Tag Archives: GBP weakness
Where Next for GBP Exchange Rates? (Matthew Vassallo)
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
impressive AUD.
For anyone looking to buy AUD, if 1.50 does become available again over the coming weeks I would seriously consider my position.
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.
Will the UK Avoid a Triple Dip Recession? (Matthew Vassallo)
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 mtv@currencies.co.uk to be kept up to date with all the latest market movements.
Will the Pound’s Recent Spike Continue? (Matthew Vassallo)
The Pound has benefited this week from the on-going unrest in Cyprus, which has caused investors once again to pull their funds away from the unpredictable EUR. This move is in stark contrast to the overwhelming sentiments of the past couple of months, which has seen the EUR move from strength to strength against GBP. This move was facilitated in a large part, due to the complete lack of confidence in our own economy. The UK stands on the verge of a potential triple-dip recession and when you add our poor growth forecasts (as highlighted by yesterdays budget) and weak exports, it all combined to put Sterling under considerable pressure.
So the question many will be asking now is will the Pound’s recent spike continue? The answer in my opinion is that it is highly unlikely.
Whilst we have see GBP realign itself against both the EUR and USD over the past couple of days, there are a number of variables we have to consider. The first is of course the on-going debate in Cyprus, where talk of a ‘bank levy’ charge on all foreign and domestic imports has been met with the expected uproar. This has caused the EUR to weaken and the knock on effect was the Pound rising against the single currency. We must remember it was the lack of investor confidence that caused the EUR to lose value, rather than any real confidence in GBP.
The second thing to consider is that due to the fact the USD strengthened so quickly against GBP and by so much, some sort of realignment was always to be expected. You can also take the view that as the US economy has started to pick up, investors risk appetite has started to return and this has led to a move away from the ‘safe haven’ USD and into riskier assets, such as the ZAR. I do not expect rates to start moving back toward 1.55 anytime soon, with further spikes dependent on how economic data is viewed over the coming weeks.
In summary, the events unfolding in Cyprus make for grim viewing and at one point the public protests were on the verge of descending into full blown anarchy. I for one would not be readily accepting someone ‘stealing’ 10% of my money, which if you strip away the political jargon, was exactly what the initial proposal suggested. I do feel that we will see a resolution and Cyprus will find a way to receive the 10 billion EUR bailout fund it requires and once this happens we could well see the focus switch back onto the UK economy and the Pound will most likely be the one to suffer when this happens.
Here at Foreign Currency Direct plc we have won multiple awards for our exchange rates and service. If you have an upcoming currency transfer and would like to be kept up to date with all the latest market movements, or would like to speak to us regarding the currency options available to you then please feel free to contact me directly at mtv@currencies.co.uk or call us on 0044 1494 787 478.
Euro Rises Ahead of Potential Deal Over Greek Funding (Matthew Vassallo)
“With Greece in line for further monetary assistance many will be feeling an unnerving case of déjà vu”
The euro strengthened during yesterday’s trading amid rumours that Greece will receive further funding, to meet its repayment targets. These targets were set by the International Monetary Fund (IMF) and were seen as a key to Greece’s long-term standing within the eurozone. Many will ask why so much weight is put on Greece’s stature within this circle and surely the money spent on its seemingly fruitless efforts of recovery could be better spent elsewhere?
The answer is because the precedent set by allowing Greece to default on their debt, made worse by the impossibility of combining ever harsher austerity measures with economic growth, is still very much an unknown and the knock on effect it may have on other peripheral nations could be catastrophic. There has been so much talk by European Central Bank president Mario Draghi and other key eurozone leaders about how they will not allow Greece to fail, that any decision that now goes against this could be political
suicide for those involved.
The EUR strengthened by over half a cent against GBP during Monday’s trading and was starting to put pressure on the 1.24 level. Any decision to extend Greece’s funding could be met by differences of opinion on how much they should receive. The IMF is believed to be reluctant to extend Greece’s debt programme by much, if any at all, whilst eurozone leaders, in general, feel Greece need to be given what is needed, to pull them back into line.
