Tag Archives: uk interest rates
Will UK interest rates be slashed over the coming months! Where will sterling trade against the EUR & USD over the next 2 months?
A quick Sterling exchange rates overview
Sterling exchaneg rates had a very quiet day as you can see from the table above. There was very little movement for the pound as the markets are eagerly awaiting central bank announcements on Thursday from the Bank of England (BoE) and European Central Bank (ECB) on their interest rate decisions.
While the pound has still remained strong against the Euro, against many other currencies the fundamental issues with the state of the UK economy and the knock on effect of issues in Europe has caused the pound to lose value against most of the other majors. Significant losses yesterday include breaching a 4 month low against the AUD and SEK and 3 month lows against the NZD and ZAR.
With a lot of pressure on the state of the UK economy and rumours of stagnant growth over the rest of the year I would not be surprised to see sterling exchange rates weaken further
in Q3 & Q4. Predictions for the coming 2 months of Lows of 1.24 v EUR & 1.52 V USD. If these predictions are a concern or a nice surprise and would like to discuss what this may do for your currency exchange please do feel free to contact me at bma@currencies.co.uk
UK Interest rates to be slashed?
This Thursday the Bank of England will head into one of the most difficult decisions they will have to make this year. Over the last few months the BoE have had to decide if they
should pump more money into the economy through QE. It now seems hat there are calls for the bank to decide if further stimulus is the right way to go or if they should look at cutting interest rates further. It has been a good 3 years since we have written about interest rate cuts for the UK.
The reasoning behind the call seems to be down to the negative data of late to come out of the UK. The economy contracted a lot more than what was expected recently. Yesterday we learnt that house prices have dipped, mortgage approvals hit an 18 month low, consumer spending dropped and money supply figures showed their biggest annual drop since records began in 1983. The main factor though is how the UK is extremely vulnerable to a deepening Eurozone crisis.
In the event of an unexpected rate cut the pound could weaken by a lot more than when QE was first introduced into the UK. This could be by as much as 4-6% A rate cut would turn investors away and is generally seen as very negative for the exchange rate in question.
I personally feel that this month policy will be unaltered but if things continue to deteriorate in the UK or in Europe then we may just see that rate cut. Be cautious, if you do require buying a currency over the next few months you would not want to get your fingers burnt by the unexpected. Rates against the Euro are still trading right up at the 4 year high and we have numerous options that may meet your requirements regardless of if you are buying or selling sterling. Please feel free to contact me at bma@currencies.co.uk and I will be happy to explain all the options that are available to you.
What will happen with the GBP/EUR exchange rate after the interest rate decisions in the UK and Europe on Thursday
As it is the 4th of July there is no data to come out from across the pond. Over here in the UK and Europe trading lines are still open and data releases are effecting the markets. Some of the key market movers that you should be wary of tomorrow is as follows:
Thursday
12:00 – BoE Interest Rate Decision
12:45 – ECB Interest Rate Decision
13:30 – ECB Monetary Policy Statement
13:00 – US Non-manufacturing PMI
This morning the EU released their retail sales for the region and it showed a decline down to -1.7% for the year but showed an increase for the month or May to 0.6% This has marginally strengthened the Euro against the pound during early morning trading.
You will see from above that the main market mover will be the interest rate decisions for the UK and in Europe tomorrow. There are many economists that are predicting that we will see QE arise in the UK (theoretically negative for sterling) and some are muting a rate cut for the Euro zone. Tomorrow is set to be a volatile day and if you are concerned about what may occur and would like to know the implications of any movements then please feel free to email me at bma@currencies.co.uk It is so difficult to predict exactly which way the rates will move and you may wish to look at placing limits in the market or secure your currency before the big decisions. Overall it would not surprise me to see the pound fall against the Euro by close of trading.
