Monthly Archives: May 2012
Will the pound remain this strong for much longer?
The pound has been on an incredible run of form in the last few weeks as fears over the single currency cause investors to change their positions according to changing economic sentiments. Sterling against the Kiwi, Rand, Loonie and Aussie has been at its best all year in the last couple of weeks. And against the Euro and Dollar too, the pound has made excellent gains which many have capitalised on. The question we can now ask is what next, will this run continue? We have covered in posts over the last few weeks how the pound has found favour because of the UK’s approach to its debts and budget deficit. Compared to the mire developing in the Eurozone, and the US’s reluctant attitude to confront its debt problems, the pound has found favour as traders feel the UK is setting itself up to be in a better position down the road. Is this really the case though?
There are a number of reasons why anyone hoping the pound will continue to make gains on EUR, USD, AUD, CAD, NZD, ZAR and all the rest should beware. Let me explain some of them here:
We are in recession! Stating the obvious perhaps? But when this was announced last month the pound barely moved against most currencies. Recession means the economy is shrinking. That makes dealing with the massive debt pile even more burdensome. With Mervyn King himself predicting no return to growth until the later part of the year the economy and the UK’s ability to tackle its debt has therefore stalled. Will those investors who currently favour the UK’s approach be so supportive if the very measures designed to keep the UK ‘safe’ are in fact doing more harm than good? I would not be surpised to see a real run of bad data in the coming months particularly with the Eurozone crisis going from bad to worse.
UK plc needs a strong Europe You do not need to read too far in the press to find negative comments about Europe. This has and probably always will be the case. The reality nowadays is the UK needs a strong Europe to keep our economy strong and foster growth. One estimate puts at 40% the amount of trade the UK receives from Europe. Many of the private businesses Mr Cameron and co regularly put pressure on to drive through the recovery, rely heavily on orders from Europe. The UK is also deeply exposed to the European debt crisis through our banking sector. If the banks runs in Europe continue to weigh on the European banking sector and the Governments and banks cannot pay back their debts to the UK, we could see UK banks needing recapitalisation. The UK is still limping, licking its wounds from the last financial crisis. The last thing it needs is another kicking now! If considering any transactions involving the pound the next few weeks could really push things one way or the other. To find out more specific to your requirements please feel free to contact me personally on jmw@currencies.co.uk or call +44 1494 787 478.
More QE may be inevitable More Quantitative Easing may be the only option to kickstart the UK’s economy later this year after we are all partied out from the Olympic and Queen’s Jubilee celebrations.
Markets move on sentiment and rumour The currency markets are often only reflections of sentiments. Currently the UK is favoured but this can quickly change. This Thursday, May 24th we have the first revision of UK GDP data for Q1. This data could well expose the reality that the situation in the UK may well get much worse before it gets better. Despite the huge undertakings by the current government the UK’s debt position is still torrid. The fear that may easily creep into investors minds in the coming weeks may be the reality the coalition has cut too much, too fast and has choked off the recovery. Remember it only needs to be these sentiments that develop for the situation to turn. If you are considering an exchange and are happy with current levels or would trade at a slightly better rate why not make us aware? Our highly personal service is designed to ensure you get the most from the markets and we can be your eyes and ears in the market.
I feel personally that with so many clear challenges ahead for the UK, the current positive sentiments for the pound may soon falter. One thing you should always prepare for on exchange rates is the unexpected and if considering any currency exchanges at the moment, to beware of all the events that could move your rate. The current Eurozone crisis may only get more problematic in the coming weeks and the negative effect this could have on the UK and the pound should not be forgotten.
Here at pound sterling forecast we are currency specialists working for the UK’s top currency brokerage. Through this website we can not only offer our expert analysis and opinion, but can also personally assist prospective clients with our award winning service and rates. I have never had any trouble making sure anyone who contacts me via this site gets the very best rates. Even if you have another source you are using, it is always worth a second opinion to double check what you are doing and that you really are getting the best deal. We offer a highly personal service to clients all over the world so to find out more about all of your options please feel free to email me directly on jmw@currencies.co.uk or call +44 1494 787 478.
I look forward to hearing from you.
