Tag Archives: sterling forecast

Anticipation in the Markets Ahead of ECB QE Decision (Matthew Vassallo)

The markets are waiting with bated breath ahead of today’s latest European Central Bank (ECB) interest rate decision and monetary policy statement. Whilst the general consensus is that the ECB will keep their base interest rate on hold, it is widely anticipated that the ECB will initiate a series of Quantitative Easing measures in order to counter the Eurozone’s recent deflation.

A report leaked yesterday has indicated they may inject up to 1 trillion EUR. This will be broken down into 50 billion tranches each month, running up until December 2016, almost double the initial estimate. Whether or not this will have the desired effect only time will tell but it will certainly be one of the biggest decisions made since the Eurozone group was first initiated.

ECB president Mario Draghi will outline the ECB’s plans during his address this afternoon and it will be interesting to see how the markets react to this. Personally I feel this decision has been factored in so I do not anticipate a major spike for GBP and it is interesting to note how yesterday’s Bank of England (BoE) minutes indicated there were no longer any members voting in favour of a UK interest rate hike. This decision has likely dampened expectation of a rate rise this year and this is likely to control the Pounds value as investors see this a s a key economic decision.

If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me directly on mtv@currencies.co.uk

IMF Cuts Global Growth Forecasts (Matthew Vassallo)

Sterling spiked up against both the EUR & USD during Tuesday’s trading, with GBP/EUR rates moving back above 1.31. The pair had dropped from the 7 year highs seen last week and whilst the EUR has found some support around the current levels, any sustained move back under 1.30 is now looking unlikely in the short-term.

GBP/USD rates have also recovered slightly, with the Pound finding support above 1.50 and whilst I do feel this level will be breached at some point in the not to distant future, we will need to see another shift in market sentiment before it happens.

The International Monetary Fund (IMF) has lowered its global growth for the remainder of 2015 & 2016. They have cut this year’s forecast to 3.5%, after previous estimates of 3.8% growth. 2016 sees a similar cut to 3.7% and will dampen expectations of a continued global recovery and what is of more concern is that this prediction has come, despite the huge drop in oil prices which is a positive factor for most countries.

With the markets now focusing on Thursday’s European Central Bank (ECB) decision, when they will decide on whether or not to initiate a series of Quantitative Easing (QE), it is likely that we will see further volatility on GBP/EUR before the week is out. The markets could well be factoring this decision into to the current rates and so any decision that deviates from the expected, is likely to cause further unrest for investors.

If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me directly on mtv@currencies.co.uk

GBP/EUR Rates Hit 7 Year High! (Matthew Vassallo)

It’s been an extremely volatile 24 hours for the Pound, following yesterday’s decision by the Swiss National Bank (SNB) to discontinue their minimum exchange rate of 1.20 against the EUR.

This caused a huge shift in the markets with GBP/CHF rates moving by over 30% during the day’s trading! It also had a knock on effect for GBP/EUR rates, with the Pound gaining further momentum against the single currency and moving up through 1.30 to a fresh high. This momentum has continued today with GBP/EUR moving above 1.31, providing EUR buyers with the best rates available in the last 7 years.

This morning Eurozone inflation data was released and came out slightly worse than expected, which has helped facilitate today’s rise for the Pound. Moving forward it does seem as if the EUR will continue to come under pressure but I do believe we will see the Bank of England (BoE) step in if this trend continues, as the rising value of the Pound will cause some concern as it could alienate our trade partners, in particular the Eurozone.

GBP/USD rates continue to float in the low 1.50’s but the Pound has found some support around 1.51. I still feel longer-term a move below 1.50 is likely. However, with US Retail Sales figures coming out lower than expected earlier this week, we may find the Pound is supported above 1.50 for longer than we initially anticipated.

If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me directly on mtv@currencies.co.uk

UK Inflation Falls to Record Low (Matthew Vassallo)

UK inflation figures were released this morning and showed a sharp fall to 0.5% in December. This equals the lowest figures on records according to the Office for National Statistics (ONS) and will trigger a letter of explanation from Bank of England (BoE) governor Mark Carney to the chancellor.

This level falls some way below the BoE’s target of 2% and a major cause for the drop is attributed to lower fuel prices. However, chancellor George Osborne hailed the fall as good news and the markets have taken it in their stride with little additional movement caused on either GBP/EUR or GBP/USD exchange rates.

With little economic data of note for the UK for the rest of the week, we may find the Pound struggles to gain much momentum from its current position, particularly against the EUR. GBP/EUR has reached the current levels a handful of times over the past 12 months and each time it has the EUR has found support and spiked back towards 1.25. The key date in investors diary will be the ECB monetary policy decision on January 22nd, where we could see full scale Quantitative Easing (QE) initiated by the European Central Bank (ECB).