In other news The ex-chairman of Barclays is set to go in front of a panel today in connection with the LIBOR scandal. I for one feel that this story has a long way to run. Barclays have been hit with a record fine (£290m) and I am sure over the coming days and weeks we will learn that the scandal is likely to involve many other banks both here and across the pond. The banking sector has been rigged with controversy recently. The banks are under fire for their role in the financial crisis, are facing a new wave of public outrage over a systems outage at RBS last month and evidence of mis-selling financial products continues.
It is no wonder that here at www.poundsterlingforecast.com we are witnessing record breaking applications from clients looking at using a specialist for their currency needs. The trusts from the banks have diminished as they are a jack of all trades and master of none. If you are looking for a personal and bespoke service to help you maximise your currency transfer then join the thousands who currently use our service to send money overseas. Please feel free to contact me at bma@currencies.co.uk. If you inform me what your situation is I will explain all the options that are available to you to try and help you minimise your risk to volatile currency movements. Alternatively you may call me from the number on the side of this page. Just ask to speak with Ben Amrany and I will make sure that I am available to discuss all the options that are available to you.
Ben Amrany
Interest rates will be market driver for sterling against a host of majors
With a busy week ahead for data releases, sterling exchange rates will mainly be driven by interest rate decisions around the globe.
AUSTRALIA
It will start off at 5.30 tomorrow morning when Australia will set their rates for the coming month. Australia’s interest rates are at 4.75% and a lot higher than here in the UK. Rates are expected to be kept on hold after their last quarters GDP showed a dip for the first time since 2009. If however we do see the RBA reduce rates by a quarter of a point then we may see the pound strengthen from close to all time current lows. I would not hold my breath for this to happen though as the consensus is that rates will be left unchanged.
NEW ZEALAND
Then on Wednesday evening it is Australia’s partners New Zealand with their rate decision. They recently reduced interest rates after the earthquake that hit Christchurch to help boost the economy. Since then they have had a batch of positive data releases and their are rumours that they will shortly be raising rates a couple of times before the end of the year. The KIWI Dollar has recently strengthened against a host of currencies hitting all time highs against the pound and US Dollar. I would expect to see this trend continue for some time until the UK has its own interest rate hike.
EURO ZONE & UK
Then this Thursday lunchtime 45 minutes will split decisions in the UK and Euro. The pound has weakened by around 2% in the last week against the Euro as Greece had agreed in principle a new bailout package. Their have once again been comments from the ECB that interest rates in the Euro may rise over the coming months. The markets have been predicting a rate hike in July. If though the rate hike hits the markets this week then we could see the pound fall back down to its May low of 1.1054. A press conference after the decision will take place and if no movement has occurred from the decision then the press conference can make the markets extremely volatile as it assesses comments from the ECB president.
Their have been rumours that the UK is not a rate hike until 2012 now. I personally feel that we may see a hike in Q4. So for this reason I feel this months rate decision will be a non event for the pound but we should look out for the minutes of the rate decision 2 weeks later. Normally the minutes will give us an indication of how many members voted for rate hikes and can give an indication on future policy stance.
For the pound to really strengthen against a host of currencies we will want to see an indication that rates will rise in the near future. If this does not happen then I think the pound will continue to trade at low levels against the AUD, NZD and EUR
If you would like more information on any data releases to hit the markets please fill in the enquiry form on the side of this page or email me directly with your name, number and enquiry on bma@currencies.co.uk. I will come back to you immediately with info and explain the mechanics of achieving our award winning rates.
UK inflation data key for sterling exchange rates
Sterling euro is currently testing the psychological 1.19 interbank level and the pound is holding up above the 1.60 mark vs. the US Dollar. Looking at other majors sterling is up 0.25% vs. the New Zealand Dollar 0.20% vs. the Swiss Franc and 0.35% vs the South African Rand.
Current sterling strength is down to expectations of a high inflationfigure in the UK, with January’s figure announced at 09:30 this morning. Analysts are predicting rates will break the 4% barrier (coming in at 4.1%) which would lend serious support to expectations of an interest rate increase in the UK sooner rather than later. The pound has strengthened significantly this year and is currently the best performing major currency (although that can also be put down to a dip in rates at the back end of 2010 and subsequently an artificially low start to the year). Much of this strength for sterling is as a result of interest rate increase expectations.
