If you are interested in GBPEUR or GBPUSD you need to know about risk appetite
Exchange Rates move as demand for a currency increases or decreases. As investors increase their investment in certain currencies we see movement on exchange rates as the price increases and falls. One of the main dictators on investors attitudes to investment is their ‘risk appetite’, i.e appetite for risk. Investors don’t want to be caught out so they will often move in unison to avoid being caught out.
Risk Appetite is very important to understand on exchange rates because it helps us to undestand why rates move the way they do. If we are looking to buy or sell a currency being aware of the sentiments of investors will help you to make a more informed decision and should lead to a much better exchange rate.
The reason I am explaining this is because in my role as a specialist currency broker assisting private and commercial clients with their currency transfers, I am often asked why things have happened and the whole idea of this site is to help anyone making a transfer save money on their rate by getting a better deal and also to time their exchange correctly.
Risk Appetite is a major driver on exchange rates at present with a few key trends emerging according to the sentiments. The concerns are all to do with the Eurozone and the outlook for the global economy.
EURO – If risk appetite is low the Euro will probably weaken. This is why the Euro has weakened so much lately. But as the last 24 hrs shows us, good news can cause risk appetite and confidence to return. GBPEUR high this week 1.252, the low 1.2360. If you would like to trade at these kind of rates not the rates offered by banks we can help, contact me no jmw@currencies.co.uk for more information.
USD – The US dollar is a safe haven. When risk appetite is low investors will move to the dollar to keep their money ‘safe’. Due to the size of the US economy it is thought that whatever happens, dollars are always worth holding and as such the Dollar remains fairly strong. But when confidence returns and risk appetite is high investors look to other riskier assets and the dollar will weaken.
STERLING – Also a safe haven, but has weakened off massively in recent years reflected by the decline of economic and political influence the UK has over the world. We have seen the pound find favour lately but it could easily fall like it did last year. The UK is not the force it used to be but maintains an important platform on the international stage and the pound will always benefit from its history and status amongst the other currencies.
AUD, KIWI, ZAR (RAND) – These are the riskier assets that strengthen when risk appetite is high. They offer higher interest rates than the major currencies and as such investors pile in when they think there is a good chance they will appreciate in value (plus investors gain from the trade due to the higher interest rates). Even though these economies are arguably stronger and performing better than their Western partners, their currencies are deemed riskier and hence will fluctuate according to sentiment. Anyone tracking these will have noticed they have toughened up today due to the EU summit coming out positive for the Euro.
CAD, NOK – Also to an extent riskier but lately have weakened due to the falling price of Oil. If global demand (orders) pick up due to confidence in the Eurozone returning, the price of Oil could start to increase and hence these currencies will strengthen.
Next week is a really important week for the pound and I think we could well see the pound lose more ground. Please see my post earlier this week http://www.poundsterlingforecast.com/2012/06/26/why-i-think-the-pound-will-fall-soon-good-news-for-sterling-buyers-bad-news-for-sellers/
This site is set up to offer our clients and new clients informatoon on exchange rates with a view to saving them money. If you are unsure if you are getting the best rate or would like any information on what is driving your exchange rate, please conatct me personally as I would be very pleased to speak to you about your trade and why I am wholly confident we can offer you a much better proposition.
For further infiormation please speak to me Jonathan on 00 44 1494 787 478 oremail jmw@currencies.co.uk
Enjoy the weekend
