Tag Archives: EUR weakness
The Pound has been on something of a roller-coaster since the start of 2013 and the recent volatility looks set to continue, regardless of whether the UK economy falls back into recession. We will not officially know this until the 25th of April, when the latest set of UK Gross Domestic Product figures are published but don’t be surprised however if the rumour mills go into overdrive in the lead up to this release. Investors are often one step ahead of the game and any major market spikes prior to the release, may well give us a key insight into the pending result.
Various reports indicate different outcomes but it does seem as if it is going to be a very tight call. My gut instinct tells me that due to the continued negativity surrounding the UK economy and our poor growth forecasts, the powers that be will do everything possible to ensure the official figures do not indicate a further recession.
Regardless of the outcome the UK economy will not fix itself overnight and I expect the Pound to continue to come under pressure over the coming months. Although we have seen GBP realign itself slightly against both the EUR and the USD over the past week, this positive movement had little to do with any investor confidence in the UK economy and more to do with a lack of faith in the Eurozone and the potential global fallout from this.
Anyone who has an upcoming GBP/EUR or GBP/USD transfer should consider their positions prior to the release of the GDP figures later this month, as there will certainly be an element of risk involved if waiting for a positive movement for Sterling off the back of this release.
Here at Foreign Currency Direct plc we are able to provide our clients not only with award winning rates of exchange but a bespoke service designed to give you the client, as much insight into the markets as possible. If you would like to find out the type of rates we can offer, or need to be kept up to date with all the latest market movements then please call us on 0044 1494 787 478.
The UK received a welcome boost yesterday, following news from the British Chambers of Commerce (BCC) that our economy will in fact avoid falling back into recession this quarter. This news, whilst extremely positive if accurate, will be viewed cautiously by investors. Indeed, a separate survey suggested that any recovery has not factored in the recent manufacturing PMI data, which indicated the sector continued to shrink last month and would counter the BCC prediction.
The Pound continues to struggle against a stagnant economy, a widening trade deficit and weak growth forecasts. Unemployment remains high but the overriding fear has been that our economy would indeed slip back into recession in the second quarter of 2013. If we do manage to avoid this, as the BCC report suggests, GBP could spike against the EUR, USD and AUD, as investor fears will be allayed and confidence returns to the Pound.
Problems in the Eurozone have also continued, with official figures confirming unemployment in the region has hit a record high of 12% in February. The number of people unemployed across the entire Eurozone now stands at 19.07 million, a quite astonishing and equally worrying figure. The highest unemployment rate was recorded in Greece and the figure made for very grim reading, at a massive 26.4%. That over one in four people are unemployed in a developed nation such as Greece is further proof of how far the region has fallen over the past few years.
I expect the recent highs and lows to continue over the foreseeable future, with political issues in Italy likely to resurface soon and
we certainly haven’t heard the last of Greece or Cyprus’s economic problems.
There is a lot of key economic data out this week that could affect GBP/EUR exchange rates but perhaps the most important could be Thursday’s interest rate and monetary policy decisions, where the Bank of England and European Central Bank are expected to keep interest rates on hold but could be tempted to increase Quantitative Easing in a bid to ease pressure on the debt laden regions.
In the US the Dow Jones and S&P stock indexes have set new all-time highs on Wall Street, news that is in stark contrast to the rest of the global climate. These levels have not been seen on the stock exchange since before the global financial crisis and will give hope that the improving US economy can help to support the global financial markets, as we move through 2013.
The greenback continues to hold firm against the Pound, despite the small fight back we have seen from Sterling recently. It is likely that we will see continued USD strength throughout Q1 of this year, with GBP/USD rates struggling to break back through 1.54.
In other news the AUD has continued to outperform most of the major currencies, seemingly unaffected by the difficulties in the Eurozone. It moved through 1.45 against the Pound during yesterday’s trading, providing AUD sellers with some of the best levels ever seen on the currency pair. I did feel that the GBP would start to realign itself in the longer-term, perhaps moving back towards 1.55 but I am getting a growing sense that by the end of 2013 we are more likely to see the pair settle between 1.35-1.40, rather than the 1.55-1.60 that we have become accustomed to.
Here at FCD we have a team of dedicated currency brokers to help you navigate the unpredictable currency markets, so call us today on 0044 1494 787 478. Alternatively you can contact me directly at firstname.lastname@example.org to be kept up to date with all the latest market movements.
Wednseday has seen a relatively flat day on the markets by close of European trading and we could well of seen the calm before tomorrows storm. We have the European central Banks (ECB) interest rate decsion and if they decide to cut rates from the current 0.25% level as widely mooted, then we could see the euro suffer as a result. We also have the Bank of England’s interest rate decsison and whilst this is meant to remain on hold at 0.5%, I do feel those holding Sterling have more to worry about and here is my reasoning for that.
Today UK PMI data for the service sector was released and it made for grim reading, as figures showed it had fallen to an eight month low. We have already seen UK PMI construction data fall to its lowest point in 2 and a half years yesterday, which sent shockwaves through the UK economy, as it was a fall in this figure that many experts believe resulted in the UK re-entering recession at the start of 2012.
This to me indicates it is very likely we will hear an annoauncemnt tomorrow from Mervyn King that of a further round of Quantitative Easing is needed, in order to give the UK economy a boost. If you add to this the damning views of Mr King on the UK’s banking sector and the current debacles with Natwest and Barclays, then to me it looks as if investors will lose short-term confidence in GBP.
We have already sen the USD gain over half a cent on GBP today, moving through 1.56 at time of writing and this to me is already a reaction to this poor UK data. Whilst its impossible to know the exact outcome of any economic decision on the currency markets I do feel any of you holding Sterling and looking to buy either EUR, USD or AUD should keep a close eye on events tomorrow, as I fear the results could cause GBP levels fall away over the coming weeks.
If you have an upcoming currency transfer and you would like to be kept up to date with all the latest market movements then please feel free to conatct me directly at email@example.com or call me on 01494 787 478.
Tomorrow’s UK GDP Figures will Determine if Sterling can Continue its Rise Against the Single Currency
The release of tomorrows UK GDP (Gross Domestic Product) figures, represents arguably the most important set of data to be released in the UK so far this year. The prediction is for 0.1% growth but anything less will mean the country has officially slipped back into recession and this will surely have a detrimental effect on GBP and its ability to continue is current rise against the euro. Personally I feel the markets have already factored in the UK just (this being the operative word) avoiding another quarter of negative growth (if a country has two successive negative quarters of economic growth then it is officially in recession) and this is another reason we are witnessing some of the best buying opportunities of the past two years.
The single currency has been hit hard over the past weeks by a continuing stream of negative media reports and a Spanish economy that is weighing heavily on the region. With Portugal, Ireland and Holland still showing signs of economic contraction and Greece struggling to meet is loan repayment deadlines, I do fear for the short-term stability of the euro. Whilst only a few weeks ago the idea of 1.25 GBP/EUR had most analysts scoffing, those same analysts may now be eating their words.
However, for all those holding on for these sort of trading levels, be aware that any long-term break up or region wide recession in Europe would have a serious and most likely negative on sterling and the UK economy. Europe remain our largest trading partner and its inability to import our goods and services would inhibit our economy’s growth prospects.
Tuesday initially saw further gains for GBP as it rose to 1.2277 against the euro but at time of writing the single currency had regained some ground and levels were hovering around the 1.2020 mark.
If you have an upcoming currency requirement or have any queries regarding the current market trends then please feel free to contact me directly at firstname.lastname@example.org or on 01494 787 478.