Inflation has spiraled in the UK above the Bank of England’s 2% target. The BoE have been loath to raise interest rates (used to counter inflation as in theory a rake hike cause people to save more and spend less, curbing price rises) because the economy has been in such a fragile position, as highlighted by Q4 GDP figures showing the economy shrank by 0.5% at the end of 2010.
A high release today, above 4.1% could see further sterling strength as it would drastically increase the chance of an interest rake hike in the UK. This could create some excellent buying opportunities for anyone with a foreign currency requirement.
Keep a close eye on the inflatoin figures this morning and for more information fill in the form on the right to speak to a specialist currency broker. In current conditions a well placed limit order is an excellent tool that can help maximise your exchange rate, while forward contracts can be used to protect your funds from adverse market movement while taking advantage of the current spike.
Sterling exchange rates and the week ahead
Sterling exchange rates saw significant gains against the Euro and USD over the course of last weeks trading. Since the poor UK GDP figures which were released a couple of weeks ago, the UK has witnessed some much improved data releases.
Early last week we saw figures in the construction and manufacturing services sector showing signs of improvement and on Friday we had the Halifax housing data showing prices had risen by 0.8% from the previous month. All these releases contributed to the pound gaining against most of the major currencies including a spike to a 12 week high against the U.S Dollar.
By far this week’s biggest data release for the UK will be the interest rate decision. Recently one of the main drivers for sterling is the growing speculation that the BoE will raise rates over the coming months.
Last months minutes showed that two members of the MPC voted for a rate rise. The chances of a rate rise this week is however unlikely as it may hamper economic growth and could potentially do more harm than good in the near term. The only reason to raise rates at present would be to try and curb inflation and with the UK so dependant on overseas pricing like oil it is hard to see inflation falling rapidly with a rate rise. So it leaves the BoE with a major headache and it will be interesting to see how things pan out this Thursday.
My personal view is that over the next few months there will be spikes for sterling purely on speculation that there will inevitably be a rate rise. For those of you holding out for this though you must remember that with all the austerity measures that have been introduced, the UK will find it hard to see significant economic growth. (Watch out for January’s GDP estimate this Thursday) The public sector is being hit hard and the knock on effect on unemployment will be huge. Just this weekend we learnt that around 10 thousand police jobs will go over the next 2 years. How many more jobs are in line to be lost? For this reason be extremely cautious if you are waiting for an interest rate rise to see a rise for the pound as you may be waiting until 2012 and lose any gains that we may see in the mean time.
If you are looking for extremely competitive rates of exchange on your money transfers please fill in the enquiry form on the side of this page and we will be in contact to explain the mechanics of trading to achieve better than average exchange rates
UK interest rates kept on hold
The Bank of England has kept interest rate in the UK on hold at 0.5% for the 21st consecutive month.
The news is in-line with market expectations as despite rising inflation the UK economy is not in a position to handle a rise in the cost of borrowing. (The most recent inflation data showed that Consumer Prices Index inflation rose to 3.2% well above the target rate of 2%.)
So far the decision has had little effect on sterling exchange rates as the market was expecting a rate hold.
In the long run low interest rates should help the country recover fully from recession, however for the pound this is typically not good news. Low interest rates discourage investors from putting money in the UK and therefore there is a lower level of demand for the pound. Low demand, as a general rule of thumb results in a lower price and in this case a weaker currency.
Therefore the pound is unlikely to make significant gains if interest rates are expected to be kept low for a prolonged period of time. The British Chambers of Commerce said interest rates should remain on hold into 2011 to help the economic recovery. They even said that the Bank should consider restarting the QE programme in order to give the economy a further boost. This could have a negative effect on the pound as the Bank would pump millions of pounds into the economy. The increase in supply would probably cause the pound to fall in value.
