Daily Archives: May 16, 2012
Sterling weakens against all major currencies on the back of the Bank of England’s Inflation report
Sterling has been on a terrific run against a host of currencies but this afternoon has started to weaken against most of the majors. We have seen the pound dip by 0.5% against the Euro & down to a 4 and a half week low against the USD while losing up to 1% against some southern hemisphere currencies. Contact me at bma@currencies.co.uk if you want to speak with meabout the outlook going forward.
The Governor of the Bank of England released his inflation report this morning and it sent the pound tumbling. He forecasted weaker growth and their 1.6% inflation forecast left room for more quantitative easing (QE). The negative outlook of QE is where the Bank of England print extra money to buy bonds which prompts traders to sell the pound hence weakening the currency. This morning’s fears go to show how much of a dent the mere mention of QE can effect sterling exchange rates.
The BoE also commented that escalating dangers from the euro zone crisis posed risks to the UK economic outlook, mainly in the banking sector which also contributed to a reversal of the recent trend. Events in Europe are driving the currency markets at present causing big swings for a host of currencies. We are expecting fresh elections in Greece and if things do not go well then this could be the beginning of seeing a country leave the Euro zone. If this did occur then we could see the currency market erupt with extremely large trades moving out of the riskier currencies and back to the safe haven ones.
The gloomy outlook from the BoE and the fact Britain is back in recession may hamper demand for the pound while the situation in Greece and the whole of Europe remains very uncertain. This leads me to believe that we may see the pound continue to struggle against the USD and should be rangebound between 1.57-1.60 in the near term. Against the Euro I do not expect to see a big loss for sterling and again will linger around this 1.24-1.2550 range.
If you are selling Euros to buy the pound and hoping that we may see a big decline against the Euro on the back of the QE scenario I personally feel that we will not see any significant movements in your favour so my recommendation would be to look at selling your position sooner rather than later to stop the recent loss.
Here at pound sterling forecast you can place limit orders in the markets and forward buy your currency if you do not have full funds available at present and would like the peace of mind aspect as to how much you will be achieving. if you would like to speak with me about any major currency pair we can look at all the options that are available to you to help you make as big a saving over the banks as possible. Please feel free to send me any questions or queries that you may have to bma@currencies.co.uk and we can discuss the mechanics of trading.
Ben Amrany
What now for the pound? Forecast GBP/EUR, GBP/USD, AUD, NZD and ZAR
Sterling exchange rates fell yesterday to a 3 week low against the greenback falling back into the 1.59 territory. This is a something that I personally feel could continue, particularly with the continuing unrest in Europe. With the US dollar still very much the global currency of choice (mainly as so many commodities are priced in dollars) during times of unrest the dollar will normally outperform most majors. I for one feel this trend is close to happening as investors digest the problems facing Spain (their bond prices reached a record high for 2012 on Monday at 6.218%). This is creeping ever closer to the 7% levels at which Greece, Portugal and Ireland had to seek bailouts and with Spain potentially a much larger problem, I really feel this will weigh on the Euro (I would expect levels to remain above 1.25 heading towards 1.26 and beyond in the short term).
For this reason I too think the US dollar will begin to find support as investor’s look to move their money to the relative safety of the dollar and we could easily see a move back towards 1.58 in the coming days. For the best exchange rates on your transfer and to discuss the various contracts we can offer in an attempt to maximise your currency exchange then please email Mike at mgv@currencies.co.uk
Greece heads back to the polls as Hollande officially takes over from Sarkozy
Greece is set to go to the polls again after days of coalition talks failed to produce an agreement on a new government, on the day the new French president Francois Hollande was officially sworn into office. Mr Hollande said he was aware of the challenges ahead, including the debt crisis, and vowed to “open a new path in Europe”.
Mr Hollande called for “a compromise” over the German-led focus on austerity as the way out of the Eurozone, however in on goings in Greece still appear to be dominating the Eurozone and the Euro.
At the elections on 6th May, the results showed a majority of Greek voters backing parties opposed to austerity plans demanded by the EU and IMF in return for two bailouts. Polls suggest the leftist Syriza bloc, which came second in the 6th
May vote and rejects all further cutbacks, could become the largest party after a new election. Syriza wants to renegotiate the bailout package but also wants to keep Greece in the euro.
However European leaders say they will cut funding for Greece if it rejects the bailout agreed in March. This would effectively mean bankruptcy for Greece and German Finance Minister Wolfgang Schaueble again ruled out amending the agreement. The Greek president Karolos Papoulias will meet all political leaders at 13:00 local time (10:00 GMT) on Wednesday to put in place an interim government until the new vote, which is expected to take
place on 10th or 17th June.
I feel this will continue to heap pressure on the Euro and any Euro sellers, certainly if funds are not liquid, may wish to consider a forward contract to guarantee their rate in advance. For Euro buyers this is potentially good news, however for anyone with an interest in GBP/EUR look out for the unemployment figures and Bank of England Inflation report at 09:30 and 10:30 respectiveley.
What now for the Aussie, Kiwi and Rand?
Recent moves against these three currencies have been dramatic to say the least. Since the year lows in February we have seen the pound gain 9.5% against the Aussie, 9.7% against the Kiwi and 10.8% against the Rand. On a transfer of £200k between the high and low during this time this makes a respective difference of AUD 29,400, NZD 41,400 and ZAR 288,000. Is it time to take advantage?
This recent trend must be somewhat of a relief to the many clients and individuals emigrating to that part of world. I personally feel with the volatility in Greece this trend could continue in theshort term. But to use the analogy of an elastic band, I do feel these currencies could snap back at any point. However until a degree of stability is restored in Greece (Christine Legarde head of the IMF was quick to rule out a breakup of the Euro) this run may continue, just make sure you are in a position to take advantage.
To dicuss the this report and my views or to run through yoru individual exchange requirement then please email Mike at mgv@currencies.co.uk or call 01494 787 478
