Tag Archives: effect

The election and how it may impact on the Pound – Pound Sterling Forecast election special

The Election and the impact it may have on the Pound

Well if the polls are anything to go by we are in for a real roller coaster ride in the next 24 hours as the U.K head into voting stations in what may be the closest election in decades.

With political certainty being one of the key factors that have an effect on the value of a currency, Sterling may struggle until we have cemented not only who will be running the U.K but also how they plan to approach their reign.

One of the best ways of putting it is that if you were due to invest in a business (i.e the U.K/Pound) then it is highly unlikely you would take the plunge until you actually knew who would be running that business and how they planned to run it. Until we have some clear results from this election then we are in exactly that position, therefore demand in the Pound slows and Sterling’s value could more than likely drop.

I thought it may be prudent to outline the possibilities that may arise in the coming days, weeks or even months and how they could impact on the value of the Pound.

First and foremost, it does look like there is now a slim chance of any party achieving a majority. A majority would be where they can set up Government solely without the need for seeking out other parties to join together with to form what is known as a coalition.

In the unlikely event that we do see a majority for the Conservatives then I would not be surprised to see Sterling gain a lot of strength as it would show certainty and also with the economy currently performing fairly well, should be taken kindly by the markets. A Labour majority may not be so positive for Sterling initially as we may see quite a lot of change on the horizon for the U.K therefore investors may hold back to wait and see what changes may be made.

Hung Parliament

It is fairly likely that once results are announced we may see what is known as a hung Parliament. This is basically where no single political party wins a majority in the House of Commons and this is where things can really start to get interesting.

Essentially, there are usually 12 days allowed for incumbent Government (current holder of political office) to attempt to form a coalition. This may be trickier than before as the current party involved in the coalition (Lib Dems) has seemingly lost a large amount of support after not keeping to key points of their manifesto during 2010.

During this period I expect large volatility for the Pound and a limit order/stop loss contract may be a prudent approach. This is where you can set a particular level you wish to achieve or a lower limit you do not want to buy below and either may be secured automatically for you should the market price become available. Feel free to email me (Daniel Wright) on djw@currencies.co.uk or call our trading floor line on 01494 787478 for more information.

After 12 days (although it did take 13 last time around) if the Conservatives have failed to put together a coalition then the largest opposition party may be asked to put together a coalition. This has every potential to end up being the Labour party attempting to put something together with the SNP (Scottish National Party).

Should this be the case then I feel Sterling may really suffer as the SNP have already commented that they would like to have another referendum on Scottish independence and I would be highly surprised that they would agree to anything without the potential of this taking place. When we had the vote for Scottish independence last year and the chance of a yes vote heightened, Sterling dropped off by over 4% in a few days so with the potential of this looming, even sometime in the future the Pound will more than likely suffer.

In the event that no party can put together a coalition then we may have a situation of ‘no overall control’ which was seen a number of times in the twentieth century. This would make life hard for the Pound and would lead to a second election later in the year and again may lead to a tricky period for the U.K and indeed the Pound for a number of months.

All in all if you are looking to buy or sell foreign currency in the coming days, weeks or months then it is extremely important that you make your account manager here at currencies.co.uk fully aware. If you are working to a particular budget then our contract options may be a sensible approach, you can book an exchange rate for anything up to a year in advance for just a small deposit, helping you to budget well in advance for the year ahead. If you would like any assistance or one of our friendly traders to explain the various options available to you then either email me on djw@currencies.co.uk   or call us directly on 01494 787 478.

The Budget and the effect it may have on the Pound

Once again the headlines are all about how much the British public will be poorer than ever over the coming year or tw, but as the Pound goes although I don’t feel it will rapidly strenghen in the coming weeks I do feel that the Pound will gather strength towards the back end of the year should things go to plan.

Of course this is by no means set in stone as all of you will know, predictions can go out of the window within a few days should we see a shock announcement to the markets globally(and there are indeed plenty of those around these days!)

People will no doubt be hit in certain matters with the budget and may gain through others, but the positive thing I am taking from it is that it does appear to support growth in the economy which in essence can only be good for those of you waiting for the Pound to strengthen before you shift your savings overseas to buy that dream second home.

I constantly speak with clients who have now emigrated to New Zealand or Australia and have spent the last year or two dripping over the proceeds of a house sale until the rates they saw when they were applying for their visas a few years ago come back.

Hopefully with the slowdown in China and numerous other factors we may see improvement for people in this positon soon…By no means do I think we will be back at 2 to the AUD or 3 to the NZD but I would not be surprised to see an improvement.

If you have transfers to make involving either buying or selling the Pound I can help you when it comes to getting the best exchange rates both in terms of having a knowledgable input and getting you the highest rate when you do decide to book your currency. Please feel free to email me if you would like me to help and you find my site useful. djw@currencies.co.uk

European Agreement and how will it effect exchange rates?