If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me directly on mtv@currencies.co.uk

Deflation Hits the Eurozone (Matthew Vassallo)

The Eurozone had a tough 2014 with many its member countries suffering from recession, poor growth forecasts and high unemployment levels. This in turn had a negative effect on the EUR, with the single currency struggling to make any sustained inroads against the Pound. 2015 was meant to signal a start of a new dawn for the Eurozone and its recovery but instead the single currency has once again found life tough going, with GBP/EUR levels hitting a fresh two year high last week, moving above 1.29 on the exchange.

Although the EUR found support and spiked back, it is unlikely to signal the end of the turmoil. Today we discovered that the Eurozone has been hit by deflation, which happens when an economies general price levels for goods and services drops and the economies inflation levels fall below 0%. This is a huge setback for the Eurozone and its members but it was to some extent expected and may even have been priced into the markets. GBP/EUR levels have spiked up but not to the extent we may have expected, considering the severity of the report and information at hand.

With GBP/EUR rates now floating between 1.27-1.28, it is likely the Pound will once again put pressure on the recent two year high over the coming weeks. A word of caution however to all those client expecting the Pound to breach 1.30 in the short-term, every time rates have reached such heights over the past 12 months, the EUR has consistently found support and moved away from this level. With the Bank of England (BoE) still keen to control Sterling’s value, I do not feel it is a given that we will see the pair move through 1.30.

With uncertainty surrounding when UK interest rates may rise, there are still a number of uncertainties that could knock the Pound very quickly and for this reason I would certainly consider my positon around the current levels.

If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me directly on mtv@currencies.co.uk

2 Key reasons to sell the £ today! Politics and Economics…

If you need to make some currency exchanges in the New Year involving the pound, you should be very much aware of some volatility expected on exchange rates. It is important to note that making firm predictions is impossible but just like we predicted in the Spring sterling would rise against the major currencies towards the middle and end of the year we can now make a prediction in the New Year sterling is likely to fall. We cannot tell you exactly how much by or which date but falls of up to ten cents on GBPEUR and 15 cents on GBPUSD wouldn’t be completely out of the question.

How can you make such a forecast? Well primarily I am basing this one major event, that is the General Election. Political Uncertainty and Economic Uncertainty are two key reasons to sell the pound today. These two factors are likely to combine and undermine much of the confidence we have seen behind sterling in 2014.

Economic Uncertainty – The sums don’t add up. The UK is still spending much more than it receives in tax receipts which is ballooning the public debt. Much slower growth than forecast will obscure the Chancellor and the OBR’s (Office of Budget Responsibility) plans for the economy to heal itself through more tax income. The Eurozone is slowing down, China and the global economy are slowing down, where exactly will all this growth come from? The current plans set out by Mr Osborne some 4 years ago were well received by markets at the time but how much patience is there? How long will workers and business stand by the current government with no real signs of the improvements promised and discussed?

Headlines surrounding the lack of any major economic progress by the government are likely to dominate the New Year and this will in my opinion combine with Political Uncertainty to fuel a sell off on sterling.

Political Uncertainty - It is very rare the government of the day increase their share of the vote when challenging for a second term. This is because it is more than likely the government has lost popularity  by nature  of being in government and the opposition can pick holes in their abilities. The Tories whose laissez faire approach to economic policy is generally the favoured approach by the markets (versus the uncertainty of Labour getting us in more debt) will likely lose their hold on parliament and require further support in the form of another coalition. Will it be the Liberal Democrats? Unlikely, they have lost swathes of support in the UK. Will it be UKIP? They plan to leave the EU immediately which in the short term at least would be terrible for UK plc as business and government has to completely renegotiate international relationships.

The Tories are also talking about an in or our referendum on Europe. The prospect of the UK leaving the EU is potentially disastrous for the UK. Attitudes towards the UK as a centre for global business will deteriorate and we will, at least in the short term suffer from a loss of inward investment.

Labour’s economic plans are not well thought out and involve some fairly draconian measures which will ultimately limit competition and drive investment overseas.

When you look at how sterling reacted to the Scottish Referendum in September we are reminded of the potential for political and economic uncertainty to affect markets. If you need to make a transfer involving the pound in the New Year making some plans now might well be a wise move because what is very clear is that the market shave not yet factored in any of the issues outlined above as of yet. Whether this trend manifests in January or the week before the election is impossible to say. But holding on to find out is the risk and with the pound at such great levels compared to averages of the last five years, it would appear any decision to hold on too long may become very costly.

To keep up to date with market ‘spike notifications’ and ‘rate alerts’ or for a personal forecast for your situation please contact me Jonathan on jmw@curencies.co.uk

 

 

GBPEUR rates spike higher above 1.27 but fall back very quickly!

