Monthly Archives: November 2011
The Budget – What effect may it have on your currency transfers going forward? Pound, Euro, Dollar, Australian Dollar, New Zealand Dollar, South African Rand
Looking at the budget in bullet point terms – you would have thought the pound may have lost ground today – Although there are some promising parts believe it or not!
Here are the key points that you need to be aware of:
- Growth forecasts for UK economy cut 0.9% this year and 0.7% next year
- Borrowing forecasts revised up
- £40bn “credit easing” scheme to underwrite bank loans to small firms
- £5bn plan to improve national infrastructure over three years. Further £25bn could be spent in future years
- £1bn scheme to subsidise work placements for the young unemployed
- Mortgage indemnity scheme to help 100,000 people get onto the property ladder
- £500m housebuilding plan in England
- January rise in regulated rail fares to be capped at 6.2%, not 8.2%
- Doubling of free childcare places for deprived two-year-olds to 260,000 in England
- 3p fuel duty rise due in January to be delayed or frozen
- Bank levy to be increased
Without a doubt next year will be tough for the U.K and indeed the world as a whole, the key for Pound strength is Sterling being the best of a bad bunch… You may have thought that would be reasonably easy with the U.S credit rating being downgraded and an increasing amount of problems within Europe that seem to be rising on almost a daily basis as contagion spreads rapidly like a nasty epidemic that nobody in truth really wants to see.
The trouble is, although we aren’t part of the marriage of the Euro Zone, we have been in bed with it so we are just as open to the problems here in U.K and although Euro buyers may be praying for more problems to arise, they actually hinder the Pound as well.
Also, when there are troubles in the Euro Zone the Dollar seems to be gaining as well due to investors looking for a safer haven to avoid risk. (With the USD being a ‘safer haven’ along with gold being priced in Dollars both lead to an increase in demand and therefore price to buy USD) This means that anyone buying Dollars or Euros with the Pound could actually do with the Euro Zone slowly getting out of trouble with the U.K however being leaps and bounds ahead, raising interest rates at a greater pace and finally looking a little like we used to 5 years ago before this mess all came to light.
An interest rate hike generally is seen as positive for the currency concerned and a cut negative, part of the reason we have not gained against the Euro as many would have imagined – The Euro is more attractive to investors because of a higher rate.
Those looking for Australian and New Zealand Dollars or South African Rand, again a risk factor is a big player. The more trouble globally the cheaper these currencies should be to buy, the more solutions that are seemingly working the more attractive the riskier currencies become, especially by means of carry trading – This is where an investor borrows a currency with a low interest rate (JPY,GBP) and moves funds to one with a much higher rate (AUD, NZD, ZAR) making their money on the difference. Clearly the performance of these countries economies will also be key in 2012 so watch this space and keep up to date with our timely, non technical updates that hopefully anyone can understand.
If you have a currency requirement imminently or in the coming months then do feel free to contact me directly djw@currencies.co.uk and I will be confident that you receive a much better rate of exchange than using your bank or another broker by using me, along with the very highest level of customer service throughout your transfer.
GBPZAR Forecast – Carry Trading at it’s extreme
Anyone tracking the GBPZAR rate recently will have been in for a real rollercoaster of a ride. The rate has breeched levels not seen since August 2009! This is presenting a fantastic opportunity for anyone buying the Rand, but providing more of a headache for anyone selling the Rand. We have had over 7.75% movement between the high and the low in the last month. On a 2m Rand sale, you would get £11,738 less trading at the low, than at the high. Unfortunately the current trend looks to be further ZAR weakness. But why the massive movements?
Well the Rand has been a major beneficiary (and is now a major loser) due to carry trading. This is where investors borrow money in a low interest bearing currency and invest in a higher interest yielding currency. The interest rate differentials are one of the main drivers of exchange rates. Quite simply generally the higher an interest rate is, the stronger that currency will be. For example the Aussie dollar has been at all time highs against the pound this year. The AUD interest rate is 4.5%, the UK rate is 0.5%. When investors invest in a country they have to buy that currency and the higher rates will generally attract more investment and hence more of the currency is bought. If you have any specific questions about what is driving your rate of exchange, not just on the Rand but also any other currency pairings, please feel free to contact me personally on jmw@currencies.co.uk or +44 (0) 1494 787 458, quoting JMW and PSF.