UK Business Secretary Vince Cable stated that UK businesses are showing ‘reassuring’ signs of recovery and that there is clearly a ‘more upbeat mood’ amongst the business community. This bold statement follows a mixed set of economic data for the UK of late, with poor Service Sector, Construction and Manufacturing figures dampening the mood, despite the positive Gross Domestic
Product (GDP) figures that recently pulled the UK out of recession.
Key to this week could be tomorrow’s Bank of England minutes, which will indicate how many members, if any, felt another round of Quantitative Easing was necessary or likely to be needed over the coming months. Any sign that we will see further QE could see the Pound lose market value.
The USD has shown signs of recovery of late, particularly against GBP. The greenback has found life tough going against the Pound for much of the summer, so its move back below 1.60 will certainly be seen as a positive by investors as we head into the last
weeks of 2012.
I feel a move a move towards 1.55 over the coming months is the most likely scenario, as the US moves forward from the elections with new hope.
The Pound has rebounded somewhat against the AUD over the past week, with levels in the mid 1.53’s ahead of last night’s RBA minutes. Much of the focus of these minutes was on whether the RBA will cut interest rates further in December and the chance was greatly increased after the minutes indicated further room for monetary easing.
Here at FCD we have various contract types all tailored specifically towards our client’s needs, so for more information please contact me directly at mtv@currencies.co.uk or call us today on 0044 1494 787 478 or visit and sign up to your free, no obligation trading account.
GBP Touches 1.25 Against the EUR but Loses Ground on the USD (Matthew Vassallo)
Sterling continued to make inroads against the euro during Friday’s trading as the Interbank touched on 1.25 for the first time in weeks. Fears remain over the economic stability of many of the eurozone’s nations and their ability to pull themsleves out of recession. The markets have reacted negatively to the on-going saga and even European Central Bank (ECB) president Mario Draghi’s commitment to the future welfare of the region, has done little to alay investors concerns.
Economic problems within the eurozone are nothing new. How often do we turn on the evening news to hear of further unrest? With public protests in Spain, Greece or Italy almost a weekly occurrence, it is sometimes difficult to see any light at the end of a very long dark tunnel.
During times like this it is easy to forget that only twelve months ago the world’s top analysts were predicting parity between GBP and the EUR. Now we have the same analysts convinced that we will see 1.30 on GBP/EUR before 2013. These statistics to me are key as they prove long-term predictions are, in this current market, quite frankly useless. Yes they can provide investors with some type of strategy but when they are disproved more often than not, this strategy will inevitably become flawed. Personally I believe we will see GBP/EUR rates range-bound between 1.2370 – 1.2540 until we see either a consistent stream of positive UK data or a further fallout in the eurozone.
GBP/USD rates tubled today as the greenback made its first significant move againt the the Pound in almost 3 months. Rates moved from 1.6132 at the high to 1.6024 at the low following the release of US Non Farm Payroll data, which came in better than expected. I always felt Sterling was over-valued against the USD and I believe we will see a move back towards 1.55 over the coming months, as the politcal uncertainty created by the upcoming elections is removed along with an upturn in economic data.
What I am currently telling my clients is that we need to be reactive to the markets without having a knee jerk reaction. We need to be in tune with market trends and even potentially realign any targets because of this but what we do not want to do is decide to throw these targets out of the window because the markets move against us for a couple of days.
This market uncertainty can be difficult to digest, especially if you have an upcoming property purchase or sale and are looking to transfer funds but are worried that market movements will ultimately leave you short changed. Here at Foreign Currency Direct plc we have multiple contract types all tailored specifically towards our client’s needs. One of our most popular types is our forward contract, which allows you to lock in an exchange rate even if you do not have the full funds available. This is perfect for anyone looking to eliminate risk from the market but still take advantage of our award winning rates. If you would like more information please contact me directly at mtv@currencies.co.uk or on 01494 787 478.
Is the UK Economy Really Recovering? (Matthew Vassallo)
The relevant health of the UK economy has been the subject of much debate for quite some time now. On one side you have the Prime Minister talking positively about our economy ‘slowly healing itself’ and the Bank of England governor Sir Mervyn King believing we will see economic growth towards the end of this year. On the other hand we seem to have the reality of the situation and these bullish statements do not seem to be aligned with the seemingly endless stream of poor economic data being released.