GBPEUR has fallen from 1.2755 as the high today back down towards 1.2637 as Mario Draghi disappointed on the big Eurozone ‘QE’ question. In fact what we saw was him refrain from announcing a full blown QE operation. This caused the Euro to strengthen and I think represents a good opportunity for anyone selling the Euro in the future. Longer term it does seem very likely that the Euro will be weaker against the pound, on balance if you are buying sterling with Euros buying on the dips is the best way to maximise your transfer.

The big gamble on GBP rates in 2015 is going to be the election. It would not be surprising to see an increase in voter apathy and the old 2 or 3 way party system split yet further. If you have any major transactions in the New Year making some careful plans now might be a very good idea. We offer a range of contract options including the option to fix prices for the future and trade automatically at certain higher or lower rates. A quick discussion with us over the best strategy to maximise your deal really might be best the course of action. Just look at the high to low movements today! A well placed order could really make a big difference in rates on a large volume of currency.

If you wish to learn more please contact me Jonathan directly on jmw@currencies.co.uk

Will Sterling Continue to Strengthen? (Matthew Vassallo)

Sterling received a huge boost yesterday with gains against  both the EUR & USD. Despite yesterday’s economic headlines being dominated by George Osborne’s Autumn statement it was the currency markets which went into overdrive during early trading yesterday.

GBP/EUR rates spiked by over a cent a half against at yesterday’s high, with the Pound trading back above 1.27, having started the day closer to 1.25. This move was unexpected but it was also helped by the positive stance taken by Osborne, who raised UK growth forecasts for 2015 and beyond. The UK economic recovery is well on track and it will now be interesting whether the Bank of England (BoE) consider raising UK interest rates sooner than expected.

Sterling also saw a spike against the USD, providing USD buyers with some much needed respite after a difficult few weeks for the Pound. The USD did recover towards the end of Wednesday’s trading and I still feel it is likely Cable exchange rates will be back at 1.55 by the end of 2014.

Today both currency pairs have levelled out ahead of the BoE & European Central Bank (ECB) interest rated decisions and monetary policy statements, both of which are considered key market movers.

If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me directly on mtv@currencies.co.uk

Where Next for Sterling Exchange Rates? (Matthew Vassallo)

Sterling continues to hold its position against the EUR but has struggled to make any significant inroads against the USD over recent weeks. On-going economic problems inside the Eurozone are handicapping the single currency and despite a slowdown in UK data, the Pound continues to find support around 1.26. UK Gross Domestic Product (GDP) figures were released this morning and came out as expected but it was European Central Bank (ECB) president Mario Draghi’s recent comments, regarding how the ECB will take drastic measure to combat the threat of deflation, has helped to push GBP back up to the current levels.

However, the same can be said for GBP/USD rates with the pair now trading between 1.57-1.58, a far cry from levels seen over the summer which were comfortable above 1.60. The USD has also been boosted by an improving economy and it now looks likely that the US FED will raise interest rates before the Bank of England (BoE). US GDP figures were revised up from 3.3% to 3.9% and this has all helped to support the USD around the current levels. I do feel a move towards 1.55 is likely, so if you have USD to buy it may be prudent to consider your position before any further losses.

If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me directly on mtv@currencies.co.uk

How well do you really understand what is driving your exchange rate?

The pound looks likely to rise against most of the major currencies longer term as the UK appears likely to raise interest rates in the future. This is important because the raising and lowering of interest rates by a central bank greatly affects the strength or weakness of a currency. Understanding this fact – that the raising and lowering of interest rates greatly affects the strength and weakness of a currency – is key to predicting where exchange rates are headed.

One of the major reasons for GBP strength in 2014 is high expectations the UK would raise interest rates in 2014. This expectation has been pushed well back into 2015, if not 2016 and anyone holding on for this to happen to make an exchange had better have a long time to do so! I remember in 2012 we were almost in an identical position , with expectations high the UK would raise interest rates in the coming year or two. We then had the Eurozone crisis deteriorate (remember Greece on the brink of leaving the Eurozone) and the following Spring the UK entered a triple dip recession and the pound crashed from 1.24 to 1.14 in about 6 weeks!

I do not think we are likely to see such a sharp move but with the General Election and increased political uncertainty on the cards for 2015 a tough patch for the pound appears highly likely. Even though May 2015 seems many months away it is not actually that far in terms of exchange rates. Considering you have seen anywhere from 5-15 cents movement per year for the last few years on GBPEUR, making some plans now for currency in the new year is clearly sensible. 

We offer a range of contract options to fix exchange rates at currency levels and also to automatically purchase when a desired rate is hit (stop / loss and limit order). Speaking with or emailing us with a brief outline of your situation carries no obligation. We are currency specialists who are here to assist in the safe planning and execution of your transfers.

The real risk on exchange rates is doing nothing and leaving it all to chance so to learn more please contact me Jonathan on jmw@currencies.co.uk,

I look forward to hearing from you.

Thank you,

Jonathan

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