European debt meetings latest and Sterling forecast – The week ahead

The table below shows the percentage movement of exchange rates on Friday along with the extra foreign currency you could have bought if buying with £200,000 catching your rate at the right moment.

Currency

% change over Friday

Difference in £200,000

GBPEUR

0.68%

€1540

GBPUSD

1.11%

USD $3500

Ongoing European crisis, global uncertainty and what it means for your currency transfer

EU Finance ministers met over the weekend and will be in discussion most of the week to finally try and come up with a resolution to a problem that appears to be spiraling out of control across Europe. Greece will need a second bailout, European banks need to be recapitalized to cope with Greek debt exposure and numerous economies are desperately trying to bring in cuts to take their expenditure below GDP.

Many economies within Europe have large exposure to Greek debt and if Greece is allowed to fail, many others may slowly follow suit. In my opinion the meetings this weekend and that we have seen after the last few months are only going to bring in temporary solutions and that inevitably at some point, finance ministers will have to throw in the towel and stop throwing money into the Greek black hole.

No headline deal has been announced however so far on Saturday ministers announced that €110 Billion of new capital must be raised by European banks to cover their loans to indebted nations, as the EFSF (European Financial Stability Fund) quite honestly has too much to deal with trying to prop up Greece, Italy, Spain and Portugal – To be kept up to date with the very latest releases and market movements get in touch by filling in the enquiry form on the right hand side of this page and let us be the eyes and ears on the market for you.

If you have a requirement to buy or sell Euros this week then you should ensure you are protected against adverse market movements by means of a stop loss order. An announcement can be made at any time and we will be sure to be receiving constant updates over the first few days of the week leading to a volatile time for the Euro.

Personally I feel there may be a few spikes for Sterling against the Euro this week, however like in the past once the meeting has ended and a new apparent fantastic approach to resolving the problems has been announced the Euro may strengthen considerably, putting us back down to 1.13 by the end of the week. If you get the chance to buy when the mid-market level is above that, then in my opinion I would be highly tempted. Contact us today by filling in the enquiry form on the right hand side of this page should you be worried about what the week may bring and one of our experienced traders will be happy to explain the various options available to you.

U.S credit rating downgrade again?

An interesting report I read over the weekend suggests that the U.S are in for another credit rating downgrade before the end of the year, according to the Bank of America. Ratings agencies had previously said that if congress did not have credible solutions and policies in place regarding debt problems in the states then this is something they would have to look at, and a downgrade could happen as soon as November.

Although you may think this would weaken the Dollar, the downgrade we saw for the States last time led to Dollar strength, probably as it heightened global uncertainty and in risk-averse times the Dollar is still one of the frontrunners as a safe haven for investors to place their funds into. One other note of caution is the saying on the market that when the U.S sneezes the U.K catches a cold, so how much longer will we indeed hold on to our top rating and what effect will that have on the Pound…. Surely a negative one?

Sterling forecast – the week ahead

Without a doubt the most important release on the financial markets this week will be the result of the current European summit, this will affect all currencies worldwide as it will change attitude to risk and potentially paint the picture as to where the world economy will be in the lead up to Christmas. Personally I feel the result will lead to immediate Euro strength and the antipodean currencies (AUD,NZD,ZAR) will also gain against the Pound as for the time being as investors will still be willing to get invest in the riskier currencies, increasing demand and making them stronger.

Cable (GBP-USD) is expected to plummet by top foreign exchange information site FX Street, however I feel that this week we could temporarily break the 1.60 barrier for the final time this year and we see key Gross Domestic Product figures out for the States on Wednesday at 13:30pm.

There are numerous interest rate decisions throughout the week with Canada, New Zealand and Japan all expected to keep rates on hold, any changes to expectations may lead to high volatility, be aware too that the markets are on alert for Japan to move to devalue the Yen and the interest decision overnight on Tuesday may be the ideal time for them to do so.

In short, an extremely volatile week ahead beckons for all major currencies and those in a position to act fast will benefit from opportunities that may arise, keep in close contact with your account manager and if you know you have an imminent requirement then email me [email protected] and we will be more than happy to assist you.

If you have any questions or queries regarding anything in this report then please do feel free to email me [email protected]or fill in the enquiry form on the right hand side of this page..