 “If you are in the process of a large currency
transaction in this current market then do be aware holding out is not for the
feint hearted – It is going to be a rocky ride out there so get belted up!”        

 Market Summary

Currency

% change over FridH/L

Difference in £200,000

GBPEUR

0.68%

EUR 1100

GBPUSD

0.85
%

USD 2640

GBPCHF

1.35%

CHF 3880

 

European
Agreement takes shape

A historic agreement was finally put in place on Friday revolving
around deeper economic integration for EU countries. However, Britain (The
third largest economy In Europe) at present has refused to be involved, with
David Cameron feeling that concessions were just not there for the U.K
regarding financial regulations.

It could now take at least three months for these agreements to
fully take shape, as there are many loseable referendums along the way for the
26 countries involved.

This all leads to an interesting few weeks before Christmas,
reports in the Sunday papers yesterday suggested Nick Clegg is not happy with
the decision of Cameron, which indeed places further pressure on the coalition
– with political stability being a factor for currency strength, a break up or
even growing speculation of it may be very damaging for the Pound.

Also, over half of trade for the U.K goes through these countries,
and there is now the risk that the U.K could drift apart from the continental
mainland and relations both politically and in trade could slow down. Again,
whilst it is unquestionable that the Euro Zone has huge problems, the U.K has
many large ones of its own, and our while our Prime minister is busy at
countless meetings surrounding fixing the Euro – who is dealing with our
problems?

Usually, we put our predictions in our reports however with the
various complications that could be thrown into the hat this week in all
honesty I don’t know where GBP-EUR
will end up… David Cameron doesn’t know, Angela Merkel doesn’t know and with
something unprecedented like this I don’t believe anyone knows.

Instead, I will lay out the options available to you in order to
protect yourself should something really hit the fan in the next few days.

Option
1
– With the positive movement for
Sterling in the past week or so against the Euro, those looking to buy Euros could book out a forward contract, this is whereby you
can lock into a rate of exchange with us for up to two years with just a small
deposit. At the risk of sounding like a game show host, it could be a great
idea to lock in half of the currency you require and ‘bank’ the current rate if
current rates are above budget. For people due to receive Euros this contract
option could be the protection you have been longing for too, as we can take a
Sterling based deposit should you not have Euros in your coffers.

Option 2 – Should you not really wish to
jump in with two feet and lock in to a rate, yet wish to be protected if there
is a bug turn for the worse then a stop-loss
order may be ideal. You essentially can decide on a buying price you would not
be happy to go below, and if we see a sudden drop in rates, your currency is
automatically bought out at that level – even if it is at 4am on a Saturday…
This saves the busier of you from watching markets 24/7 yet keeps you
protected, we also offer a limit order which works the other way should there
be a rate you wish to achieve. Both of these orders can be cancelled or amended
at any time if not filled and do not cost you a penny to put in place. Contact
me by filling in the form on the right hand side of this page today to discuss
these in more detail.

Dollar to
benefit from all of this? Swiss devalue again?

Many analysts believe the big winner from all of this may now be the USD. In times
of uncertainty historically investors have ran to the perceived ‘safer haven’
of the USD, with gold being seen as a safe bet also being priced in USD, demand
for the currency increases and therefore so does its value.

If political matters in the U.K continue to take the headlines
along with riots, static interest rates and ever decreasing growth forecasts
then as an investor, although the States has problems of its own I know where I
would put my money, it would not surprise me now to see GBP-USD dip below 1.50
in the early part of 2012.

For the past few years the Swiss Franc and Japanese Yen had taken
away some demand for the USD in uncertain times, with the Swiss Franc having
increased in value by over 50% during this global crisis at its peak. Since
then, both the Swiss and Japanese have moved to devalue their currency
artificially as the strength was starting to seriously impact their exports, in
fact there are growing rumours that the Swiss may devalue again and with their
interest rate decision due on Thursday, if you have Swiss francs to sell then I
would seriously consider the options mentioned earlier in this report, a second
devaluing could push GBP-CHF well above 1.55.

The Federal Reserve (US) Interest rate decision is also due on
Tuesday evening and the U.S have thrown a spanner into the works in the past so
for those with a pending Dollar interest make sure we are aware, fill in the form on the right hand side of this page and I will be happy  to guide you throughout the process.

Data out today

 A quiet day data wise today but I’m sure the markets will have plenty to react to
with the European announcements, which will probably be the talking point of
the week (yet again). Make sure your Christmas isn’t spent watching exchange
rates and get your protection in place, or at least let us be your eyes and
ears on the market for you – contact me directly
djw@currencies.co.uk if you would like assistance or have any questions or queries
surrounding this report – Thanks for reading.

The Budget – What effect may it have on your currency transfers going forward? Pound, Euro, Dollar, Australian Dollar, New Zealand Dollar, South African Rand

Looking at the budget in bullet point terms – you would have thought the pound may have lost ground today – Although there are some promising parts believe it or not!