Dollar rates continue to strengthen as credit rating for Spanish bank Santander cut
US dollar rates have continued to strengthen and I personally feel are likely to continue in this fashion as global economic uncertainty continues to rise. Yesterday Bank of Santander along with 15 other banks in Spain were downgraded because it could not guarantee the ability of the Spanish government to provide the support they need. This is likley, in my opinion to keep pressure mounting on the Euro and is also more than likely to continue the current trading conditions we are seeing. I would expect the dollar to be a major mover benefitting from its ‘safe haven’ tag and I would expect the USD to post further strong gains towards 1.55 against the pound and 1.25 against the Euro. Good news if you are selling dollars but those buying may need to reasses their options.
As my colleague Ben also alluded to in his post yesterday, I also feel the so called ‘riskier’ currencies such as the AUD, NZD and ZAR will also lose further ground from this economic turmoil. These currencies are notoriously popular during times of more stabe conditions due to their higher yields and hence potential return for investors. Through the use of a ‘carry trade’ investors borrow in low yielding currencies ie JPY, CHF and seek alternatives with much greater interest rates, hence the move towards the AUD (at 3.75%) NZD (2.5%) and ZAR (5.5%). However during a downturn in global confidence you will often see the unwinding of these trades and an influx of currency to the market, through simply supply and demand – the more of a currency the cheaper it becomes and therfore the value of the sold currency falls. These moves to me are likley to continue and I would expect GBP/AUD to head towards 1.65, GBP/NZD to 2.10 and GBP/ZAR close to 13.5. Likewise I would expect currencies such as the Yen to find support and strengthen against the pound and dollar.
As a specialist broker here at currencies.co.uk the purpose of this website is to give our market knowledge and opinions to private and corporate clients alike in an attempt to help you make the decision as when best to trade. Of course it is impossible to get it right all the time, although some traders think they do, but we can happily provide you with the tools and data to try and pin point the right time for you and your requirement. To utilise the service please keep following the blog and take a look at some of the other websites we also regularly post on including www.eurorateforecast.com and www.australiandollarforecast.com
Should you wish to reach me direct to discuss my views and to trun though your individual transfer in more detail then please email Mike at mgv@currencies.co.uk or call 01494 787 478
One month away from the election in Greece should help the AUD, NZD & ZAR claw back some of its losses.
Good morning readers,
In early morning trading in the UK the pound has started off the trading session in much the same way it finished yesterday with red screens. Sterling has dipped below 1.25 against the Euro and now below 1.59 against the USD.
With no economic data off note to come out of the UK today, eyes will be on David Cameron as he prepares to give a speech to business leaders in Manchester. Depending on his tone the pound could react one way or the other as he will talk up how he prepares to protect the UK from a spiralling Euro zone crisis.
I have stated before that what is happening in Greece is having a knock on effect on all major currencies. Now that we know that an election is Greece has been called for the 17th of June I feel this will help the market settle down slightly. Take the southern hemisphere currencies for instance. (AUD, NZD & ZAR) The pound has gained by over 10 cents against some of them recently mainly down to investors fleeing the riskier currencies. Now that we have a month or so before any major news comes out from Greece I think we may see investors move back into the riskier currencies and hence the pound may come back down a cent or two over the coming weeks.
Regardless of which way the currency markets go a sharp correction for the pound cannot be written off. We have seen on far too many occasions over the last year or two that when the pound spikes it normally comes crashing down. With rates at 2.07 against the Kiwi Dollar 1.60 v the Aussie Dollar and 13.2 v the Rand you may want to think about limiting your exposure to the market movements.
If you speak with me via the number on the side of this page 01494 787 478 just ask for Ben Amrany when you call or email me at bma@currencies.co.uk I can talk you through the different options that may be suitable, from stop loss and limit orders to forward buying your currency if you want peace of mind. Some of these contract types will protect the price of your upcoming property or any purchase that you are making. The limits do not commit you to today’s rate thus allowing you to take advantage of any brief spikes. The stop loss can protect you from any adverse market movements.
