Tag Archives: bank of england minutes
GBP/EUR rates have been extremely volatile since the turn of the year and I expect more of the same as we move through Q2. If we look individually, both the UK and Eurozone economies remain stagnant, with little hope of any serious economic growth in the short to medium-term. For this reason I expect both the Pound and the Euro to struggle against most of the major currencies for the foreseeable future. However, this also means trying to forecast the pair becomes increasingly difficult but I do believe the recent Sterling strength, whilst unexpected, is a key factor.
Prior to this positive move for GBP all forecasts had previously indicated EUR strength, with a move down through 1.10 on GBP/EUR widely mooted. Fast forward and suddenly the talk becomes of a move back towards 1.20 again and to me this highlights just how fragile the Eurozone economy is and how quickly the landscape can change. Until the now well documented recent events in Cyprus started to unfold, the EUR was benefiting from a more bullish outlook, with positive comments from Mario Draghi amongst others pushing it higher against the Pound. Whilst the UK still faces economic difficulties, I do believe there is a wider range of fiscal problems deep rooted across the entire Eurozone region. Recent events in Cyprus just highlight the fact that it seems to be only a matter of time until the next Eurozone crisis raises its head and erodes any market confidence that has started to be rebuilt.
A key date for anyone with a GBP/EUR requirement will be the 25/4/13, when the latest set of UK Gross Domestic Product (GDP) figures will be released. These figures will determine whether the UK economy has gone back into recession and the outcome is sure to affect GBP/EUR exchange rates.
Key economic data this week includes tomorrows Bank of England (BoE) minutes and UK unemployment figures. These minutes will give us an insight into the BoE’s recent decision not to change interest rates or initiate another round of Quantitative Easing (QE). We also have Retail Sales figures out Thursday morning, which are expected to show a significant drop.
GBP has started to realign itself against the USD following weeks spent hovering either below, or around the 1.50 level. Historically GBP/USD rates very rarely stay below 1.50 for long and those who did not sell at that time may be waiting quite a while before we see those levels again. Whilst the US economy has performed better than expected in 2013, the UK economy has done quite the opposite and that is the key reason rates struggled to break 1.50 for such a sustained period of time. The reason for the recent shift back in Sterling’s favour to around the 1.53 mark, can be attributed to the recent poor Nonfarm payroll data. This indicated far fewer jobs had been created in the US economy than initially predicted and the USD lost value
because of this.
Whilst this news should be enough to keep levels above 1.50 for the foreseeable future, it is hard to envisage GBP breaking through 1.55 anytime soon. I think we may see GBP/USD rates move back towards 1.51-1.52, if UK economic data does not improve and or the UK finds itself back in a recession come the end of the month.
The AUD has continued to outperform most of the major currencies so far this year, despite the threat of interest rate cuts and a slowdown in China’s demand for their raw materials. This demand has buoyed the Australian economy over recent years and the AUD has continued to benefit from this. Whilst reports over the past couple of days indicated China’s growth has indeed slowed, even more than many expected, I still think GBP will find huge resistance at 1.50 and then 1.55. Whilst our own growth forecasts remain so poor and our trade deficit seems to be forever widening, the Pound will struggle to make any serious inroads against the
For anyone looking to buy AUD, if 1.50 does become available again over the coming weeks I would seriously consider my position.
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Busy day for the pound with the Bank of England minutes, UK unemployment figures and FED Reserve meeting
The pound is set for another busy day with a host of data starting at 09:30 this morning with the Bank of England minutes and UK unemployment figures due for release. Unemployment figures (both the unemployment rate and the claimant count) are expected to stay on hold at 8.2% and 4.9% respectively. Should this be the case I would expect to see a small gain for the pound, however any deviation from these expected figures and we could see market volatility as a result. More importantly for anyone with an interest in the Pound will be the Bank of England minutes at 09:30 as this will give an insight into any future monetary policy and more importantly, whether more monetary stimulus has been discussed. Following Mervyn Kings speech last week at his annual Mansion House dinner, he made his first indications that more stimulus is on the cards and should today’s minutes confirm this then we can expect Sterling losses as a result this morning. This trend may continue throughout the day against the Euro and most majors, however moves against the US dollar could turn around this afternoon.
Short term direction for cable hinges on FED Meeting, will there be more stimulus?
As with their UK counterparts, the heads of the US Central Bank (the Federal Reserve) will meet later (17:30 BST) with many analysts expecting another round of stimulus from Ben Bernanke (FED Chairman). Recent moves for cable (GBP/USD) have been pretty varied, being up at 1.63 just 7 weeks ago, falling to a low of 1.53 last week, and now forging its way back towards the 1.60 level. We are currently sitting at the 1.57 territory, and I feel any stimulus from the FED is likely to drive the dollar level to 1.58/1.59. Make sure you are in a position to take advantage as the moves could be short lived.
With plenty of data due today and the Greek coalition party still yet to be forged (there is talk this may be in place by the end of today) then we can expect plenty of movement in todays trading. Should you wish to discuss my thoughts and to run through the service we offer at currencies.co.uk then please email Mike at firstname.lastname@example.org and I will happily give you my thoughts and opinions on this current market.