Monthly Archives: September 2011
Sterling Forecast – Is a bird in the hand worth two in the bush?
‘A bird in the hand is worth two in the bush’ is a quote that originates from harsher times when men and women had to hunt to eat. Quite simply if you didn’t value your catch you may go hungry!
Well this proverb is true of many things in life, one being exchange rates. As discussed in yesterday’s post (see below) the pound is enjoying an impressive spike against many currencies – we have the proverbial ‘catch’. We are seeing impressive gains against the New Zealand dollar (NZD), the EURO (EUR), the Japanese Yen (JPY), the Canadian dollar (CAD), the Singapore dollar (SGD), the South African Rand (ZAR), the Czech Koruna (CZK), the Hungarian Forint (HUF), the Polish Zloty (PLN), the Swedish Krona (SEK) and the Norwegian Krone (NOK).
As I pointed out in yesterday’s post I do feel that we could see an end to the current spike for the pound. Why? Well the economic outlook for the pound is far from certain. To add to the list of woes outlined yesterday there are futher Public Sector strikes planned, an expected dip in Retail sales (a major contributor to UK GDP) and the danger of the global economy slipping back to recession which will affect the pound.
There is of course the prospect that the pound could continue to make gains but markets just like a rubber band will snap when pushed too much. Luckily we trade all these currencies and many more so if you have any FX transfers to make please get in touch on (+44) 01494 787 458 or jmw@currencies.co.uk. We can help protect the bird in your hand while you chase the two in the bush through our range of contract options. The market may move further in your favour, it may plummet but we will be able to keep you posted and make sure that when you do trade you do it at the very best exchange rates.
Enjoy the weekend
USD GDP Figures and German bailout vote boost markets, but for how long?
It is not only the UK enjoying some good weather today, the pound too is enjoying a brief warm spell. With over 1% gained today against the Dollar and the Yen, we have also seen strength against the Kiwi and the pound has retraced some of the highs seens earlier this week against the Euro.
US GDP figures released this afternoon showed a 0.1% increase in their GDP for the final estimate of Q2. Whils this is good news for the global economy it neglects to take into account the more recent data that has shown global consumption and growth falling. Nevertheless it is good news for the global economy and combined with news from Germany that Merkel achieved a higher than expected majority in pushing for an expanded bailout fund helped boost stock markets and helped EUR/USD climb over a cent.
I believe that the reason the pound is enjoying some strength this afternoon is signs the global economy is not about to go down the drain. Today’s events also paint the UK’s current economic position in a better light. Yes the economy is suffering in the UK, but things are bad everywhere and as long as the UK gets through this, we should be in a good position to capitalise on better times. As George Osborne stated, he felt the measures undertaken to manage our debt problems have made the UK a ’safe haven’ going forward. I feel investors in this afternoon’s improved global outlook have been given reason to have faith in the pound. Yes there are challenges ahead but the whole world is suffering. Germany getting behind the Euro is a good thing for the Euro and the pound. A crippled Eurozone will not buy British goods. A crippled Eurozone will not need the UK’s services. A crippled Eurozone will actually hurt our banking sector and stifle the fragile recovery we are experiencing in the UK. A crippled Eurozone also places extreme strain on the global economy, which in turn does not bode well for the UK which benefits massively from a strong global economy to export products and services to.
It is still very likely that the pound will suffer further before things get better. QE could well be necessary in the UK based on all the recent economic data. We have the final revision for Q2 GDP next Wednesday 5th October which I am sure be key in shaping the MPC’s decision on Thursday 6th October. In all probability it is probably still too early to really launch QE. The MPC will need some very strong indications to launch this as there are other options available. There is the chance the economy can bounce back itself and other options from government such as tax breaks and public infrastructure spending.
So just like today’s and the weekend’s sunny spells in the UK will soon come to an end, so too I feel will some of the current attractive trading levels in the coming weeks. If you have any foreign exchange requirements we can assist in the safe transfer of your funds at commerical exchange rates. Please feel free to get in touch on (+44) 01494 787 458 or e-mail jmw@currencies.co.uk to discuss all the options available to you.
Germany key to the future of Greece and Euro exchange rates going forward
The last few trading days have been some of the busiest that we have witnessed on the trading floor. The volumes have increased due to the uncertainty surrounding the EU debt problems and this has given us the opportunity to offer clients buying or selling Euros some of the tightest spreads available on the FX markets. Because we are in unprecedented territory no one can categorically state what is going to happen with the Euro and Greece going forward over the next few years.
German Chancellor Angela Merkel may fall short of a majority in her own coalition for a crucial vote tomorrow on the euro zone rescue fund meant to stop a sovereign debt crisis spreading across Europe from Greece. We have witnessed the PIIGS of Europe going through a horrendous year or two and if the German Chancellor cannot convince the German MP’s to agree to raising more funds for the EFSF then the future of Greece could be bleak in the near term.
