Monthly Archives: July 2012
Will UK interest rates be slashed over the coming months! Where will sterling trade against the EUR & USD over the next 2 months?
A quick Sterling exchange rates overview
Sterling exchaneg rates had a very quiet day as you can see from the table above. There was very little movement for the pound as the markets are eagerly awaiting central bank announcements on Thursday from the Bank of England (BoE) and European Central Bank (ECB) on their interest rate decisions.
While the pound has still remained strong against the Euro, against many other currencies the fundamental issues with the state of the UK economy and the knock on effect of issues in Europe has caused the pound to lose value against most of the other majors. Significant losses yesterday include breaching a 4 month low against the AUD and SEK and 3 month lows against the NZD and ZAR.
With a lot of pressure on the state of the UK economy and rumours of stagnant growth over the rest of the year I would not be surprised to see sterling exchange rates weaken further
in Q3 & Q4. Predictions for the coming 2 months of Lows of 1.24 v EUR & 1.52 V USD. If these predictions are a concern or a nice surprise and would like to discuss what this may do for your currency exchange please do feel free to contact me at bma@currencies.co.uk
UK Interest rates to be slashed?
This Thursday the Bank of England will head into one of the most difficult decisions they will have to make this year. Over the last few months the BoE have had to decide if they
should pump more money into the economy through QE. It now seems hat there are calls for the bank to decide if further stimulus is the right way to go or if they should look at cutting interest rates further. It has been a good 3 years since we have written about interest rate cuts for the UK.
The reasoning behind the call seems to be down to the negative data of late to come out of the UK. The economy contracted a lot more than what was expected recently. Yesterday we learnt that house prices have dipped, mortgage approvals hit an 18 month low, consumer spending dropped and money supply figures showed their biggest annual drop since records began in 1983. The main factor though is how the UK is extremely vulnerable to a deepening Eurozone crisis.
In the event of an unexpected rate cut the pound could weaken by a lot more than when QE was first introduced into the UK. This could be by as much as 4-6% A rate cut would turn investors away and is generally seen as very negative for the exchange rate in question.
I personally feel that this month policy will be unaltered but if things continue to deteriorate in the UK or in Europe then we may just see that rate cut. Be cautious, if you do require buying a currency over the next few months you would not want to get your fingers burnt by the unexpected. Rates against the Euro are still trading right up at the 4 year high and we have numerous options that may meet your requirements regardless of if you are buying or selling sterling. Please feel free to contact me at bma@currencies.co.uk and I will be happy to explain all the options that are available to you.
Olympic opening Ceremony sums up that Britain is indeed great – And anyone based in the U.K that saw the amount of people queuing for Euromillions lottery tickets on Friday do you believe we are deep in recession?
The scene was set and the script was written for the London Olympic opening ceremony to be a shocker… Surely something would go drastically wrong as the eyes of the worlds media watched eagerly for a large error. In fact in my opinion the whole thing was absolutely brilliant and showed what a fantastic force we are and bought a great deal ofjoy and confidence to the U.K as a whole.
Just before the start of the ceremony we had one major rush for Euromillions lottery tickets – Everyone I know bought lots and lots of tickets and every shop I went past on my home had people queuing out of the door, along with that most offices had syndicates running and there was a great buzz as to celebrate the Olympics 100 millionares were going to be made in the U.K as part of a raffle, along with a top prize of over €100,000,000. Needless to say I didn’t win the top prize or indeed become a millionaire but I did manage to get a whopping £45!
The point of all my gabbling on is that I think there are much better economic data figures to come from the U.K in the coming weeks and months, more than likely August/September should be a little more positive compared to what we have seen over the past few months which hopefully should lead to Sterling gaining back a little ground against most of the majors.
This is purely my opinion and I don’t know what is going on behind closed doors… With the Bank of England Interest Rate decision due out on Thursday anythnig can indeed be thrown into the mix.
Should you have a bank to bank currency transaction to carry out either imminently or in the future then I can personally help you. I deal with private and corporate clients and offer not only award winning rates of exchange but an award winning level of customer service to match. Email me today djw@currencies.co.uk if you would like assistance and I shall be more than happy to call you back, If you just want updates for now then feel free to join our mailing list by filling in the form at the top right hand side of this page.
Best time to buy euros?
Over the last 24 hours markets have again swung wildly and without notice. The movement on GBPEUR has been in excess of 1% and the reason behind it was comments made by Mario Draghi, the President of the European Central Bank (ECB.) He made a very strong statement saying that the Euro would survive and the ECB can do more than enough to save the euro from collapse. These strong comment gave confidence to the euro which gained against most currencies. Again this, in my option, gave sellers out there another last chance to move away from the single currency.
