Money Transfer Update: The Pound Slides to a 5 Month Low Against the Euro

A very quiet start to the trading week saw the pound continue to lose ground against the euro, at one point reaching a 5 month low against the single currency but continue to make modest gains against the US dollar.

In a light news day, the euro strengthened against the majority of the 16 most actively traded currencies after the results of Spain's regional elections on Sunday showed that Prime Minister Mariano Rajoy’s party retained power in Galicia. Rajoy’s election victory took the wind out of the sails of those, especially in the Basque and Catalonia regions that are calling for regional autonomy or outright independence. It will also help the Rajoy government push through its austerity measures. Analysts also believe that the results will ultimately make it easier for Spain to ask for a bailout.

Eurostat, the European Union's (EU) official statistics office reported that the euro zone's average budget deficit as a percentage of the gross domestic product (GDP) fell by 4.1% in 2011 following earlier falls of 6.2% in 2010; 6.3% in 2009 and 2.1% in 2008. However, outstanding public debt as a percentage of GDP for the euro zone actually rose, to 87.3% in 2011, as a result of the dramatic slowdown in the majority of the euro zone economies.

Furthermore, the report showed that only 10 European Union members managed to keep their deficits below the EU target of 3% of GDP.

Elsewhere, the Canadian dollar is under pressure after crude oil futures slipped by 1.5% in trading yesterday amid weak stock markets and persistent concern about a general worldwide slowdown as reported by recent GDP data from the International Monetary Fund (IMF).

For the UK, the key data this week is likely to be published on Thursday when the preliminary GDP data for the three months to September is released. Whilst the preliminary figures are always subject to amendment (and sometimes dramatically so) analysts will be keeping a close eye on this release as any suggestion that the UK remains mired in recession will heap further pressure on the pound and shorten the odds that the Bank of England may intervene once again and follow the American lead with the authorisation of a third round of their Quantitative Easing (QE) program.

Money transfers to America (USA):-

The one bright spot for the pound at the moment is it remains close to a 4 month high against the US dollar as the dollar has felt the devaluing affect of the Federal Reserve’s decision to instigate a third round of their Quantitative Easing (QE) program to try and boost economic activity and lower the unemployment rate. Political factors are also having an impact with the US Presidential election only weeks away. Whatever the result, the markets hate uncertainty so whatever the result, historically the dollar strengthens in the immediate post election period. One further political factor. A Romney win would result in a Republican president facing a Republican held Senate and Congress and in theory, break the ever present deadlock in US politics leading some analysts to suggest a strong appreciation in the value of the dollar as we approach year end so any dollar buyers may be best served by locking into the rates that are currently available.