It is getting close to crunch time though for EUR exchange rates. Most of the traders in the office still feel that the Euro is overvalued against the pound. The problem is that every time a further bailout is announced the Euro goes on a rally strengthening due to confidence being put back into the global economy.
Depending on where you are in Europe you should be very concerned of the events that could pan out over the next year. The way I see it is that the IMF & World bank cannot continue indefinitely to pump Billions of Euros into countries that will eventually default. I think the strongest economies in the Euro Zone will continue to use the Euro but the weaker economies like Greece, Italy Spain and Portugal could eventually be expelled. If you have assets in these countries you could find that they half in value. This is a very scary thought!!! For you as an individual this could be horrendous but from the individual countries point of view it will boost exports again, increase tourism once more and start to create jobs for the locals. I feel this is the only way the Euro Zone can go forward.
Looking forward for clients who are exchanging GBP/EUR or vice versa the rest of the week throws up many data releases in both the UK and Germany from house prices, consumer confidence figures to employment data.
Then next week the biggest release will be the interest rate decisions in both the UK and Euro Zone. There is an outside chance that we may see the ECB cut rates and for the BoE to step up their QE programme. Over the next week we will inform what the implications are for all scenarios but if you would like to speak with us before this to see what we can do to help you make a saving on your currency exchanges please feel free to contact us on 0044 1494 787 474 or email me at bma@currencies.co.uk. Just quote PSF and ask for Ben.
Excellent NZD, AUD and ZAR buying opportunities
The current volatility on financial markets has everyone in a spin. Stock markets are up and down like a yo-yo, Gold the ‘untouchable’ safe haven has lost 20% from its high of the year and the US dollar has climbed around 12 cents against both the pound and the Euro as investors flee other assets. World leaders are frantically drawing up a €3 trillion plan to ‘save the Euro’. And by save the Euro I mean save the world, because quite frankly something has to be done soon in Europe or the whole world will be tipped back to recession. Some already think this process is underway and cannot be stopped…
This volatility is however presenting some great opportunities on the New Zealand dollar, the Australian dollar and the South African Rand. But why? These currencies have been strong because they have economies strongly linked to the global performance of commodities. When global demand is up these economies (particularly the Rand and the Aussie) benefit from investment. When there are signs that the global economy may be slowing we can then see these currencies weaken as investors come to the conclusion that they won’t get much stronger. These currencies also benefit from investment because they have higher interest rates than most other central banks. Australia’s is 4.75%, New Zealand 2.5% and South Africa 5.5%. ‘Carry Trading’ is where investors borrow in a low interest yielding currency (JPY, USD, GBP) and invest in a higher yielding currency (like the ones mentioned) to benefit from the interest rate differential – essentially they get a better return on their investments.
The current volatility and uncertainty is therefore providing spikes on these currencies but the movements are very sporadic and highly unpredictable. I would strongly recommend employing Stops and Losses to protect your rates. A Stop / Loss and Limit order is where we set limits and levels in the market where we automatically trade for you when levels are hit. Due to timezone differences your ‘ideal rate’ could occur late at night or early in the morning, using these tools means you can benefit from the current uncertainty not suffer. If you are selling these currencies for any reason I would be very concerned that you could quickly lose out on trading at some of the strongest periods in the histories of these currencies against the pound. Despite the single digit percentage losses for anyone selling, things could easily get much worse should investors really abandon these currencies.
If you have any requirements for any of these currencies (or any others) we can keep you informed of the spikes that will maximise your transfers. We are specialist currency brokers who have won awards for our commercial exchange rates and exemplary service. If you wish to discuss any issues surrounding your currency transfers please call (+44) 01494 787 458, email jmw@currencies.co.uk or fill in the contact form. If you contact me direct please quote JMW and PSF. I look forward to hearing from you.
Euro declines over the weekend, New Zealand Dollar also weakens following wide trade deficit
The Euro saw an extremely sharp slump over the weekend following concerns that the Eurozone still just cannot cope with this dramatic debt crisis.
Yesterday (usually a typically quiet day on the market) Sawa huge spike in the GBP/EUR pairing, momentarily up to the late 1.16s, by open this morning rates had headed right down to 1.15 again, however we did see another minor spike in the afternoon, certainly proof once again that you need to bwe on the ball in these volatile times!
The NZD also took quite a hit overnight folllowing a much wider than expenceted trade deficit figure, raising alarms that that maybe the economies over that way are starting to feel the pressure slightly?!
Plenty to come tomorrow i’m sure, the week ahead and indeed the weeks ahead are guaranteed to be rocky for all with a currency transfer to carry out, feel free to get in touch to discuss your specific situation.
South African Rand Weakness – What is happening?
The South African Rand has weakened considerably over the past few weeks and most notably in the last couple of days.
It appears the Rand is being hit from a few angles, investors are rushing to dump off riskier assets, which would be inclusive of notoriously volatile and risky South African Rand, it appears growth forecasts for South Africa may well be downgraded today and also we are seeing a minimal unwinding of carry trades as global uncertainty sticks its head above the wall once again.