Regular readers should now have a good understanding that Europe takes a long time to change anything, so these comments should only be a short term thing. Plus I don’t know if anyone has tried to do anything in Europe in August but well it is extremely difficult due to the month long rest everyone of power seems to take. Even the top guys in Germany are off for 3 weeks so I personally would not be surprised to see GBPEUR will push back up to around 1.29 within the next 3 weeks. So again a great time to sell euros currently, and for buyers of the euro out there I would hold off. I think this is just a short term spike rather than a long term change in the general good fortune of the pound against the euro recently.
Dates to keep an eye out for next week.
- UK Consumer confidence
- European Consumer Confidence
- UK and European bond auctions
- Interest rate decisions for the UK and Europe
Each of these are well potential to change rates by several percent, making property, invoices, bills, wages all worth less or cost more. If you would like assistance in trying to time your transfer at a high use our
pro-active service, either myself or a co-writer here are willing to help if you wish by putting a strategy together for your situation.
To discuss this, or anything else, contact us today by either calling 01494 787-478 and asking for me Steve Eakins or via emailing me directly at hse@currencies.co.uk
Sterling Struggles As Predicted Due To Weak GDP So Is Another Interest Rate Cut On the Cards?
The pound dropped as anticipated yesterday following some horrendous UK GDP figures that will probably have George Osborne sleeping fitfully for some time. With the wet weather curbing spending and floods costing both insurance and delaying build projects it was no great surprise to see GDP much lower than forecast. Added to the extra bank holiday from the Jubilee which will have cost the economy much like the Royal Wedding, and the fact that our biggest trade partner, Europe, is slowing, then it is still difficult to see how the UK will get itself back on track to achieve growth in the near term.
The Bank of England have already pumped billions into the system and kept interest rates at a record low in an effort to kick start the economy. Whilst the debate rages as to whether this process is working (some say it has meant the recession is a lot better than it would have been without QE, others say it has been a total failure), it looks as though more QE will be on the cards in the not too distant future. More worrying though for anyone holding sterling are the rumours the Bank of England may cut interest rates by another 0.25% before the first quarter of next year, a move which would no doubt weaken the pound.
Why would they do this with rates so low already you may ask? Well it is all down to the current GBP EUR levels in my view. Whilst the government and BofE cant officially try and weaken sterling to gain a competitive advantage against other EU states, the idea of an export led recovery by UK manufacturers is largely being killed off by the problems in Europe. The decrease in European spending (our biggest market) and the cost of the pound going up against the Euro, has meant it is much more difficult for UK companies to export to the rest of Europe. Whilst the pound remains very weak against a whole basket of currencies, I disagree with many of my colleagues that GBP EUR will continue to rise much more. Europe will no doubt have huge amounts of obstacles to overcome, and the Euro will obviously remain under pressure. However, the euro crisis should not distract people from the fundamental weakness of the UK economy- if the economy is not growing then the whole deficit reduction targets upon which the government has based its strategy will be completely out of kilter. I wouldn’t be surprised to see an interest rate cut in another attempt to stimulate growth with a desired byproduct being a halt to the pounds recent surge to an ever weakening euro.
The future of exchange rates for the pound will depend on whether the Bank of England takes on board the recent data and makes a move sooner rather than later. If you are looking to buy Euros from sterling it may be prudent to secure something in case the markets begin to price in the possibility of a UK rate cut. For any more information please feel free to e-mail Colm at cmg@currencies.co.uk and I would be happy to help.
UK GDP drops sharply along with the pound – The best time to buy sterling this week?
Following on from this morning’s post we have seen GDP (Gross Domestic Product) data in the first estimate of Q2 GDP come in at -0.7% versus the expected -0.2%. This has weakend the pound against all currencies by about 0.2-0.8% taking the edge of recent levels, presenting a good buy sterling opportunity. 0.2% may not sound like much but on €300,000 transfer, it is 458 GBP. I don’t think anyone would turn down nearly 500 GBP for a mornings work! Indeed I have traded many of my clients selling Euros this morning on this spike.
For the reasons I covered at the end of this morning’s post we have not seen a major sell off of the pound which underlines the point I was making that the UK is holding its own because it is dealing with its debt problems. The pound is however still down slightly so I think this is presenting a good opportunity for anyone looking to buy sterling in the coming days and weeks.
If you would like further information about the markets or what is moving your rates please feel free to contact me on jmw@currencies.co.uk or call me on 01494 787 478 quoting PSF and asking to speak with me Jonathan.
What will the pound do today?
This morning at 09.30 am we have the first estimate of Q2 GDP in the UK and the estimate is that we will have had another quarter of contraction in the UK. This will be the third successive quarter and is not good news for the coalition or the Bank of England.
