Posted by Allison on 24 March 2009, 09:57
We saw last week that the last full week of September was something of a mixed bag as far as the currency markets were concerned. Some people with holidays planned would have been quite relieved at having a strengthened pound to put into the currency converter when figuring out how far their holiday cash would stretch, but in other places it wasn't doing as well.
So how have things developed over the past seven days? While it is too much to hope for that the pound might have strengthened markedly, given the state of the economy at the moment, we may be able to draw encouragement from a few good results here and there.
So let's see whether we have done well over the last few days… or whether this is a time of consolation more than anything else.
When we took a look at how the pound was doing against the American dollar last week, we ended up with an exchange rate of 1.8420. As usual that is where we are going to pick up on the action this week, so let's see what happened from the 29th onwards.
As it happened, the week started on a note that made you wonder what on earth there was still to come. The first day of the week ended with the exchange rate plummeting and landing at a pitiful 1.8028. That is a full 0.0392 – nearly four whole cents – lower than where we finished at the previous Friday.
Understandably this made us uneasy and the perkiness of the dollar was unquestionably a worrying time for us. Things steadied a little on the following day, as the pound managed to push back by an inconceivably small amount to 1.8098. But it was better than nothing.
So what would Wednesday bring as we reached the midweek point? Unfortunately the answer came in just two words – bad news. By the end of the day the exchange rate had fallen still further to 1.7781, making the beginning of October a forgettable event in the process. Suddenly the exchange rates we were seeing last week were looking decidedly like a distant memory.
By this stage it was very much a case of wondering if it could get any worse. Surely the exchange rate couldn't go any lower – not in the space of a single week?
But the answer, once again, was that we shouldn't assume anything, not in the current climate and not when it comes to the exchange between the pound and the US dollar. Thursday's performance made this quite clear, because by the end of the day the pound had suffered a further fall and was down to 1.7661. We'll save the incredible loss that the pound had gone through since the previous Friday for a moment longer, but suffice it to say that it was a bad one.
So what did Friday have in store? Well by the close of the week the British pound was well and truly licking its wounds, as it limped home on an exchange rate of 1.7655. That is down a shocking 0.0765 over the course of the week – a drop of over seven and a half cents.
The question now is how much worse can it get? Last week we dared to feel a little encouraged by the upward movement but it really did turn out to be the calm before the storm, and we are wondering now whether it could get any worse in the coming weeks. Perhaps the people who were speculating on a $1.50 exchange rate were not so far off the mark after all?
All we can do is hope for better results next week.
So let's leave that sorry state behind and go on to the Euro. 1.2582 was the closing exchange rate that the pound claimed against the Euro last week, but the situation with the dollar has shown that anything can happen within the space of a week, so were we going to see better results here… or were they going to go south like they did in America?
Well Monday did take a slight nosedive to 1.2564, but this was bearable as it was only a minor drop in the rate. Tuesday's news was better though, and by the end of the day the pound had claimed 1.2653 against the European currency. Was this a sign that it was going to be a better week as far as the Euro was concerned?
Once again there was a slight drop the following day that didn't really worry anyone unduly, as the rate slipped back to 1.2627. Small drops like that we can handle – it's the huge ones that are extremely worrying.
On Thursday there was more good news though as the pound fought back to 1.2703. Was this going to be a week to remember? A good result here wasn't exactly going to take the sting out of what had happened in America, but it would certainly help a little to have one reasonable result to cling onto in these times of uncertainty.
And on Friday we got our wish. The pound finished strongly on an exchange rate of 1.2762 – a further increase from the previous day and 0.018 up on the same time the week before. So that's a rise of nearly two cents over the course of a week, indicating that in the battle between the Euro and the British pound at least, the pound seems to be nosing in front.
Next we carry on over to Hong Kong, where the pound enjoyed a good performance last week. Would we see a similar picture as September turned into October?
From a starting exchange rate of 14.319, the most notable event on Monday – unluckily for us – was that the pound slipped out of 14.0 territory and ended up just outside it at 13.998 by the end of the day. It did manage to push back up over the 14.0 mark again the following day though, when it recorded an exchange rate of 14.060.
