Business Climate in Germany

The past week has been rather volatile for the Sterling-Euro currency pairing with a 1.6% shift between the highs and the lows of the week. On Tuesday, data released pertaining to figures for both the Consumer Price and Retail Price Indices showed that inflation levels in the UK had contracted; giving strength to the Pound. However, Wednesday presented a good reading for the Business Climate in Germany anticipating Bullish movement for the Euro. This movement was further comPounded by Alistair Darling’s Budget report. Conservative leader David Cameron stated, “This chancellor has had his last chance….he totally failed….they (Labour) are carrying on spending and failing. The biggest risk to our [economic] recovery is five more years of this prime minister.” This all amounted to a fall in the GBP/EUR rate.

Thursday presented the high of the week on the back of greater than expected retails sales data in the UK; peaking at 1.1242 before quickly falling back to previous levels. We also saw a financial aid package agreed for Greece at the end of the week, providing €22bn should the debt-laden country run into difficulties borrowing money to service its high debt levels. Whilst this did give the Euro strength against the Pound and Dollar, analyst Ulrich Leuchtmann of Commerzbank said “the agreement is however, hardly reason for a significant correction.” This volatility in the currency pairing highlights the benefits of placing a ‘Stop Loss’ or ‘Limit Order’ on a contract with FCG. Talking to your Account Executive and knowing where to place a minimum and/or maximum on your exchange rate would help to optimise your purchase. This would safeguard against any potential loss should the market drop and ensure that you are able to take advantage of any upward spikes (as on Thursday) without having to stay glued to the markets.

As we look to the week ahead, there is still a lot of uncertainty remaining for the GBP/EUR cross. The Germans hold many of the answers over the next few days. On Monday, figures for inflation indices will be released in Berlin, with no forecast for whether the rate will have changed over the last year, though a rise in inflation would be seen as positive and adding strength to the Euro. Wednesday has data for unemployment change published by the German Statistics Office; with a rise predicted giving negative implications for consumer spending and subsequent economic growth.

As we approach the Easter weekend, German Retail Sales and Manufacturing Purchasing Managers Indices for both the Euro Zone and the UK are released. Whilst predictions are currently conservative with little growth predicted, it is worth stating the importance of a consultation with your account manager here at FCG.

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