Monthly Archives: June 2011

Exchange rate update Pound Sterling against Euro, Dollar, New Zealand Dollar and Swiss Franc

Sterling Euro

The Pound has continued to weaken against the Euro even with the ongoing Greek debt issues.

To many it just does not make sense just how the Euro continues to gain against the Pound with all of the problems in Europe, and if I am honest then I personally am quite surprised we aren’t closer to 1.20 than 1.10, however by the look of it we may well even drop well below 1.10 in the near term before things get better.

One of the helping factors this morning is the new leader of the IMF being European, this suggests that they will be slighly more pro Euro assistance and could well continue to strengthen the Euro over the course of the week. The head of the European Central Bank Jean Claude Trichet also has been hinting throughout June that we should see another rate hike for Europe.

For those that aren’t aware, a rate hike is generally seen as positive for the currency concerned however I personally believe this one has been priced into the market already. Today we see Greek Austerity measures hitting the headlines, personally I feel we may see a little Euro weakness dependant on the outcome as I feel there could be big trouble over there should this be passed.

In short, an important week ahead for the Euro – watch this space for how things actually pan out.

Sterling Dollar

The Pound has been range bound against the Dollar of late, I would expect this to continue in the near term without any major surprises popping up. It seems that the Pound is dipping just over and just below the 1.60 barrier.

Sterling New Zealand Dollar

A tricky currency pairing of late – The New Zealand Dollar has made huge gains against the Pound of late and this is due to a couple of factors in my opinion.

Firstly, carry trading is playing a huge part in todays market – this is where someone borrows money in a currency with a very low interest rate (JPY,GBP) and shifts the funds over to a currency with a very high interest rate (AUD, NZD) gaining their return on the interest.

This some day I believe will unwind rapidly and cause huge weakness to the Australian Dollar and New Zealand Dollar, however we could well be waiting quite some time to see this.

Secondly, much like Japan – I believe that New Zealand may be selling off their investments worldwide and bringing them back into NZD in order to fix and recover from the horrible earthquakes that have rocked their capital of late.

Sterling Swiss Franc

Personally, I cannot see the rates against the new fashionable safe haven of currencies for too long. It will no doubt start having an impact on the Swiss and things have to turn around at some point.

Those with CHF mortgages must be having a nightmare, I know this because I deal with many and I really do feel for them!

Any Currency Transfers Pending?

If you have an upcoming currency requirement be it buying or selling the Pound then do feel free to contact me directly djw@currencies.co.uk and I will be happy to assist you with your transfer offering a high level of service and top rates of exchange compared to that of the banks or your current currency broker.








Greece has second day of votes!!!

For anyone with a Euro requirement, the recent saga in Greece has caused much uncertainty and left Euro buyers not knowing which way to turn. Yesterday the Greek parliament had a key vote to push through severe austerity legislation to ensure that bailout funds from the EU/IMF keep the economy from collapse.

A close 155-138 vote was crucial not only for Europe but also for “the stability of the world economy,” said European Union President Herman Van Rompuy.

A second vote will happen today aimed at reforming laws to allow the package to be implemented. If approved, European Finance ministers will then meet on July 3 to approve the next bailout tranche and discuss options to ensure continued financing for the country.

Tens of thousands of Greeks have been taking to the streets since early on Tuesday with 48 hours of strikes by 80% of the population. This as a mark of protest against what they see as unreasonable demands from the EU and IMF with huge austerity cuts.

I believe that if the politicians had not approved the bill, Greece would have been pushed to the brink of defaulting on its debts and the country would have gone down the pan. But even though the government has won backing for its plan, the nation’s problems seem to be far from over.

From the currency perspective the pound bounced back from an 8 week low against the single currency in what was a very volatile day for word markets and today will surely be the same.

For those of you hoping that the issues in Greece would dent the impressive flight the Euro has taken, I think you may have further disappointment around the corner. There have been strong rumours that the ECB will raise interest rates again next month and when this occurred at the beginning of April the pound lost 3 cents over the course of a week.  If you couple this with recent weak UK economic data I think the pound will weaken further and levels of 1.08/1.09 are just around the corner.