As well as us trying to help protect you from any adverse market movements we will also make sure that we beat the rates of exchange that your bank will offer you. This helps you make the biggest saving possible. We are one of the largest currency brokers in the UK and we have been trading for over 12 years now. We specialise in currency exchange and do not deal with any other financial products. We will offer you a very personal service talking you through all the options that are available to you to help you maximise your currency exchange.
If you would like to speak with me regarding any major currency pair you can contact me at bma@currencies.co.uk or call on 01494 787 478 and just ask for Ben Amrany.
Ben Amrany
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
Sterling strength continues Euro weakness and attitude to risk is dropping like a stone.
The Pound has started the week off fairly strongly once again against most major currencies as European woes continue and global risk seems to be getting lower by the hour… I know my shares are certainly tumbling off the back of this news too which is quite depressing!
Pretty much daily now we are seeing new problems either economically or politically throughout the Eurozone and it looks like this trend could easily continue.
We have France with a new President seemingly unwilling to get involved with austerity, Greece not being able to agree on anything, Spain bailing out their banks and a whole host of other problems dotted around.
Nothing is set in stone and suprises can pop up at any point on the currency market but with the Pound seemingly being used as a safer haven and all of the above actually happening personally if i had Euros to sell I would be looking at doing something fairly rapidly.
Regarding buying the riskier currencies it does become tempting to at least hedge your bets and book half of your requirement so that you can at least guarantee yourself half of your funds at a rate that would have been fantastic around six weeks ago.
If you were planning on using your bank for the exchange then i can assist you, likewise if you currently use a broker I am only one email away for you to compare to make sure you really are getting the best rate of exchange for your transfer.
Feel free to get in touch with me directly djw@currencies.co.uk or join or mailing list by filling in the form at the top right hand corner of this page, only this morning I helped a client who has ended up with over £12,000 more of Australian Dollars since he has been following this site both in terms of holding off from booking out a rate when we were a lows a few weeks back and getting a much better rate of exchange than his bank now he has decided to book out his currency.
Can the pound continue its recent strong run to finish off the week?
Sterling exchange rates have fallen slightly this morning but are still set to post strong gains across the board this week, continuing a run that has now seen the pound set some levels not seen for a good while. Notably reaching a high not seen since November 2008 against the Euro, remaining close to a seven month high against the greenback (USD) and trading at year highs against the AUD and NZD. However it is not just the so called major currencies that the pound has posted strong gains and I thought the below table would make interesting reading for regular followers of this website.
|
Currency |
% increase |
Extra |
|
Indian Rupee |
18.0% |
INR |
|
Hungarian |
17.4% |
HUF |
|
Polish Zloty |
15.9% |
PLN 83,793 |
|
South |
14.1% |
ZAR 182,313 |
|
Czech Koruna |
12.6% |
CZK 395,766 |
|
Mexican Peso |
12.3% |
MXN 267,168 |
Working for one of the UK’s largest independent currency brokers I come across a number of different clients with varying requirements predominantly dominated by the majors. Remember, at Currencies.co.uk we are happy to assist you with the exchange and transfer of money for a huge variety of reasons such as property, emigration, investments, cars, weddings, hotel bills, imports and exports to name but a few. So, if you, a friend, relative, colleague or your business have currency exposure that you have not already discussed with a broker then email me directly to mgv@currencies.co.uk – alternatively call 01494 787478 and ask for Mike quoting PSF.
To finish off lets take a look at the data today to keep a close eye on:
This morning at 09:30 we have UK PPI (Producer Price Index) data – figures expected to fall sharply from 1.0% to -1% – this could hamper to the pounds recent run this morning.
At 13:30 we have US PPI data – expected to post a small fall from 0.3% to 0.2% – this could cause some small dollar weakness in the afternoon session but I would expect this to be minimal.
Finally also at 13:30 we have Canadian unemployment figures, expected to increase from 7.2% to 7.3% – watch out for the loonie (CAD) to weaken a touch this afternoon, potential creating some good buy opportunities.