The estimate is predicted to come in at -0.2% versus the contraction we saw of -0.3% in Q1. One of the main reasons for this is the Queens Jubilee Celebrations which some say will have artificially weakened the quarter. This event is however a big unknown as any decline in prodictivity could have been offset by extra consumer spending and tourism. The fact that no one can say just what impact the celebrations had, means there could be some volatility if figures come out worse or better than expected.
‘The pound has actually been finding favour amonsgt traders and has been one of the better performers this year, and this is despite the recession!’
If shown to be worse than expected I expect the pound to suffer as this will be the third quarter of contraction in a row. We are in the midst of the dreaded double dip recession so the pound could easily lose vlaue. It is fair to say however that because the expectation is contraction, it would have to be significantly bad figures, say -0.5%, to really have a strong negative impact. The market has priced in bad news so the downside risk on this release is fairly limited.
‘The UK may not be about to enter an Industrial Revolution style era of growth but UK plc will enter prosperity once again. Can we make such predictions about where Europe will be?
The pound has actually been finding favour amonsgt traders this year and has been one of the better performers this year, and this is despite the recession! This is because the UK with control of it own currency and a fairly diversive, reactive and flexible economy is being seen as being able to manage its problems. The deficit reduction measures may be causing GDP to fall in the short term but it should prevent us entering a Greek style debt spiral in years to come. And when investors look at a currency they are often taking a long position of a few years rather than days and weeks.
We can look at the UK and have a rough idea of how the pound will be performing and where the economy will be in say 2, 3 or 5 years. This is the same for the US and Australia. The UK may not be about to enter an Industrial Revolution style era of growth but UK plc ’should’ be chugging away and entering prosperity once again soon. Can we make such predictions about where Europe will be? Absolutely not and this is why UK bonds (gilts) and hence the pound are relatively stable depsite these stagnant economic times. Therefore we know the news is going to be bad and as such I don’t expect too negative a move this morning, indeed we could see a relief rally whereby if the news is slightly better than expected, we see a big upside move as investors unwind their positions taken expecting a drop. For free daily updates please contact me directly as below.
The UK GDP figures are released at 09.30 am and could well affect short term movements on the pound. If you are considering any currency transfers now or in the future you can speak to us about all of your options ahead of the event. My personal email is jmw@currencies.co.uk and I will be more than happy to speak to anyone who would like assistance with a currency transfer or more infromation on the rates.
The week ahead of economic data – Pound Sterling forecast against Euro, U.S Dollar, Australian Dollar, New Zealand Dollar, Canadian Dollar, South African Rand and all majors – What will happen next with the Euro?
Euro Forecast and latest news from Europe
The Euro will remain the main talking point for weeks and months to come. Bond markets are showing extreme stress which is usually the first sign of a major crisis and the Euro has hit record lows against the Australian Dollar, New Zealand Dollar and Canadian Dollar recently.
The real question everyone is asking is just how much further will it go? Personally I feel there is more weakness to come. Bond markets in Spain are now at Euro era highs and well over 7% (usually the unofficial trigger point for a bailout) Spain is the headline concern at present and on Friday Valencia, Spain’s most indebted region asked for assistance and an 18 Billion Euro assistance program aimed to assist regional finances.
Should Spain require a bailout then we will see a much different kettle of fish to the bailouts we have seen of late, personally I feel it will trigger the beginning of the end of the Euro for numerous economies and global markets worldwide will become extremely fragile to say the least. If you have Euros to sell or indeed are in the process of selling a property overseas a forward contract may be sensible. With a forward contract you can lock into a rate of exchange for anything up to two years for just a small deposit (which can be taken in Sterling) taking away the stress of continuing Euro weakness and leaving you in the peace of mind you know how much money you will actually receive for your property. Feel free to get in touch today on 01494 787 478 or email me directly djw@currencies.co.uk for more information on this contract type.
Pound Sterling Forecast The week ahead
Tomorrow gives us a fairly quiet start to the week with European Consumer Confidence the most notable data release due out in the afternoon, however personally I feel the markets will be fixated on what is happening with European bond levels I feel the Sterling – Euro rate will edge closer to 1.30 throughout the day.
Tuesday we have mortgage approvals data for the U.K which was fairly poor last time around, and retail sales figures for Canada later on in the afternoon. One thing that may throw up some volatility at any point in the day is the fact that Troika (lenders from the European Central Bank, International Monetary Fund and the European Union are due to visit Greece.
Wednesday we have inflationary data from Australia very early in the morning so anyone with AUD interest may wish to put protection in place by means of a stop loss or limit order overnight. U.K GDP data is also out at 09:30am on Tuesday morning and after a fairly poor performance from the U.K of late any sign of things looking up and the Pound may have a good day. Lastly on Wednesday later on in the evening those with an interest in New Zealand Dollars should be aware we have the interest rate decision for New Zealand at 10:00pm. No major changes are expected however a sudden cut in rates could lead to a sharp weakening of the NZD overnight.
