Welcome back to our weekly look at what has been happening in the currency markets. The British pound actually did reasonably well the week before last, and although we wouldn't go as far as to say that it experienced a resounding success, even a reasonably good week was something to celebrate.
It is certainly the case that the pound has been on the ropes against a lot of different currencies recently. If you have been trying to take advantage of a halfway decent exchange rate to get your Christmas presents abroad this year, the figures your currency converter have been throwing back at you might not be as good as you would have wanted.
But as we go into the final month of the year, it will be interesting to see how well (or badly) the pound does as we head towards 2009. So with no further ado, let's take a look at what happened in the first full week of December.
An overview of the currency markets for December 1st – December 7th
As per usual our journey starts with the performance of the British pound against the US dollar. Last week we clawed back some three and a half cents against the dollar, so we're eager to see whether we could maintain that small surge into December.
Our starting point was 1.5335 – but if we were hoping for a good start to the week we certainly didn't get it. By the end of trading on the Monday, we were staring at an exchange rate which once again dipped below that fabled $1.50 level. In fact, it was stuck at 1.4981 – not much below, but it still represented a big drop for a single day.
Could we get our act together and start seeing some better results for the rest of the week though?
Tuesday actually saw very little movement by the day's end, but at least what little we saw did go in the right direction. The closing rate then was 1.4991 – just 0.001 up on the previous day, but we will take anything in these rocky times.
Unfortunately we weren't destined to hang on to that small increase even for a day. By the time the markets closed on Wednesday the exchange rate had gone in favour of the US dollar once more, leaving us looking at a figure of 1.4768.
If you are starting to get a sinking feeling in your stomach at this point, we wouldn't blame you. Things didn't improve on Thursday, and by the close of play that figure had become even smaller, levelling out at 1.4630.
The only question left now was whether or not we could improve on that even a little by the time everyone went home for the weekend. Damage limitation was very much the name of the game now.
But as it happened it wasn't something we could successfully pull off. As Friday limped to a close we found ourselves with an exchange rate against the US dollar of 1.4614. That means that over the course of the week the British pound had lost a little over seven whole cents in just a week. That wiped out last week's gains twice over.
While some people think that the US dollar might be struggling somewhat and experience more problems in the near future, there is no doubt that where the British pound is concerned, the dollar is still very much in the driving seat.
The pound improved against the Euro as well last week, so would we see the pattern repeat itself with a loss against this currency as well?
Let's find out. Our starting point here was 1.2049, and once again the 1st December was clearly not a good day to start the week on. By the end of trading in the currency markets that had slipped down to 1.1882, which made everyone wonder whether this was the start of another slide for the pound.
Now as with the exchange rate against the dollar, Tuesday saw only a marginal degree of movement. We were left with 1.1807 at the end of the day – only a small change but it was heading the wrong way as far as the pound was concerned.
And once again, Wednesday turned out to be very bleak. The exchange rate slipped still further on that day, and by the end of it we could only claim 1.1699 Euros to each pound. Was this a downward slide that would continue for the rest of the week?
Well we dropped into 1.15 territory the very next day, as we could claim no more than 1.1592 by the close of play. This was clearly not shaping up to be a great week for the pound, and it looked as though it wasn't over yet.
Another small drop followed on Friday, and we closed things out with a figure of 1.1539. That meant that over the course of the week we had lost a total of 0.051 cents against the Euro. It was another alarmingly big figure, and it certainly didn't give us much hope of ending the year on a good performance. There may well be a few weeks to go yet, but it isn't looking good at the moment.
The thing we should remember as well is that the Euro isn't one of the strongest currencies itself at present. So for the pound to lose this much ground in a single week really does give us cause for concern.
Our next stop is Hong Kong, which again gave us a good result the week before last. But given the lacklustre performance of the pound last week, we should perhaps expect a bad result this time.
Let's see what actually happened. The starting figure for the first week of December was 11.885. And did we see that familiar slump on the first day of trading, much as we already have in other places?
Yes we did. Monday actually ended on 11.614 – representing a drop of 0.271 in a single day. The real question now – even though it sounds cynical – is how much worse could it get?
Tuesday brought us more information which flew in the face of what we were expecting. We actually saw a minor increase in the exchange rate which went in our favour. Unfortunately that didn't last – but by now we would probably be braced for bad news.
And Wednesday certainly brought it. By the end of the midweek point the exchange rate had dropped to 11.448, and it seemed as if that slide which had occurred in the second half of the week against other currencies would be seen here as well.
