They sicken of the calm, those who know the storm

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It’s a good thing that the Jackson Hole symposium is taking place tomorrow or I would really worry about the sanity of those of us working in markets; the gradual and continual grind sideways leaves nobody interested in putting their head above the parapet for fear of having it shot off by some form of central bank action. Dorothy Parker put it succinctly when she said “they sicken of the calm, those who know the storm”; storms are a-coming however.

Most FX crosses were very much range bound yesterday with the USD slightly on the back foot, as it has been for the past few weeks. Overnight data from Japan has taken Asian shares slightly lower. Japanese retail sales fell as consumers decided to not spend in the run up to the end of various government subsidies on items such as cars.

The 0.8% fall was the first decline since January and further heightens fears that the Far East is no longer immune to the pressures caused by the Eurozone debt crisis. The weather also played a part with cooler temperatures blamed on falling beer and clothing sales.

After the news that Mario Draghi would not be attending Jackson Hole it seemed obvious that he would want to get his speech out in to the world; just because he doesn’t show up, doesn’t mean he can’t influence these things. His views were published in Die Zeit and he once again stated that the ECB would always work within its mandate. He did also say that it was justified for the bank to use the “exceptional measures” as part of the mandate, if the necessity arose.

While this is not an explicit two-fingers at the German Bundesbank, it certainly reaffirms their positions are diametrically opposed and the ECB meeting come Sept 6th will be an interesting one.

As we move into the Jackson Hole circle of orbit I think that we may start to see some dollar strength return to the market with Ben Bernanke not launching any new initiatives during his speech. GBPUSD has traded well in the past few sessions and we would be wary of running things too much higher especially through the Fed chair’s speech. GBPEUR should remain steady and supported by 1.25.

The major news today is an Italian auction of 10yr debt. Tuesday’s short term auction was well demanded, but tends to be so on liquidity grounds by local banks. Today’s is a much longer benchmark auction and will be key to showing how sentiment towards the periphery has changed since Draghi’s original “whatever it takes” statement. This should be out by 10.15am BST

World First is going to Tanzania to build a school with Childreach and we’re currently raising funds for the building materials required. We’d really appreciate any donation you might be able to make.

John will take over for the next 10 days as I am off on holiday, just as it gets exciting

Indicative Rates Sell Buy

GBPEUR 1.2609 1.2617
GBPUSD 1.5821 1.5846
EURUSD 1.2532 1.2555
GBPJPY 124.39 124.66
GBPAUD 1.5309 1.5337
GBPNZD 1.9736 1.9764
GBPCAD 1.5671 1.5700
NZDUSD 0.8020 0.8026
GBPZAR 13.31 13.363
USDZAR 8.4102 8.4399
GBPPLN 5.2587 5.2851
EURJPY 98.51 98.79

Please note these rates are “interbank” rates ie they indicate where the market is currently trading and are not indicative of the rates offered. Rates are dependent on amount transacted. It is important to remember that foreign exchange rates fluctuate all the time. The rate you will receive will depend on the amount and currency you require.

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They sicken of the calm, those who know the storm

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