With the South African interest rate at 5.5% (previously at 6.5%), it has made the Rand particularly attractive for carry trading. Just like consumers will choose a bank account offering a good rate of return, the Rand has been seen as very attractive because of it’s higher interest rate. Combine this with the recent massive demand of South African natural resources (for China and expanding economies) and you can understand why the Rand had reached it’s strongest against the pound at 10.26 in December last year, it strongest since 2006! Well not even a year later and the Rand has completely devalued as investors flee this currency. But why?
Carry trading as mentioned above is only attractive when we see confidence in the global economy. When this confidence diminishes as it has done recently due to the Euro crisis you will see investors pull away from perceived riskier investments. In a way the Rands exceptional strength in the last few years has been it’s downfall. The recent strength of the US Dollar highlights the recent flight to safety in the face of the uncertainty in the global economy. You can therefore link the ongoing debt crisis (and reduced global confidence) to the ZAR’s performance.
I foresee there is an improved chance of ZAR weakness as investors concerns increase due to the uncertainty in Europe. With no sign of an abatement in the crisis, Germany is now being affected too. German bonds were majorly undersubscribed last week and this shows investors are wary of investing in Germany due to it’s exposure to the crisis. The Rand will of course continue to be volatile but further continued strength looks unlikely. With so much movement in recent weeks it is really critical to make sure you are aware of what is happening and why. To be kept up to date of all the events that will affect the rate of exchange, not just on the Rand but also any other currency pairings, please feel free to contact me personally on jmw@currencies.co.uk or +44 (0) 1494 787 458. Please quote JMW and PSF.
As well as writing on the blog I work for one of the UK’s leading foreign exchange brokerages and can help secure the very best rates of exchange. I have never had any trouble beating not only the banks but also other sources and moreover, our sepcialist service is designed to further enhance your rate of exchange by working with you to determine the best time to execute your transactions.
Once I know what you need to do and when we can start to look at the necessary strategies designed to maximise your rate of exchange.
I look forward to hearing from you.
Data out this week that could effect the Pound against the Euro and the Dollar (Apart from surprises of course)
Below is data out this week that may have an effect on your currency transfers, of course there are pleanty of other matter effecting rates too at present.
Please remember that the more we see global uncertainty the more the AUD, NZD and ZAR should weaken, the more settled things are we should see those currncies fight back again (like this morning)
UK DATA
THIS WEEK:
- Monday 11.00am CBI distributive trades for November, previously at -11
- Tuesday 09.30am BOE mortgage approvals for October, previously 50.97k
-
Tuesday 12.00 Chancellor Osborne gives Autumn Economic statement to
Commons -
Wednesday 00.01am GFK consumer confidence for November, previously at
-32 -
Thursday 08.00am Halifax house prices for November, previously 1.2% m/m;
-1.8% q/q - Thursday 09.28am CIPS manufacturing PMI for November, previously at 47.4
- Friday 09.30am CIPS construction PMI for November, previously at 53.9
US DATA
THIS WEEK:
- Monday 15.00pm New home sales for October, previously at 313k
- Tuesday 14.00pm S+P Case Shiller home price, previously -3.8% y/y
- Tuesday 15.00pm Consumer confidence for November, previously at 39.8
- Wednesday 14.45pm Chicago PMI for November, previously at 58.4
- Wednesday 18.00pm Beige book release
- Thursday 15.00pm Manufacturing ISM for November, previously at 50.8
-
Friday 13.30pm NFPs for November, previously 80k; unemployment rate
previously 9%
EU DATA
THIS WEEK:
- Tuesday 10.00am Business climate index for November, previously at -0.18
- Tuesday 10.00am Consumer sentiment for November, previously at -20.4
- Wednesday 10.00am Flash HICP for November, previously at 3% y/y
- Wednesday 10.00am Unemployment for October, previously at 10.2%
- Thursday 08.58am Manufacturing PMI for October, previously at 46.4
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Private Clients:
For private clients we can carry out a similar service, helping you get the best rate of exchange for an overseas property purchase or sale, your wages, building work, a new car, a wedding or indeed any particular need to exchange money from bank to bank. Contact me djw@currencies.co.uk with what you are looking to do and a contact numebr and I will get in touch shortly.
