Tag Archives: imf
Sterling Exchange rates expected to drop after credit ratings downgrade and GDP Data due out Thursday
Credit ratings agency Fitch has downgraded the UK to AA+ after a period of low economic outlook and a poor performance as of late. the other credit ratings agency Moody’s downgraded the UK during February so this is the second agency to do the same. British Chancellor George Osborne has come out to defend his policy of austerity measures and and the government’s plan to continue with cuts.
The International Monetary Fund has already downgraded the UK towards the end of last week and suggested that Britain needs a different plan to get back on the right track. Last Wednesday the IMF published its World Economic Outlook and changed its growth forecast for the UK to 0.7% in 2013 from January’s suggestion that it expects the UK to grow by 1%. The impact this could have on Sterling exchange rates could be negative as a lack in confidence in the UK means less investment therefore potentially weakening the Pound.
European interest rates are not being cut in the short term according to ECB member Weidmann. The meeting held on Friday saw Sterling vs Euro exchange rates fall by approx 0.5% on last Friday’s afternoon following the announcement. With European interest rates currently higher than the UK and the Bank of England keeping QE on hold at the moment Europe is now seemingly a little more attractive than the UK.
With some analysts predicting a rate cut during this quarter this has given the Euro a boost which could see further strengthening early this week as the sentiment continues to drive the single currency. For information about contract types that might suit your currency requirement contact me directly via email Tom Holian firstname.lastname@example.org
Today, as the country pays its last respects to the Iron Lady, the Bank of England will release its latest minutes from the interest rate decision held at the beginning of the month. The minutes are widely scrutinised for any clues as to future monetary policy and in particular whether the bank is considering further QE (Quantitative Easing). It is my view that the bank will not consider any QE in the short term and I hope the pound may have a positive day as a result. Of course any indication that QE will be considered again and the pound could fall across the board against the majors – for this reason today could prove very volatile.
For me the Bank of England will hold steady on any radical policies until the result of the latest GDP figures on the 25th April are released. This will officially confirm whether the UK has avoided recession, and I feel the result will be very close. With the NIESR (National Institute for Economic and Social Research) just last week forecasting revised figures of 0.1% I am confident the UK will scrape through and we may see sterling strength as a result. I would hope to see GBP/EUR moving towards 1.18, GBP/USD towards 1.55 and GBP/AUD breaking the 1.50 barrier.
IMF cuts global growth for the fourth consecutive time
Yesterday the International Monetary Fund (IMF) headed by Christine Legarde reduced its global growth forecast and urged European policy makers to use “aggressive” monetary policy as a second year of contraction leaves the euro area’s recovery lagging behind the rest of the world, its then stated it felt the global economy to grow a further 3.3% this year, less than the 3.5% forecast in January, after 3.2% growth in 2012 – this beings its fourth consecutive reduction in a row. The market didn’t react a great deal, as this news is of little surprise due to the state of much of the economic world, however it still is not particularly positive.
China’s growth forecast, is this a concern for the global economy?
Although figures from China were poor they are still considerably higher than much of the developed world, however signs that China is slowing may give cause to concern for the commodity based currencies such as the AUD and ZAR. Following the reduced forecasts the AUD weakened over 1.5% and the ZAR over 2.5% against the pound, a trend that may continue, all be it on not such a heavy scale. Figures for GBP/AUD are the best in nearly 6 weeks (1.4850) and GBP/ZAR has reached above 14 – I would expect those buying these currencies to get better opportunities in the next few days but these levels may not hang around for too long.
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Sterling exchange rates fell yesterday to a 3 week low against the greenback falling back into the 1.59 territory. This is a something that I personally feel could continue, particularly with the continuing unrest in Europe. With the US dollar still very much the global currency of choice (mainly as so many commodities are priced in dollars) during times of unrest the dollar will normally outperform most majors. I for one feel this trend is close to happening as investors digest the problems facing Spain (their bond prices reached a record high for 2012 on Monday at 6.218%). This is creeping ever closer to the 7% levels at which Greece, Portugal and Ireland had to seek bailouts and with Spain potentially a much larger problem, I really feel this will weigh on the Euro (I would expect levels to remain above 1.25 heading towards 1.26 and beyond in the short term).
For this reason I too think the US dollar will begin to find support as investor’s look to move their money to the relative safety of the dollar and we could easily see a move back towards 1.58 in the coming days. For the best exchange rates on your transfer and to discuss the various contracts we can offer in an attempt to maximise your currency exchange then please email Mike at firstname.lastname@example.org
Greece heads back to the polls as Hollande officially takes over from Sarkozy
Greece is set to go to the polls again after days of coalition talks failed to produce an agreement on a new government, on the day the new French president Francois Hollande was officially sworn into office. Mr Hollande said he was aware of the challenges ahead, including the debt crisis, and vowed to “open a new path in Europe”.
Mr Hollande called for “a compromise” over the German-led focus on austerity as the way out of the Eurozone, however in on goings in Greece still appear to be dominating the Eurozone and the Euro.
At the elections on 6th May, the results showed a majority of Greek voters backing parties opposed to austerity plans demanded by the EU and IMF in return for two bailouts. Polls suggest the leftist Syriza bloc, which came second in the 6th
May vote and rejects all further cutbacks, could become the largest party after a new election. Syriza wants to renegotiate the bailout package but also wants to keep Greece in the euro.
However European leaders say they will cut funding for Greece if it rejects the bailout agreed in March. This would effectively mean bankruptcy for Greece and German Finance Minister Wolfgang Schaueble again ruled out amending the agreement. The Greek president Karolos Papoulias will meet all political leaders at 13:00 local time (10:00 GMT) on Wednesday to put in place an interim government until the new vote, which is expected to take
place on 10th or 17th June.
I feel this will continue to heap pressure on the Euro and any Euro sellers, certainly if funds are not liquid, may wish to consider a forward contract to guarantee their rate in advance. For Euro buyers this is potentially good news, however for anyone with an interest in GBP/EUR look out for the unemployment figures and Bank of England Inflation report at 09:30 and 10:30 respectiveley.
What now for the Aussie, Kiwi and Rand?
Recent moves against these three currencies have been dramatic to say the least. Since the year lows in February we have seen the pound gain 9.5% against the Aussie, 9.7% against the Kiwi and 10.8% against the Rand. On a transfer of £200k between the high and low during this time this makes a respective difference of AUD 29,400, NZD 41,400 and ZAR 288,000. Is it time to take advantage?
This recent trend must be somewhat of a relief to the many clients and individuals emigrating to that part of world. I personally feel with the volatility in Greece this trend could continue in theshort term. But to use the analogy of an elastic band, I do feel these currencies could snap back at any point. However until a degree of stability is restored in Greece (Christine Legarde head of the IMF was quick to rule out a breakup of the Euro) this run may continue, just make sure you are in a position to take advantage.
To dicuss the this report and my views or to run through yoru individual exchange requirement then please email Mike at email@example.com or call 01494 787 478