We have seen UK growth forecasts cut consistently and a report last week indicated that our economy has actually stagnated again during quarter 3 of this year. Add to this today’s report that our trade deficit has once again widened during August and we can see a rather bleak picture being painted. I did feel the Pound was going to come under some pressure as I alluded to in recent blogs, as it seemed to be over-valued against both the EUR and the USD. The levels we witnessed a couple of months ago, particularly against the EUR, were born out of sheer despair at the lack of growth opportunities and prospects for multiple debt ridden eurozone economies, rather than any real confidence in our own currency.
It now seems as if things have started to realign themselves some what, with the EUR making consistent headway against the Pound over the past couple of weeks. Today was the first time we have seen Sterling make any notable inroads against the single currency for some time, as rates spiked back up through 1.24. This comes despite the negative data mentioned above and it may be the markets have started to factor in a Spanish bailout that in my opinion is inevitable, regardless of comments made by the Spanish economic minister recently that they may not require one at all. I do believe that GBP/EUR rates are currently on a knife edge but my gut feeling is that we could see levels fall away towards 1.22 over the coming weeks, if the situation in Europe does not destabilize any further.
GBP/USD rates have provided those holding Sterling with excellent buying opportunities of late. The markets have reacted to the political uncertainty, with concerns over the upcoming US elections and the relevant direction of each party following the outcome. The US economy has also been struggling and with another round of Quantitative Easing recently introduced, market confidence in the greenback has been drained.
Today we have seen the USD move back through 1.60 but whilst the political uncertainty remains we may find GBP/USD rates stay fairly flat, although a move back towards 1.55 sooner rather than later is likely in my opinion.
This market uncertainty can be difficult to digest, especially if you have an upcoming property purchase or sale and are looking to transfer funds but are worried that market movements will ultimately leave you short changed. Here at Foreign Currency Direct plc we have multiple contract types all tailored specifically towards our client’s needs. One of our most popular types is our forward contract, which allows you to lock in an exchange rate even if you do not have the full funds available. This is perfect for anyone looking to eliminate risk from the market but still take advantage of our award winning rates. If you would like more information please contact me directly at mtv@currencies.co.uk or on 01494 787 478.
GBP Fights Back Against the Euro but Negative Trade Deficit a Worry. GBP/USD & GBP/AUD Forecasts
GBP rates have spiked against its EUR counterpart during Thursdays trading, despite yesterdays negative report by BoE (Bank of England) governor Mervyn King. You could be forgiven for thinking that every announcement Mr King makes is nothing but doom and gloom regarding the UK economy and unfortunately yesterdays statement was more of the same. Whilst the UK basks in the success of the London 2012 Olympics and our athletes achievements, the UK economy is struggling to provide the same excitement. Once again growth forecasts have been cut and the words ’a long road to recovery’ seem to be used more often than any others.
As mentioned though the Pound has spiked by over 0.5% and at time of writing was sitting comfortably above 1.27 against the euro. It is difficult to pinpoint the exact reason for this, although in my opinion it was the fact that despite yesterdays negative outlook talk of an interest rate cut seemed to be downplayed. If this turns out to be correct it would be this, rather than the likelyhood of further monetary stimulus (Quantitative Easing) that was a major factor behind yesterday’s EUR strength. It is also conceivable that tomorrows ECB (European Central Bank) monthly report may hold further negative sentiment for the short-term recovery of the single currency and this is now being factored into the markets.
Either way we are still witnessing excellent buying opportunities on GBP/EUR, especially when you consider today’s announcement that the UK trade deficit is at a 15 year high and the worst since records began. The deficit measures how much imported goods and services exceed exports and this rise has been driven by a 4.6% month-on-month fall in the value of UK exports to eurozone and non-EU countries. In fact these levels become even more attractive when you consider the Pound has fallen off against most major currencies today, including both the USD and AUD. Personally I would consider your positions if you do have a EUR requirement, as these levels may come under pressure if we hear a positive news from European leaders over the coming days. I feel a move above 1.30 is now unlikely, unless there is a further shift in momentum and I am sticking by my previous predictions that a move towards 1.25 is more likely than a move towards 1.30 in the weeks ahead.