U.K GDP (Gross Domestic Product) Data as expected and Happy Thanksgiving to our readers in the States!
This morning probably the biggest potential market mover of the day for the Pound came out exactly as had been expected and the markets are fairly flat following this….
Roughly 0.5% movement back for the AUD, NZD and ZAR against the Pound but all in all the markets are flat as a pancake so far so no need to panic if you have an imminent trade to carry out.
Also, happy Thanksgiving to all in the USA and I hope you have a great day over there!!
This may lead to slightly thinner trading due to the American markets being closed which sometimes can add to voliatility if something does happen so you should be aware of this as well!
Bank of England minutes most important for the Pound – released tomorrow morning… Will Mervyn King do Sterling a favour for once?? Doubtful!
Well what can I say…. I go away for a long weekend and the Pound has slipped away again against the Euro….. The single currency appears to not know how to lay down and give up, and investors out there somewhere are still more than happy to back it.
Tomorrow morning is the next key data due for the U.K and indeed the Pound – further doom and gloom from the U.K could knock the Pound even further against the Euro.
The Pound is indeed still gaining ground against the perceived ‘riskier currencies’ such as the AUD, NZD and ZAR as investors risk appetite declines accross the world, as mentioned before when risk appetite is generally low then the more exotic currencies can tend to weaken…. great news for those of you looking to emigrate further afield!
Personally I feel the Pound will creep up a little further against the AUD, NZD and ZAR in the near term, until some major issues accross Europe at least have reasonably solid solutions in place to resolve them.
Tomorrow will be key for those with Euro requirements be it buying or selling as we could easily see a shift of quite some force surrounding the Bank of England’s release. It would not surprise me to see the Pound struggle again against the Euro and a spanner to be thrown into the works, it is easy when you have a currency transaction to carry out to stare upwards and just hope that rates follw suit, the problem is the currency markets can quite easily nip in your back pocket and steal your wallet whilst you are looking at the sky, and there is no guarantee that they will give it back and rates will return.
If you have a currency requirement imminently or in the coming months then do feel free to contact me directly djw@currencies.co.uk and I will be confident that you receive a much better rate of exchange than using your bank or another broker by using me – So far this year through this site alone 231 people have got in touch and used me personally, joining our growing list of over 40,000 clients here at Foreign Currency Direct.
Important data releases that could have an impact for the week ahead for sterling exchange rates.
Below is an outline of some of the key data releases that could effect your up and coming currency convesion this week. Some of the main ones to look out for must be the Bank of England’s minutes out on Wednesday morning and the second estimate of Q3 GDP out the day after. Have a glance through the list and if you are concerned about how any specific data release may affect your conversion please feel free to contact me at bma@currencies.co.uk. I will then contact you to discuss the options that are available to you.