To discuss the best way to exchange your foreign currency and to discuss my personal views email Mike at mgv@currencies.co.uk
GBP/EUR Hits 3 and a Half Year High
Sterling has continued its sharp rise against the euro this week, blowing past predictions out of the water and proving that in the currency markets there is no such thing as certainty. In October of 2011, GBP/EUR levels were sitting around the 1.15 mark and analysts were queuing up to predict not if but when the single currency would reach parity against GBP. 9 months on and my how the picture has changed. Whilst the UK may be cursing the weather gods and wondering if two days sun in March was as good as it was going to get, there is no doubt are economy is in a better position and in turn our currency has benefited from this and the decline of others.
GBP levels have reached a 3 and a half year high against the EUR and there is no doubt this has coincided with major unrest in Europe, manifested by poor growth prospects and high levels of government debt. Greece and Spain are the two we hear most about in the news but Portugal, Ireland, Holland and Italy (with others following suit) are all having to implement heavy austerity measures and cost cutting, which is proving both unmanageable and very unpopular amongst the locals. Add to this the new French President who is concerned primarily with France’s short-term welfare, not Europe’s and it is no surprise investor confidence is ebbing lower and lower.
I do believe the current strength we are seeing for GBP is primarily to do with the problems in Europe, rather than any real long-term confidence in our own currency and for this reason I do feel a move back down to 1.20 is not out of the question over the coming months, providing there is some sort of long-term sustainable plan for ‘saving’ the EU and its single currency. In my opinion however, we will continue to see Sterling push on and a move past 1.25, which is currently providing some kind of resistance, is very possible based on current global economic conditions.
If you have an upcoming currency transfer and would like to hear about our various contract types, or require information on the markets then please feel free to contact me directly at mtv@currencies.co.uk or on 01494 787 478.
Will the Bank of England launch more QE today? Bank of England Rate decision 12.00 noon UK Time. GBP still the market’s favourite
Today sees the biggest economic release of the week in the form of the Bank of England Interest Rate decision. This will dictate sterling movements today and is well worth being aware of if considering any currency transfers involving the pound.
In the first full working week of every month the Bank of England’s Monetary Policy Committee meets to discuss whether or not they will make any changes to the UK’s base interest rate and any changes in their ‘asset purchase facility’, also known as QE.
Interest Rates – It is always worth being aware of the interest rate of the central bank for the currency you are concerned with. Generally speaking the lower a rate the weaker the currency. And vice versa the higher the rate, the stronger the currency. In much the same way as a higher interest rate attracts savers to a bank account, a higher central bank rate increases the likelihood of investment in that country and hence currency. The mere sentiment an interest rate will be raised or lowered can cause exchange rates to move as investors move money to take advantage of any perceived future gains.
The UK has had interest rates at 0.5% ( an all time low) for 3 years because of the financial crisis. A lower interest rate helps boost an economy by making borrowing cheaper and increases the chance of growth in the economy. It is highly unlikely we shall see any interest rate movement today, but the fact the UK is probably going to be the first of the US, UK and Europe to be raising interest rates (even though not for at least a year) is causing the pound to strengthen at the moment. The lowering or raising of Interest Rates is not the only way a central bank can influence the economy however…
Quantitative Easing – QE or the ‘asset purchase facility’ as it is known is the process whereby the Bank of England purchases assets of banks to create extra money which allows the banks to lend more to private individuals and businesses, thereby stimulating the economy. Seen as a dirty word by some, QE increases the money supply and generally causes the currency to weaken. Some would question its effects on the economy but it is impossible to say what state the UK would be in now, had it not been for the previous rounds of QE. Employed by the US and Japan it was previously seen as a method of last resort, now more of a crutch for economies struggling to grow.
Considering the UK is now technically back in recession and Eurozone issues look set to get even more complicated we may see the BoE adopt a pre-emptive strike as they did last year. I personally do not think they will but for anyone looking to purchase the pound, this morning’s news is well worth waiting for. But if you do not see the rate go the way you had wished I would be set for further losses because if there is no change in rates or QE then we may see a ‘relief rally’ as the market picks up slightly countering any drop prior to the release in expectation of more QE.
If you are considering any currency transfers and would like assistance with securing with the very best exchange rates and free no obligation information about all of the events moving your exchange rate including forecasts, please contact me Jonathan directly on 01494 787 478, quoting PSF or email me directly jmw@currencies.co.uk
Any comments, questions, suggestions or enquiries welcome.
Jonathan