Thursday is fairly quiet data wise however like with Monday bond markets will no doubt be key and by Thursday I expect the pace of speculation about the troubles with Spain to be at a maximum leading to very volatile rates of exchange.
U.S annualized GDP figures are due on Friday afternoon along with a host of other data. In times of uncertainty you do tend to see the Dollar gain strength as investors pull of riskier assets and look for a ‘safer haven’. The reason this effects the AUD, NZD and ZAR and pretty much most majors is because as I am sure you can imagine it will affect attitude to risk and will lead to rapid movements of large amounts of money globally in what generally presents a volatile end to the week.
Should you have a bank to bank currency transaction to carry out either imminently or in the future then I can personally help you. I deal with private and corporate clients and offer not only award winning rates of exchange but an award winning level of customer service to match. Email me today djw@currencies.co.uk if you would like assistance and I shall be more than happy to call you back, If you just want updates for now then feel free to join our mailing list by filling in the form at the top right hand side of this page.
Will GBPEUR continue to climb?
GBPEUR rates continue to climb up to 4 year highs of 1.28, but will it continue??
Well no one knows the answer to this but I personally would not be surprised to see it push up to 1.30. This is due to the continuing proof that the euro is falling as borrowing costs between the North and South widen further. The borrowing costs of France and Germany (Northern Europe) are close to 1.5%, while in Southern Europe, Spain, Portugal and Italy are continuing to climb up and over 7%. This is the fundamental reason why rates are continuing to climb, it is simply a massive concern for the Euro, in its current state the Euro is failing. Yes – they are making steps forward, Spain will probably get their bailout confirmed later today and Italy are rumoured to be close to going to the ECB with their hands out for more money, but the process takes too long and rates as a result will continue to climb as a result, in my opinion.
We all know the Pound is doing well against the Euro, but that does not mean the UK economy is actually performing well. I think we can all see the effect on the high street, it was again confirmed today that things are not improving as the UK government borrowed more money last month than expected pushing our total borrowed to over £1 trillion again!
So when do you trade if you are buying this coming week?
Honestly, I would hold out and continue to watch the rates. We are entering the volatile time of the month with little economic data, resulting in markets being driven by both demand and expectation. Use your broker to help you time the transfer to try and get the most out of your trade. For example I have a number of clients that were waiting for the next high. That came yesterday afternoon and I managed to help
90% of my clients which were ready to take advantage.
Saying all that, if I had told you we would be this high in January or even May I don’t think you would have believed me! So make sure to take stock and re-calculate how much you are willing to lose if rates start falling back!
If you would like a more personal discussion about your situation feel free to contact me, Steve Eakins on 01494 787 478 or via email me directly at hse@currencies.co.uk
Sterling Rises Across the Board
Thursday has seen Sterling continue its recent rise in the markets, as it posted gains across the board by close of European trading. GBP has performed particulalry well against the euro for the past couple of weeks, showing almost daily gains. With the currency pair closing in on the almost sacred 1.30 level, the question investors will be asking is how much further can GBP go?
Analysts are quickly revising their forecasts and even this particualr analyst is now start starting to turn with the tide of opinion that 1.30 could well be in range, based on the current economic climate. It has to be remembered however that we have still not hit this level and by no means is it a given. I still believe that Sterling is over-valued by at least a couple of cents against the single currency but the deep rooted economic and fiscal deficiencies in Europe, are hampering the euro’s chances of even a short-term recovery. It was in my opinion, the European central Banks decision to cut interest rates by 0.25% that was the catalyst for this recent spike and it has been compounded by the rising Spanish bonds, which remain above the critical 7% level. Add to this the revelation by Italian leaders that they to will most likely require some sort of EU funded financial bailout and you can start to see a bleak picture unfolding for the short to mid-term recovery of the euro.
Sterling has also seen gains against the USD, with almost half a cent added to Sterling’s value during Thursdays trading, rising above 1.57 on the Interbank. This may have been boosted today by the release of UK retail sales, which showed an increase in June. The US Federal reserve chairman Ben Bernanke also reiterated his stance that the FED is prepared to act if necessary to boost the US economy. This in turn may have boosted global market confidence, which could be another reason the USD has fallen off slightly, as investors will have started to move away from the ‘safe haven’ Dollar.
If you have any currency requirements and would like to be kept up to date with all the latest market movements, or be alerted when your target rate becomes available as a trading level, then please feel free to conatct me directly at mtv@currencies.co.uk or on 01494 787 478.