Thursday confirmed this with a closing figure of 11.340, and as if to confirm that was the case we saw another drop on Friday. As the slump ended – even if only because the weekend got in the way – we finished on 11.327 for the week. That gave us another bad result to add to the ones we had already. We had lost 0.558 in total.
We lost four cents over the course of the previous week against the New Zealand dollar, so we had a starting point of 2.7969 to work from this time round. We often see big swings and changes against the New Zealand dollar, so this time it would be nice to see a big increase to temper the bad results so far.
In actual fact Monday saw a slight improvement as the pound exerted a tiny bit of pressure to return a figure of 2.8055 by the end of the day. Tuesday brought still better news as that increased to 2.8105. But would this be enough to get us on a winning roll for the whole week?
As it turned out – perhaps somewhat predictably as well – there was a drop on Wednesday. By the close of play on that day the exchange rate had taken a nosedive and finished on 2.7849. But if we thought that might be the worst we saw, we still had Thursday to come.
By the time trading closed on that day and everyone had gone home in anticipation of the final day of trading for that week, the exchange rate stood at 2.7351. That meant the pound had lost 0.0498 over the course of just twenty four hours. Would there be worse news to come on Friday night?
As it happened there wasn't. We actually managed to regain some of the ground we had lost on
that day. By the time the weekend arrived the exchange rate stood at 2.7712. That represented a loss of just 0.0257 over the whole week; perhaps not as bad as we might have feared.
And finally we complete our journey in Australia. Here we ended on 2.3536 the week before, giving us a loss of 0.0575 over the course of the week. What did the currency have in store for us this time around?
Well we had an almost inevitable dip on Monday, as we finished on 2.3348. That was the first step in a journey that saw the exchange rate plummet further over the course of a few days. By the time the markets closed on Tuesday the pound could only claim 2.3144 Australian dollars.
From there the next two days saw similarly steady drops. Wednesday closed on 2.2959 for the day, while Thursday went down still further to 2.2761. But Friday reclaimed some ground in much the same way as we saw in New Zealand. By the close of play on Friday the exchange rate had seen a slight rise and finished on 2.2957.
That meant we had lost 0.0579 over the week as a whole – very similar to the loss we had experienced the week before.
So all in all this was a week we would rather forget – and certainly not the best start to December. Here's hoping we could regain some ground next time.
Notable events in the world of currency
The British pound continues to struggle
Perhaps not surprisingly given the news so far, the pound is not expected to perform particularly well in the near future.
The gloomy economy is causing problems for many currencies, and the pound is one of those that is having the biggest amount of trouble in stabilising itself.
US dollar has up and down time against the Euro
It started reasonably well, before losing ground, gaining it and then losing it once more last week.
The Euro might normally be the weaker of the two currencies at the moment, but it certainly does have its moments against the US dollar. It is well worth watching the two as time goes on.
Rate cuts can influence exchange rates
More than one country has cut interest rates recently to try and stave off a major downturn.
But this of course has a major effect on the currencies of the countries concerned. Sweden and Britain have recently cut rates – so watch out for any further countries doing the same thing.
At this point in our article we always mention a worthwhile website that is good to visit. But this time we are going to point the way to a website that is actually a currency blog.
World First is a particularly good blog that can be seen at http://www.worldfirst.com/blog/, and it concentrates on studying lots of current news events and occurrences concerning currencies. If you have any in depth interest in the subject, this is the place to start.
So there we have it – another week gone in the world of currencies and exchange rates, and no matter what you thought sterling would be up against, it has been another not so good week all in all.
We must just wait and see now to find out how good (or bad) the next week will be. Given the current situation it is virtually impossible to figure out in advance what kind of figures we'll be looking at next week, so until then we will just hope that we get better exchange rates instead of worse ones.
See you then.
Doesn’t seem like the pound is going to end this year on a great note, does it? I reckon we will see it go down even further too – that $1.50 rate everyone keeps on about is going to seem like a walk in the park once it dips down even lower.
It may well bounce back eventually, but that isn’t going to happen soon. Let me tell you, the pound has seen better days and the sooner people realise those days are gone – at least for a while – the better we will all be. It’s time to get real and accept it!
I can remember this stage in the proceedings when the pound was quite weak against a range of other currencies. I was really struggling at some points – I am self employed and I often import goods from other countries to resell here. As a consequence of the poor pound I ended up spending a lot more than I normally would on the same stock.
Of course I wasn’t alone in this, but it did send shivers down my spine to read this report again and remember what it was like at the time. Luckily I got through it okay and I am still in business now. I do have a healthier appreciation of the currency markets though – before all this I didn’t even think about it very much.