far, what could we expect here?
Here was where the pattern changed though, as we didn’t get a good start to the week. By the time everyone headed home on Monday, the rate had slipped back to 12.342. Not a huge loss, but something to think about as we waited for the markets to open again the next day.
Luckily there was good news in store by the end of Tuesday, as the rate had then gone up to 12.534. The question now was whether we would slip back again, or whether we could advance – and luckily for us the answer was the latter. Wednesday’s final rate was pegged at 12.735, leaving just two days to try and improve on that to make three good results in a row.
We did slide back slightly the following day though, although it wasn’t by an awful lot. The closing rate for Thursday was 12.727, just 0.008 down on the previous day. Now would the final day of the week give us another lower rate, or could we pull things back in our favour?
Well as it happened the answer did go to the Hong Kong dollar, but it didn’t make much of a difference overall. Friday’s rate finished as 12.712, which meant that across the week as a whole we had added an impressive 0.214 onto the exchange rate since the previous week. Another good result to enjoy – and with two to go, things were definitely looking up for the British pound.
Next it’s onto the New Zealand dollar, where we had a dramatic time last time around. We’d finished with very little difference across the week as a whole though, which left us on 2.5321.
But this was to be a very different week, as was indicated by the first day of trading. Monday finished up with an exchange rate of 2.5648, which represented a very good start to the week indeed. But could we keep it up?
We had another huge leap up on Tuesday and ended up on 2.5932. But if there is one thing we know with the New Zealand dollar it is that it is capable of producing huge differences in the exchange rate like this, so anything could happen yet.
If we were prepared for another big change the next day, we didn’t get it. As it turned out we were left on 2.5931 by the close of play, so there was actually very little difference.
Thursday was different though, because it brought a very big drop unfortunately. By the close of play we were claiming just 2.5667 New Zealand dollars and wondering whether all our gains would be wiped out by the end of the week.
Luckily for us Friday’s drop was a very small one. By the end of the day we were on 2.5641 to close, which meant we had added just over three cents over the whole week. That at least made those losses during the week more palatable.
And finally we come to Australia, our final stop on the world tour of currencies. We lost two cents the previous week and finished up on 2.0025, so we were looking to improve on that this time around.
Monday got us off to a good start by bagging a closing rate of 2.0197. That was a great start, but what did the rest of the week have in store?
The following day got better still, as we landed on 2.0355. Unfortunately we couldn’t hang on to that figure for very long, because by the time we got to closing time on Wednesday, it had dropped back to 2.0257. Did that mean it was going to be downhill from here on in?
We did have another decrease the following day, but it wasn’t too bad in size. By the end of trading on Thursday we’d hit 2.0229. Could we hang on and at least keep this kind of figure to close out the week?
As it happened we did drop slightly on Friday, but only to 2.0209. That meant we had managed to add on nearly two cents since the week before. So even though we’d had a downhill run from partway through the week, we’d added enough on before that to give ourselves something to celebrate at the end of the week.
So it was good results all round in the end – which makes a real contrast to the week before.
If all these results weren’t enough, there was good news elsewhere last week too. The pound was bagging 156.768 Japanese yen on Monday, but just four days later it finished the week on 161.103.
The Swiss franc had a good week against the Hong Kong dollar as well. From a closing position of 7.0876 on Monday it picked up and shot ahead to finish on 7.1887 on Friday night.
The Swiss franc couldn’t repeat its performance against the Hong Kong dollar when it came to the British pound though.
From 0.5742 on Monday it actually dropped back as the pound took charge, and finished on 0.5654 at the end of the week.
There has been talk lately of whether the US dollar is strong enough to hang on to its position as the world’s foremost reserve currency. This news story from the BBC website - illustrates that most think it will. It makes for an enlightening read.
So there we are at the end of a week we should certainly celebrate. Will next week be just as good, or will there be bad news set to come? We’ll be back to find out.