Merkozy back to set the agenda

Bank exchange rates are you being ripped off by your bank

The year of good data continued on Friday with the US jobs numbers all surprising to the high-side. 200,000 jobs were added in the month of December and the unemployment rate fell to 8.5% from 8.7% previously, the lowest level it has been since 2009. This is of course an election year in the United States and we would not be surprised if Obama did a little dance around the Oval Office as a result of that number printing

The reaction in FX was muted however and the “risk on” spike that many predicted was conspicuous by its absence. The belief is now that, should the US continue to release data that suggests the worst may be over in the US, the likelihood of another round of quantitative easing from the Federal Reserve is becoming less and less likely. The dollar remained strong in the aftermath of the announcement and EURUSD has hit fresh lows in overnight’s Asian session (1.2666) with GBPUSD moving below the 1.54 level as well.

The euro has not been helped by a refocus on to Europe this week with a meeting between Merkel and Sarkozy today, and an ECB policy meeting on Thursday. Comments over the weekend in the press were pretty scathing towards Greece with articles stating that further haircuts on Greek debt would need to be agreed to avoid a total default. Unfortunately, you can haircut as much as you want but if the underlying growth isn’t there then there is little to really argue about.

The meeting between Merkel and Sarkozy will not be the last this year and has dragged up some pretty depressing feelings in people who spent most of year covering the Eurozone crisis. Comments are expected from the two but this is by no means a meeting in which a “silver bullet” or panacea to the crisis is likely to be announced and we expect the market to be disappointed by comments.

After the breezy nature of last week we are thrown headlong into a line-up of sessions that have a supreme amount of event risk. Alongside the ECB meeting, at which no change in rates are expected, we also have the first Bank of England meeting of the year. We expect no change from the MPC either as far as rates but there are some analysts who are expecting a bump in the level of asset purchases (quantitative easing). You can get our immediate thoughts on the Bank of England and ECB meetings from our live, free webinar on Thursday afternoon at 2pm.

We also have a fair few bond auctions from Europe as well with Italy, Spain and Germany active in the markets towards the end of the week. With the focus on Berlin, the data calendar will remain fairly quiet today with German industrial production the main release. Friday’s factory orders number was horrific, falling nearly 5% in the month of December, and a fall in production of 0.5% is expected against a previous number of 0.8%.

Indicative Rates Sell Buy
GBPEUR 1.2089 1.2116
GBPUSD 1.5427 1.5455
EURUSD 1.2752 1.2777
GBPJPY 118.68 118.95
GBPAUD 1.5089 1.5116
GBPNZD 1.9659 1.9692
GBPCAD 1.5868 1.5898
NZDUSD 0.7842 0.7863
GBPZAR 12.58 12.63
USDZAR 8.1405 8.1794
GBPPLN 5.4117 5.4413
EURJPY 98.07 98.33

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