Carry trading is where an investor borrows money from a currency with a very low interest rate (JPY,GBP,USD) and invests in one with a higher one (AUD,NZD,ZAR) making their return on the difference. As soon as the currencies with the higher rate start to weaken the difference can be lost so yuou see a huge unwinding of trades which canweaken them even further, leading to a snowball effect.
Should you have a South African Rand transfer to carry out, please contact me directly djw@currencies.co.uk and I will explain the various options available to you and how I can help. The ZAR has lost 22% against the Pound so far this year!
Greece default… What could happen?
An interesting article on the BBC website surrounding Greece…. Do take a look!
Bank Of England Minutes – Sterling Weakness
Following this morning’s decision, UK Interest Rates remain at historic lows (0.5%) and the current asset purchase programme (QE) remains at £200 billion. The tone of the minutes clearly reflects the change not just in the economic outlook for the UK, but also the global economy. There are references that imply QE may be considered if the current outlook remains and as predicted we have seen sterling weaken across the board. Notably against the Euro and the Dollar we have seen a gradual erosion of trading levels. For a detailed explanation of QE and the impact on exchange rates please see my earlier post this week http://www.poundsterlingforecast.com/2011/09/19/sterling-outlook-for-the-week-ahead-and-dollar-strength/ or get in touch to get up to the second information. You can fill in the contact form, call +44 1494 787 458 or e-mail jmw@currencies.co.uk
As Dan stated this morning we are award winning specialist currency brokers who can help clients save thousands on their currency transactions. If you are considering any currency exchanges why not speak to us to find out about a better deal. Please quote PSF when making your enquiries.
Where can you get the best exchange rates? Contact the experts in this field directly… save money over the bank and/or your existing broker
It is very pleasing to see that from a mere information site I started up last March www.poundsterlingforecast.com is now getting over 20,000 unique visitors a month, I hope if you are a regular reader that you have found the information useful and it has helped you save money on any currency transactions you may have carried out.
I work for a specialist foreign exchange brokerage (regulated by the FSA and authorised as a payments institute) and we have recently been named ‘best exchange rates’ in the Daily Telegraph’ along with winning the same type of award three years in a row in the Sunday Times. I do not only pride myself on getting great rates of exchange but also the service to compliment the rates too.
Feel free to take a look at some testimonials on my Linkedin profile here under recommendations: http://www.linkedin.com/pub/daniel-wright/14/985/862
Should you have an upcoming transfer to make then feel free to contact me directly by emailing me djw@currencies.co.uk or calling 01494 787 462 during U.K hours 8am – 6pm and ask for myself (Daniel Wright) directly quoting www.poundsterlingforecast.com and I will be happy to explain the service, the rates we can obtain and just exactly how the whole process works.
I look forward to hearing from you, on another note of extreme importance we have the Bank of England minutes out at 09:30am this morning, do watch out for follow up posts later in the day to explain exactly what has happened and why.
Euro woes continue as Italy is downgraded, Greece still in the spotlight but the USD benefits from the flight to safety
Last night Greece said it held productive talks with the IMF and European authorities over whether they should receive more bailout funds. No information has been made public of the conversation but we believe that the talks will continue today.
Greece is due another instalment worth €8 billion of its rescue plan next month but the IMF feel that Greece is not doing enough to get its spending under control and may not warrant any further bailout. The IMF feel that Greece need deeper spending cuts to avert a default. The current rate of spending cuts have already caused mass demonstrations in Athens.
The EU & IMF have already thrown €110 billion at Greece and there is a further €109 billion provisionally agreed to be given to them in instalments should they meet their spending cut targets.
If Greece do not get further assistance then they will likely default on their debt and they will be bust. The fears of this sent global stock markets into freefall once again and the Euro weakened against all majors.
On the back of Greece last night S&P the credit rating agency cut Italy’s credit rating too. The main gainer from the debacle in the Euro zone is the USD as investors have been seeking refuge in the Dollar. This coupled with Obama’s speech yesterday to cut 3 trillion from the deficit over the next 10 years by taxing millionaires a minimum amount on their investments is the main contributing factor as to why the pound has lost so much ground recently against the USD. Now trading at around an 8 month low.
If issues are not sorted out very soon in the Euro then it would not surprise me to see the pound trading at levels below 1.50 against the USD by the end of this year. Against the Euro it is harder to predict as sterling should be trading in the late teens by now but every time Greece get a further bailout the Euro starts to strengthen again. I feel that Greece will get the €8 billion Euros they require next month and hence sterling will struggle to gain and could trade around the 1.11/12 level.
If you are concerned about sterling exchange rates and are looking to make a saving on your exchange over the high street bank then please feel free to contact me on 01494 787474. Just quote pound sterling forecast and ask for Ben for an exemplary service.
