Daily Archives: April 12, 2012
Sterling remains strong against a basket of major currencies, but what next?
Recently the pound has been posting some excellent gains against a host of major currencies reaching close to an 18 month high against the Euro, a four month high against the Australian dollar and seen a near 7 cent gain against the US dollar in the last couple of months. But what now for the pound? Is this run likely to continue? These are questions a number of my clients are asking me and in many ways the I do not think anyone can hold their hand up with confidence and predict what direction the market will take next, however lets explore the potential outcomes and what data sets are coming up that may affect the pound against a number of commonly traded currencies.
GBP/EUR
Many Euro buyers have been waiting for the market to breach the 1.20 mark before dipping their toe in the market and now we have breached 1.21 level many have decided they are waiting for levels to creep towards the 1.25 mark, to me this could be a risky strategy and I have seen this happen on many occasions with people getting their fingers burnt. I do not feel this is necessarily the peak of the GBP/EUR range and I would not be surprised to see continued strength in the short term for the pound (mainly caused by the increased uncertainty in Europe and in particular the concerns within Spain) however I do feel many are forgetting and some ways dismissing the continued underlying problems in the UK. The situation in Europe is a European problem and not just that of the Euro zone, many forget that the UK too is massively exposed to the debt problems being the 3rd or 4th most heavily exposed nation to the debt. We therefore will also have huge problems should any of the Euro zone countries default and this is something that is likely to curb sterling from making any further significant gains against the Euro (in my opinion) and therefore a near 18 month high at current levels surely represents a good opportunity? Should you wish to discuss your thoughts or have an upcoming transfer then email Michael at mgv@currencies.co.uk
Data watch – for short term Euro buyers or sellers keep an German Consumer Price Index data tomorrow morning at 07:00. Expectations are for inflation figures to fall month on month from 0.7% to 0.3% – with inflationary pressure potentially falling within Europe this may give the European Central Bank more scope to cut interest rates in the coming months. For this reason I think GBP/EUR will remain within the 1.21/22 range but feel may struggle to actually breach the 1.22 level.
GBP/USD
As with GBP/EUR the pound has had a good recent run against the greenback breaching 1.60 last week for the first time in a number of months. The dollar has fought back slightly, however weaker employment figures from the US last week have lead to moves back towards the the 1.60 level. The dollar is a hard currency to predict as it is used as a global barometer for investors and often you find that the dollar moves in the opposite direction to what the data releases would normally suggest. In times of global economic uncertainty, however, one thing is usually certain and that is the fact the dollar will usually perform well and I feel the euro debacle will ultimately only benefit the dollar int he longer term. I would expect a move back towards the 1.55 mark in the coming months I would therefore view the current buy levels as attractive.
Data watch – US consumer price index tomorrow at 13:30. Figures expected to fall month on month from 0.4% to 0.2%, these figures are unlikely to influence the federal reserve with regards monetary policy and you would therefore expect interest rates to remain on hold for the foreseeable.
GBP/AUD
Recent gains againt the Australian dollar have been strong moving nearly 6% in the last few weeks alone. With growth forcasts down in China tomorrows GDP figures should be viewed with interest. Levels are expected to fall from 8.9% to 8.3% – this may have been priced in already and can be seen in the recent moves for the Aussie. With so much of Australian’s vast mining sector being exported to China the recent boom conditions in China has helped Australia no end, and although the growth figures in China are still comparatively strong compared with much of the rest of the world, the fact they are showing signs of a slow down could hamper the AUD further.
To disuss the market conditions in further detail and to run through the various contracts we can offer as one of the UK’s largest independent currency brokers please email me at mgv@currencies.co.uk
Sterling at current highs against the Euro, USD, Aussie & Kiwi Dollar. What next for the pound currency prediction
Good Morning readers,
Sterling has so far this month outperformed many of its major currency pairs hitting a 14 month high on a trade weighted basis while reaching a 3 month high against the Euro and very recently a 5 month high against the USD. Sterling has also strengthened to recent highs against the Aussie & Kiwi Dollar.
So why is sterling looking so resilient and what is around the corner for the great British pound?
The likelihood is that the pound has outperformed other currencies due to the poor performance of many other economies. The Euro is constantly being hit by the regions on going debt crisis. The US has recently been hit by poorer employment figures in the form of their nonfarm payroll which was out last Friday. Australia and New Zealand has seen their currencies weaken due to China’s economic growth slowdown.
The UK economy witnessed last week some positive data in the form of manufacturing, construction and the services sector. All data came out better than expected which boosted sterling but if you have a currency transfer to make selling the pound you must be wary as their is still a big threat hanging over the UK economy of a double dip recession due to weak growth, the risk of further QE by the Bank of England and the risk of a credit downgrade by one of the credit rating agencies.
I cannot stress more that with the current highs against a range of currencies I would not be surprised to see the pound weaken by a few per cent against a range of currencies. Over the last 4 years every time that the pound has spiked it has then gone on to lose a few cents very quickly. It seems that the pound is hitting a resistance barrier against the Euro at 1.2150, 1.60 against the USD and 1.55 against the AUD. If you are worried about any of the above email me at bma@currencies.co.uk and we can discuss your currency requirement in detail.
With more bad news to come out of Europe I feel that the pound will linger above 1.20 against the Euro for the foreseeable future. Due to the UK’s close ties with Europe though against a host of other currencies I can see sterling really struggle to push on. For this reason I feel the pound will weaken against the USD with a target level of 1.56 and we could see a drop back down to 1.50/1.52 against the Aussie Dollar.
So if you need to Sell Euros I would start to get in the mind-set that you will more than likely struggle to sell Euros below 1.20. If you need to buy any major currency please do contact me at bma@currencies.co.uk and we can look at the currency pair that you are dealing with. I will give you our expert opinion which may help you decide when is the best time to convert your funds. We offer much better rates of exchange than the high street banks. If you are using a broker at present challenge me to achieve a better rate than them to help make you the best saving on your currency transfer.