So we'd seen something of a shaky beginning as the pound went head to head with the Hong Kong dollar, making us wonder which way this battle was going to go for the second half of the week.
And on Wednesday it looked as if we had our answer. The dollar pushed back and the pound was clearly on the back foot as the currency fought to finish on 13.812 for the end of the day. This looked as if it could be a slippery slope that the pound didn't want or need to be on – and it turned out to be just that.
Thursday saw the pound fall even further back to 13.721 and short of a miracle on the last day of the week it looked as if we were going to record a loss against this particular dollar just as we had against the US dollar.
And we were right. By the end of trading on Friday the exchange rate against the Hong Kong dollar stood at 13.719 – that's a drop of 0.60 since the same time the previous week. Clearly this wasn't turning into one of the British pound's better weeks.
From there let's move across to New Zealand, where the pound did well last week despite having something of an up and down week. 2.6868 was the figure that we started with on the morning of the 29th, so what would happen next?
Perhaps not surprisingly given the lacklustre performance of the pound elsewhere so far, first blood went to the New Zealand dollar on Monday, as the rate went to 2.6665 at the end of the day. Was this the sign of worse to come, or could the pound pull back some ground?
Tuesday elicited a better performance from the pound as it went up to 2.6753 so we finally had something to be relieved about there, although it was still too early to really celebrate.
And indeed it would have been a premature celebration since the pound lost a lot of ground the very next day, falling to 2.6315 before the trading had finished. That was quite a drop and sometimes a fall of that nature can be brought back into line pretty much the following day, but this time it didn't happen. The rate stayed virtually unchanged at 2.6364.
So what would the last day of the week bring? More bad news, or could we recover some ground? In fact, could we hope to recover that much ground in a day at all?
In fact we could – and we did, because by the close of play on Friday we had pulled back the exchange rate in our favour at 2.6645. That was still down on last week by 0.0223, but given what happened halfway through the week it could easily have been a lot worse.
So how did things go in Australia? Would they follow the same up and down rollercoaster pattern as they had in New Zealand?
The previous week we ended on an exchange rate with the Australian dollar of 2.2225, and by the close of play on Monday the pound had fallen back slightly to 2.2132. Not too much to worry about yet, but it was crucial to try and recover some ground – and indeed make some ground the next day if we were going to perform well over the week as a whole.
Someone must have been listening to those hopes because the pound finished the next day having nosed ahead to 2.2445. Was this the start of better things to come? Could we really hope for a great result here to take as the best part of what could be a dismal week?
Those hopes were dashed on the very next day, which finished with the pound looking weaker again at 2.2298. By the end of Thursday things were once again looking up however as we finished on 2.2454. Could we make a final push to close out the week on a successful rate for once?
Gloriously the answer was yes – and we not only managed to nudge those figures more firmly in our favour, we gave them a hearty push. The final exchange rate against the Australian dollar for the week in question was an impressive 2.2717, a marked victory for the pound and 0.0492 up on the previous week. That's nearly five cents so it was well worth celebrating.
Something of a topsy turvy week then for the British pound, with some notable gains and some crushing losses as well, which reflects much of what is going on in the world at the moment.
Not surprisingly the housing market in the UK is stagnant and losing money fast as far as selling prices is concerned.
The market is just another indication of an impending recession in the UK, which is partly to blame for the weakening pound and the lack of confidence in the economy at the moment.
If the British pound is struggling at the moment in some quarters, spare a thought for the South Korean won, which is sinking even lower and not looking likely to buck up its performance any time soon.
It is thought that the won may in the end be saved or ruined by what happens in other economies, such as that of the US, so it remains to be seen what happens next.
Congress may have voted to save the finance markets in the US, but the Euro took a nosedive against the dollar as a result.
After starting the week with an exchange rate of 1.4349 against the dollar, the Euro could only manage 1.3834 by the end of the same week.
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So we have been through another tumultuous week in the world of currency, and we can expect next week to bring more of the same as we continue to move through this area of uncertainty where the word 'recession' is lurking around every corner.
So brace yourself, and we will be back here with more to report next week.