The pound strengthened on Tuesday as an upbeat speech from Bank of England rate setter Kate Barker offset a weak UK manufacturing survey. UK factory orders fell in October, a survey from the Confederation of British Industry (CBI) suggests.
However, the broader picture is that orders grew strongly over the last three months. The CBI said there was little evidence that weakness in financial markets was having an effect on manufacturers. This data will fuel arguments about whether or not the Bank of England should cut interest rates.
Barker in her speech stressed that although the risks to the UK economy are tilted to the downside, there is little evidence that the recent credit crunch will have a major impact on household consumption.
"Even if there were a major weakening in the housing market, the response of household consumption may be muted, since it is not expected to be linked either to rising unemployment or deterioration in households' income expectations," she said.
Over the course of this year, Kate Barker has been perhaps the key swing voter on the Monetary Policy Committee,'' said Malcolm Barr, chief U.K. economist at JPMorgan Chase & Co., who used to work at the Bank of England. Barker's remarks suggest she may favor gathering more evidence about the economy before lowering interest rates from the current six-year high.
Sterling dipped following the report, but has since clawed back earlier gains since the speech as it boosted investor's enthusiasm for currencies with relatively high yields such as the pound. With Interest Rates in the UK potentially cut in the future this may lead to Sterling weakness as investors move their funds to higher yielding currencies. Which may lead to your currency purchase being more expensive across the board e.g. Euros, ZAR etc.
The US Dollar $
The U.S. economy still faces pressure from a drawn-out housing-market slowdown but will "probably not" slip into recession as a result, former Federal Reserve Chairman Alan Greenspan said on Tuesday. In a broad-ranging question-and-answer session Greenspan said chances of a recession are "less than 50-50."
This was compounded by a speech made by Federal Reserve Bank of Chicago President Charles L. Evans on the same day. Evans, who votes on interest rates this year, stressed the importance of ``risk management'' in determining Fed policy and noted that ``uncertainty'' about the impact of financial volatility has increased in the past week. Some anticipate the Fed will lower rates for a second time on Oct. 31, and Evans didn't rebuff those expectations.
With an interest rate cut in the US very much priced into the market, if such an event was not to occur we may well see the US dollar gain strength and lead to the exchange rates for Sterling to US Dollar worsen. With exchange rates for Sterling to USD trading at such attractive trading levels, if you have a US dollar requirement it may well be wise to secure your currency sooner rather than later.
Canada's Dollar Rises
Canada's dollar rose to a 33-year high on Tuesday, the currency extended gains after the government report showed Canadian retail sales rose 0.7 percent in August, faster than economists expected, led by new car dealers.
This was supported by Investors buying currencies of commodity exporters, such as Canada. A commodity is something for which there is demand and generally, these are basic resources. Canada is considered to be a major commodity exporter due to the fact it is the second largest oil exporter.
With oil prices remaining close to record highs and recent strong Canadian retail sales, it appears rates for purchasing Canadian Dollar’s may not improve in the near future. Please feel free to contact your dedicated account manager today to discuss how this data may affect your currency purchase.
In other news
Almost exactly 100 years ago the US experienced the Panic of 1907 also known as 1907 Bankers' Panic which was a financial crisis in the United States. Its primary cause was a retraction of loans by some banks that began in New York and soon spread across the nation, leading to the closings of banks and businesses. Made worse by the stock market falling nearly 50% from its peak in 1906 plus the economy being in recession.
A hundred years later striking resemblances can be made with our current credit squeeze created by the infamous sub-prime mortgage market of the US.
In 1907 there were no central banks, no lender of last resort. There was, however, 70-year-old JP Morgan, who helped avert complete ruin of the national economy. Morgan organized a team who redirected money between banks and within a few weeks the panic passed, with only minimal effects on the country.
A century on, and with the recent credit crisis the Federal Reserve, European Central Bank and, reluctantly, the Bank of England have been offering billions to the financial markets to allow money to flow where it was needed.
Although this time around we are not reliant on JP Morgan, but with Sterling & the financial markets currently experiencing a turbulent time & potentially the full impact of the recent credit crisis not yet realized. Ensure to keep in touch with your designated account manager at FCD to achieve the very most for your money.
For more information on JP Morgan & The Panic of 1907.
http://news.bbc.co.uk/1/hi/business/7050529.stm
http://en.wikipedia.org/wiki/Panic_of_1907
If you are buying a property abroad, and want the best exchange rates, just click on the links below to go straight to our main site, or Email Me
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