Canadian Dollar surges on higher inflation

Sterling’s biggest loss of the day was against the CAD yesterday as Canada’s annual inflation rate jumped to the highest level in eight years last month, rising to 3.7 per cent, much higher than economists had expected. That prompted speculation that the Bank of Canada may have to raise interest rates earlier than expected and calls are for a rate hike before the year end. The pound lost around 2 cents against the CAD after the data release. If you had traded before the data release you could have achieved an extra $3780 on a £200K purchase.

We have seen the pound fluctuate by over 6 cents in the last month alone and for those with a requirement to buy Canadian Dollars the outlook is bleak if interest rates start to rise by the year end.

If you want to speak with us regarding any future exchanges that you need to make please feel free to contact me on bma@currencies.co.uk

Greek debt crisis compared to Lehman…

An Interesting interview from another FX site, here is part of it, feel free to click on the link below to see the rest of it.

If you have a currency transfer to make in the near future be it large or small then do not hesitate to fill in the form on the right hand side of this page and one of our experienced and friendly brokers will happily get in touch.

What do you think about the idea that the Greece/Eurozone problem is smelling like Lehman Brother in 2008 summer?

There is little doubt that a Greece default would trigger a global financial downturn similar to the effect of Lehman’s collapse. The Greece crisis will likely have more dire consequences. Greece has over €340 billion in bonds outstanding while Lehman had $100 billion. Although Lehman did have a substantial amount of derivatives outstanding, they hedged their positions, a benefit that evades Greece. When Lehman went down, despite its effects being felt at many banks, it did not take those banks down with them. In Europe, the contagion risk is far greater. Greece represents a very small portion of the Euro zone economy. The monetary loss other governments and banks would face due to exposure in Greek bonds, while large, would be manageable. It is the fear of other debt-ridden Euro members (PIIGS) following suit that would set off an irreversible catastrophe.

http://www.fxstreet.com/fundamental/market-view/conversations-with-forex-experts/2011/06/27/

Will the Euro Survive?

One question I get asked a lot at the moment by my clients is ‘will the Euro will survive?’  closely followed by ‘when will Greece leave the euro?’  Both are difficult to answer in a sentence, but If i had to I’d say ‘yes in the short term’ and it ‘won’t', I’ll explain my reasoning now!

I fell that the euro will survive in the short term because European leaders have too much invested in the single currency, to allow it to fail.  I do however feel that the only way the euro will survive is through the formation and wide spread use of a Euro bond.  This would basically mean that rather than each country issuing bonds and therefore owing debt individually, a Euro bond would be issued by the entire EU.  This will reduce the cost of borrowing for peripheral countries and therefore alleviate the debt and budget deficit pressures on these countries. 

Another idea widely floated is the need for fiscal transfers.  The example cited is the US , where richer states pay for poorer states deficits.  In theory, this is happening already through loans and bailouts for Greece, Ireland and Portugal.  However the fiscal transfer is not a loan and would not be repaid.  Personally I can’t see this happening as I think national differences in culture, work ethic, and outlook on life is too varied for one country to be happy to pay another countries debts.  For example, could you see French Tax payers happily funding Irish health care?  It seems unlikely to me.

Therefore in the short term I see the Euro Bond as the most viable option, but longer term I feel that some of the peripheral countries may have to leave the euro in order to manage their own monetary policy and primarily to devalue their own currency if required.

Many clients also ask what this will mean for their currency requirements, if the euro does break up in any way.  Ultimately it will really depend on how the break up occurred.  But as this is unlike in the short term (in my option) I’d expect to see the Euro continue to remain reasonably strong over the coming months as investors will not be scared away from the single currency in my opinion.

To see views of some leading economists and analyst have a look at the following article on the BBC. http://www.bbc.co.uk/news/business-13872847 I found it quite interesting.

BOE Minutes vote 7-2 What you need to know

  • Voted 8-1 to keep QE at 200 bln  (Quantitative Easing)
  • Dale and Weale voted for 25 bps rate hike
  • MPC judges downside risks to medium term inflation have risen in past month, upside risks stable (cable lower)
  • Some members think possible more QE might be warranted if downside risks materialise
  • GDP growth weak, latest data suggest likely to be below historic average in middle of 2011
  • Public inflation expectations more firmly rooted than might have been expected
  • Weale and Dale say case for rate hike rise remains strong, despite weak growth outlook data. Concerned rate of wage growth consistent with low inflation may have fallen

Bank Of England minutes imminent

We are roughly 15 miutes away from the Bank of England minutes… will this bring more weakness for the Pound as new member Ben Broadbent has his opinion released for the first time.