Here are the key points that you need to be aware of:

  • Growth forecasts for UK economy cut 0.9% this year and 0.7% next year
  • Borrowing forecasts revised up
  • £40bn “credit easing” scheme to underwrite bank loans to small firms
  • £5bn plan to improve national infrastructure over three years. Further £25bn could be spent in future years
  • £1bn scheme to subsidise work placements for the young unemployed
  • Mortgage indemnity scheme to help 100,000 people get onto the property ladder
  • £500m housebuilding plan in England
  • January rise in regulated rail fares to be capped at 6.2%, not 8.2%
  • Doubling of free childcare places for deprived two-year-olds to 260,000 in England
  • 3p fuel duty rise due in January to be delayed or frozen
  • Bank levy to be increased

Without a doubt next year will be tough for the U.K and indeed the world as a whole, the key for Pound strength is Sterling being the best of a bad bunch… You may have thought that would be reasonably easy with the U.S credit rating being downgraded and an increasing amount of problems within Europe that seem to be rising on almost a daily basis as contagion spreads rapidly like a nasty epidemic that nobody in truth really wants to see.

The trouble is, although we aren’t part of the marriage of the Euro Zone, we have been in bed with it so we are just as open to the problems here in U.K and although Euro buyers may be praying for more problems to arise, they actually hinder the Pound as well.

Also, when there are troubles in the Euro Zone the Dollar seems to be gaining as well due to investors looking for a safer haven to avoid risk. (With the USD being a ‘safer haven’ along with gold being priced in Dollars both lead to an increase in demand and therefore price to buy USD) This means that anyone buying Dollars or Euros with the Pound could actually do with the Euro Zone slowly getting out of trouble with the U.K however being leaps and bounds ahead, raising interest rates at a greater pace and finally looking a little like we used to 5 years ago before this mess all came to light.

An interest rate hike generally is seen as positive for the currency concerned and a cut negative, part of the reason we have not gained against the Euro as many would have imagined – The Euro is more attractive to investors because of a higher rate.

Those looking for Australian and New Zealand Dollars or South African Rand, again a risk factor is a big player. The more trouble globally the cheaper these currencies should be to buy, the more solutions that are seemingly working the more attractive the riskier currencies become, especially by means of carry trading – This is where an investor borrows a currency  with a low interest rate (JPY,GBP) and moves funds to one with a much higher rate (AUD, NZD, ZAR) making their money on the difference. Clearly the performance of these countries economies will also be key in 2012 so watch this space and keep up to date with our timely, non technical updates that hopefully anyone can understand.

If you have a currency requirement imminently or in the coming months then do feel free to contact me directly djw@currencies.co.uk and I will be confident that you receive a much better rate of exchange than using your bank or another broker by using me, along with the very highest level of customer service throughout your transfer.

Data out this week that could effect the Pound against the Euro and the Dollar (Apart from surprises of course)

Below is  data out this week that may have an effect on your currency transfers, of course there are pleanty of other matter effecting rates too at present.

Please remember that the more we see global uncertainty the more the AUD, NZD and ZAR should weaken, the more settled things are we should see those currncies fight back again (like this morning)

UK DATA

THIS WEEK:

  • Monday 11.00am CBI distributive trades for November, previously at -11
  • Tuesday 09.30am BOE mortgage approvals for October, previously 50.97k
  • Tuesday 12.00 Chancellor Osborne gives Autumn Economic statement to
    Commons
  • Wednesday 00.01am GFK consumer confidence for November, previously at
    -32
  • Thursday 08.00am Halifax house prices for November, previously 1.2% m/m;
    -1.8% q/q
  • Thursday 09.28am CIPS manufacturing PMI for November, previously at 47.4
  • Friday 09.30am CIPS construction PMI for November, previously at 53.9

US DATA

THIS WEEK:

  • Monday 15.00pm New home sales for October, previously at 313k
  • Tuesday 14.00pm S+P Case Shiller home price, previously -3.8% y/y
  • Tuesday 15.00pm Consumer confidence for November, previously at 39.8
  • Wednesday 14.45pm Chicago PMI for November, previously at 58.4
  • Wednesday 18.00pm Beige book release
  • Thursday 15.00pm Manufacturing ISM for November, previously at 50.8
  • Friday 13.30pm NFPs for November, previously 80k; unemployment rate
    previously 9%

EU DATA

THIS WEEK:

  • Tuesday 10.00am Business climate index for November, previously at -0.18
  • Tuesday 10.00am Consumer sentiment for November, previously at -20.4
  • Wednesday 10.00am Flash HICP for November, previously at 3% y/y
  • Wednesday 10.00am Unemployment for October, previously at 10.2%
  • Thursday 08.58am Manufacturing PMI for October, previously at 46.4

 

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