UK DATA THIS WEEK:
•Tuesday 09.30am Public borrowing for October, previously 14.138 bio
•Wednesday 09.30am Minutes of previous MPC meeting release (9/10 Nov)
•Wednesday 09.30am BBA mortgage approvals for October, previously at 33,130 k
•Thursday 09.30am 2nd estimate of Q3 GDP, previously at 0.5% q/q and 0.5% y/y
•Thursday 12.00 pm CBI Industrial trends for November, previously at -18
US DATA THIS WEEK:
•Monday 15.00pm Existing home sales for October, previously at 4.91 mio
•Tuesday 13.30pm 2nd estimate of Q3 GDP, previously at 2.5% q/q annualised
•Tuesday 19.00pm Minutes of prior FOMC meeting release (1/2 Nov)
•Wednesday 13.30pm Durable goods orders for October, previously at -0.6% m/m
•Wednesday 13.30pm Personal spending for October, previously at 0.6% m/m
•Wednesday 13.30pm Building permits for October, previously at 594k
•Wednesday 14.55pm Final University of Michigan for November, previously at 64.2
•Thursday – Thanksgiving
EU DATA THIS WEEK:
•Tuesday 16.00pm Flash consumer sentiment for November, previously at -19.9
•Wednesday 08.28am Flash German manufacturing PMI for November, previously at 49.1
•Wednesday 08.58am Flash manufacturing PMI for November, previously at 47.1
•Wednesday 10.00am Industrial new orders for September, previously 1.9% m/m
•Thursday 07.00am Final German Q3 GDP, previously at 0.5% q/q
•Thursday 09.00am German IFO business climate for November, previously at 106.4
•Thursday 09.00am German IFO current conditions for November, previously at 116.7
•Thursday 09.00am German IFO expectations for November, previously at 97
Southern Hemisphere Currency Warning!!!
We have seen a decent spike for the pound over the last week or so against the southern hemisphere currencies. This morning sterling exchange rates are trading up at 1.5855 against the Aussie Dollar, 2.0960 against the Kiwi Dollar and 13.00 against the South African Rand.
However clients who need to buy AUD, NZD or ZAR need to be acutely aware of how the problems in the Eurozone are affecting your exchange rates.
Traditionally the higher rates of interest offered in these countries means that investors who are getting a poor return on their savings in areas such as the UK, the Eurozone and even the US buy significant volumes with the aim of holding them and benefiting from the greater interest paid out (known as carry trading) – supply and demand means that the more people looking to buy a currency the more expensive it gets – a trend we have seen since the financial crisis began 3 years ago and worldwide interest rates were slashed.
This trend is reversed when we see major political or economic upheaval as investors sell their Southern Hemisphere Currencies and repatriate their funds for a short period of time until things “settle down again” – this causes a huge drop in demand and we get an exchange rate spike such as we saw in the middle of August, the end of September and during November so far.
With Greece, Italy and Spain putting new Governments in place over the last week and things are again “settling down” I would expect to see demand for these high yielding currencies go up and hence exchange rates for sterling weaken slightly. Now by no means is this a science and there a huge number of other contributing factors but this is a pattern that we have seen time and time again – If you have a need for any of these currencies now may be a key time to secure your funds either on a spot or forward contract. Make sure you keep me aware on bma@currencies.co.uk so I can continue to act as your eyes and ears into the world’s most volatile market. Let me know what your requirement is and we can assess the markets and decide when may be a key time to secure your currency.
Retail sales better than expected – The Pound however does not move accordingly
Retail sales came out this morning however the release did not lead to a major market movement in the right direction, somehow in these times of high unemployment and standing on the edge of another recession people are still spening plenty of money.
Many of my clients I speak to involved in manufacturing and retail are not exactly having a great time out there and I think (and so must investors hence the minimal strength today) that this is merely a minor jump in the right direction and 2012 will not start so well…. The Dollar had continued its run of form over this morning however the Pound has boxed its way back ever so slightly in early afternoon trading, consumer confidence figures for the U.K tonight are the next big focus point for the U.K and it would surprise me to see these to come out farily poor.
We appear to be range bound against the Euro this week (1.16s – 1.17s) as we awaiti the next big surprise to push the pairing one way or another, personally I think the European problems will come back to a head agian sooner than you can say “super mario” however another prolonged cover up could well take place in the lead up to Christmas too….
Absolutely anything could happen next with these markets so make sure you are on the ball and in a position to jump on a rate of exchange should the ideal one come along – Fill in the enquiry form on the right hand side of this page and one of our experienced traders will be happy to call to discuss the various options available to you.
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