The man he replaced, Andrew Sentance had been extremely in favour of an interest rate hike and should the newbie come out and be against this then we may see weakness for the Pound as it once again indicates that a rate rise in the U.K is to be pushed even further away.

An interest rate hike (or the mere mention of one) is generally seen as positive for the currency concerned as it make it much more attractive to investors. I have an awful lot of clients at present sending their Sterling to Australian bank accounts and biting the bullet on poor exchange rates as they are receiving 7% interest on their funds compared to the poor levels over here…

If your business carries out regular transactions involving currency exchange, you are buying or selling a property abroad or have any other currency requirement be it large or small, fill in the enquiry form on the right hand side of this page or email me directly djw@currencies.co.uk and I will be more than happy to save you a substantial amount over using your bank.

UK political pressure fails to help sterling exchange rates

The chancellor George Osborne and the Prime minister have both suggested that they do not want to see the UK contribute any more money to the next Greek bailout.

The Eurozone is in grave danger according to many commentators and there is widespread speculation that the problems in Greece may be the downfall of the single currency.  We are also hearing rumours that the EU were aware that Greece had lied  about its key economic indications in order to get into the Euro in the first place.  This is further undermining the EU and highlighting the shortfall of a  single currency for such a large and diverse economic area.Despite what appears to be a stonewall and fundamental issue for the euro, the single currency has not lost a huge amount of ground as a result. 

EUR USD has fallen a modest 3% since February, while EUR GBP has actually gained 4.4% since February, somewhat surprising consider the situation the euro is in.  The reason for this is that investors have chosen to focus on interest rate outlooks, and as the UK has not hiked rates while the EU has, the single currency has made gains over sterling.

The next key development for Greece could be this evening when the next vote for Austerity measures and the bailout take place.  This could well cause some Euro strength, if a package is agreed.  Despite UK politicians claiming we will not make a contribution, we have to pay £1billion to the next package from the IMF as it has already been agreed.  not great news considering our own budget deficit and economic problems.

Interesting view on the Greek bail out deal…

Good morning all,

I thought regular readers and those with a keen interest in the Euro would find this interesting http://www.bbc.co.uk/news/business-13838819 Feel free to get in touch should you wish to achieve fantastic rates of exchange as and when you do have a currency requirement..

Sterling, Euro, Dollar, Australian Dollar, Swiss Franc…. The story so far weakness and strength, what will happen going forward? Will Greece exit the Euro?

Just a handful of questions I have been asked over the past few days and my word aren’t we seeing a lot of activity at present since I have been away.

The Greeks bell has rung and they are out for round two, an interest rate hike in the U.K has seemingly sailed off into the distance and the Swiss Franc is stronger than Popeye on spinach.

Personally, I cannot see the Pound gaining too much ground against the majority in the near term, unless the Bank of England minutes released this Wednesday throw a spanner in the works…  An interest rate hike (or the mere mention of it) can really strengthen a currency as it makes it more attractive to investors.

The fact that the Bank Of England keep on pushing back the possibility of the U.K raising their rates really is denting and holding back Sterling, so keep a keen eye on these on Wednesday morning to see the next twist in the story for the Pound.

Meanwhile, in Europe the Greek debt crisis came to a head once more, and I stuggle to understand how this whole situation has been patched up and patched up no end of times by the ECB…. Surely it is only a matter of time before something that smells hits the fan and we see the Euro Zone and indeed the Euro take quite a hit, as I only see this problem (not just Greece but numerous economies) getting worse and worse, and the European Central Bank are burying their heads in the sand…. However, for the past few years I have been saying this and they keep on battingt their problems away, so those holding out for better rates against the Euro could well still be waiting until next year :(

The Swiss Franc and Australian Dollar are still strong as ever, I have had dozens of clients sending funds over to their Australian accounts to take advantage of a 6-7% interest rate and I can’t say I blame them looking at my savings accounts interest over here, and the Swiss Franc appears to be the safe haven and currency of choice for investors worldwide, how long this will continue depends on risk, interest rates and global turmoil.

If your business carries out regular transactions involving currency exchange, you are buying or selling a property abroad or have any other currency requirement be it large or small, fill in the enquiry form on the right hand side of this page or email me directly djw@currencies.co.uk and I will be more than happy to save you a substantial amount over using your bank.

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