Exchange rates take a breather

21 July, 2015

Robin Haynes

As we have seen Greek banks re-opening and Athens clearing its debt arrears with the IMF already this week, for a change financial markets appear poised for a quieter couple of days after the turmoil of recent weeks.

While the Greek debt crisis is far from over, the pressure is for now off the Euro, which yesterday gained slightly in price. In the absence of any major economic data yesterday, it was unusually quiet for rate volatility, with many currency pairs trading in tight ranges. Both GBP-EUR and GBP-USD failed to move more than 0.5c during the day.

The net result is more stable rates than we have seen for some time, leaving us near multi-year highs for those of you buying many currencies, including the Euro, Canadian and Australian Dollars. The US Dollar is also still good value, and for those of you sending money to South Africa we currently have the best exchange rates for over 10 years. Don’t forget that you can fix an exchange rate for up to a year ahead of your intended transaction, with a forward contract from Currency Index.

Public sector borrowing today

The only UK news due out today is public sector borrowing figures at 9.30am, although given last night’s passing of the government’s welfare bill in the House of Commons there will be little impact on the markets. There are no other important news releases due today, although overnight the Australian interest rate minutes sent the Aussie Dollar a little lower, as policy-makers noted that developments in China and Greece would influence their future interest rate decisions, and saying that “further depreciation [of the Dollar] seemed both likely and necessary”. The Australian Dollar is also cheaper due to falling gold prices.

Tomorrow we do have the Bank of England’s own interest rate minutes being published, and markets are now expectant that UK interest rates may go up within 6 months, so if all 9 of the MPC members voted for rates to stay on hold this month we may see the value of sterling drop back. Interest rate rises are likely to be one of the main drivers of the Pound’s direction as we approach the year end, and any expectations of much delay into 2016 will likely have a negative effect on sterling.