Foreign Currency Exchange

An interesting week prevailed last week as the Dollar continued to gain ground against the Pound predominantly due to flat data in the UK and the Eurozone.

With hurricane season in full swing, oil prices started to rise as hurricane Gustav hit. However, the hurricane failed to realise the damage to production and infrastructure to oil that had been feared. Subsequently the Dollar didn’t lose any ground against the pound.

US data releases showed promise last week, with Factory orders, productivity, average earnings and inflation figures all came out better than expectation. However, there was disappointment with non farm payroll figures which are a key measure of employment in the US. The figures showed that unemployment hit its worst level in nearly 5 years at 6.1%.

Despite this, last week the Dollar cross held up well as the market was more focused more towards the Eurozone and UK as both kept their rates on hold and the rhetoric was relatively downbeat especially with Sterling as there was speculation of a surprise rate cut.

Over the weekend, the markets confirmed the State take over of the US giant mortgage companies ‘Fannie Mae’ and ‘Freddie Mac’. Despite investors losing everything in the takeover, generally the markets took this as a positive step to kick start the economy and rescue the ailing mortgage and housing market. As a result the Dollar maintained its strength against the Pound and is broadly expected to continue its course.

For those Dollar purchasers who missed the Sterling highs and are just waiting for the currency to bounce back, they should approach the market with care given the expected trend of the market. Speak to your FCG account manager to explore all of your options within the market in order to get a balance view before you purchase your currency.