‘Euro sinks, dollar surges with sterling somewhere in the middle’

8th September 2014

Alex Plester, a senior foreign exchange broker with VFX Financial, takes a look at the big developments in the currency markets last week.

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Last week’s events have seen currency markets keeping to form with a weakening euro, rallying dollar and sterling being somewhere mixed in the middle. We saw the euro fall to a 13-month low as the ECB unexpectedly cut interest rates and announced a bond-buying program. The single currency weakened against all of its 31 peers, falling below $1.30 for the first time since July 2013. The euro weakened 1.5% to $1.2949, its lowest level versus the dollar since July 2013. Against sterling we saw the single unit fall close to one and a half cents to the cheer of sterling holders. The rate cuts clearly took the market by surprise judging by the immediate euro reaction. It’s clear the ECB wants a weaker euro and they are prepared to do what is necessary to get it.

Sterling holders who have exposure to the euro will welcome this as recent strength seen in the UK currency has taken a hit of late. The up and coming Scottish referendum on independence is beginning to have a detrimental effect on the value of the pound, as uncertainty creeps into currency markets about which currency will be used and how debt will be shared. As we all know, there’s nothing like uncertainty to take a big bite out of risk appetite in financial markets. Now maybe as good a time as any to settle those euro invoices, as the closer we get to referendum day (18th September) the more the pound may start to wobble. You can obtain a free quote at www.vfxplc.com

Cable’s (GBP/USD) position on the other hand went in the opposite direction continuing GBP/USD’s slide as the pound hit a seven month low against a strong dollar. The dollar extended gains, with the yen sliding to its weakest level since 2008 and emerging-market currencies retreating on speculation the U.S. is moving toward higher borrowing costs while Japan and Europe strive to ignite growth. The euro’s plunge against the dollar triggered the yen’s drop to new lows against the greenback. The policy divergence between Japan and the U.S. was the driver. From sterling holder’s point of view, for the short term anyway, its hard to see cable (GBP/USD) making to much of a recovery.

The Bloomberg dollar gauge, which tracks the greenback against 10 major peers, climbed 0.7% on Friday, its steepest one-day gain since March.

Alex Plester is a senior foreign exchange broker with City firm VFX Financial PLC. Working in the deliverable currency markets for the last 12 years, he has been helping clients save money on converting currency by showing them an alternative route which realises substantial savings on the exchange rate as well as fees. He see’s building relationships with clients as key when dealing with converting currencies and making overseas payments.

You can find out more including free advice on how to move funds internationally and FREE CURRENCY QUOTES at: www.vfxplc.com.

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This article was sponsored by vfx.plc.

 

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