GBP/USD levels have fallen away during Thursdays trading, possibly because of the trade deficit announcement and a further reaction to yesterdays negative BoE report. Pressure is now being put on 1.56 and a move towards 1.55 is a possibility over the coming days. When you consider it looked as if we may be breaking back through 1.57, it would be wise to stay in touch with your personal currency broker for all the latest cable (GBP/USD) movements and any key economic data releases, that will ultimately affect the rate of exchange you will receive.
GBP/AUD levels have also fallen away during Thursday’s trading and at time of writing were sitting comfortably below the 1.48 mark (1.4775). Levels seem to be gravitating towards the all time highs we witnessed back in February and anyone looking to purchase AUD need to consider their positions due to this unwavering market support. The AUD has continued to strengthen off the back of China’s demands for its raw materials and a very attractive interest rate (3.5%). We also heard the announcement this morning that unemployment figures had fallen to 5.2%, which also gave the AUD a boost.
If you have an upcoming currency requirement and woulod like to take advantage of our award winning exchange rates, or would simply like to be kept up to date with all the latest market movements, then please feel free to contact me at mtv@currencies.co.uk or on 0044 1494 725 353.
Falling PMI Data a Worry for UK Economy
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 mtv@currencies.co.uk or call me on 01494 787 478.
Pressure on the Single Currency Continues but Concerns Over Stability of UK Economy Resurfacing
I wanted to take a moment before embarking on my next blog to thank our vast and growing reader base for all their positive comments about the site and their continued interest in our currency views. Your feedback has been invaluable and we appreciate any comments, both positive and negative, that will continue to help us impove and taylor the website specifically towards our readers needs.
Moving on and Wednesday has seen Sterling fall off against both the EUR and USD by the close of European trading and has offered a welcome opportunity for all those clients selling euro or USD. We have been continually bombarded over recent months with negativity surrounding the global economy and the sceptics amongts us will require far more than just potive words from the powers that be, before any long-term market confidence is restored.
The on-going economic struggles of multiple EU countries, particularly Greece, Spain and Italy have severely hampered the single currency and its ability to break free from its current stranglehold. It’s as if a positive statement is quickly eradictaed by two neagtive ones and anyone who follows the markets closely, ’as this particular analyst does on a daily basis’, can be forgiven for being close to despair on more than one occassion.
I suppose the million pound question has to be, which direction will the GBP/EUR currency pair take next?
In total honesty if I had the answer to that question I would probably not be writing this blog (or if I was it would in the tranquil surroundings of somewhat sunnier climbs) and the honest answer is unfortunately no one does. What we can do however is make educated guess’s and provide facts to back up our argument and that is essentially what we try and provide our readers with. We also provide market analysis and updates for over 40,000 clients, as well as provding some of the most competitive exchange rates in the country.
The way I am viewing the current economic climate in Europe is with the glass half full, which may well surprise many of you. The fact is the EU could not lose much more market confidence and with the official bailout request coming from Spain and Cyprus over the past week (it should be noted that these were both expected) I do wonder if we have almost hit rock bottom. With the annoucnement of EU leaders ’10 year vision’ to save the eurozone and the recent formation of a new Greek government, which seems to have eased some market tension, I do feel the tide is starting to turn and whilst it would be foolish to suggest that Europe’s problems are over, I do feel better times for the euro may be on the horizon.
Shifting the focus back to the UK and we already know that growth forecasts have been cut for the remainder of 2012. Further Quantitative Easing is also extremely likely over the coming months and if Mervyn King is to be believed, there are many reasons to suggest the recent highs GBP has been enjoying won’t necessarily last.
Whatever happens next it is improtant to stay up to date with the latest market movments, particularly if you have a currency transfer to initiate before the end of the year. If you would like to receive my market alerts, or have an upcoming currency transfer that you would like to discuss then please feel free to contact me directly at mtv@currencies.co.uk or on 01494 787 478.
