Exchange Rate Forecast

We saw Euro strength yesterday afternoon which pushed GBP EUR back to nearer the 1.27 mark – strong US data made the Euro more appealing for international investors. EUR USD is the most heavily traded currency pair worldwide, so sometimes manufacturing data in Detroit can affect the rate you can achieve buying in the Dordogne! Speculation is currently rife in the ECB surrounding the future of Mario Draghi. Many senior economists are calling for Draghis head as they feel he has an erratic approach to solving the ECB money worries. ECB interest rates are currently at an all time low, and with no sign of growth would change be a bad thing for the single currency? If Draghi did go I am confident we would see short term Euro weakness.

The Bank of England Monetary Policy Committee meets today to agree the UK Interest Rate for November. The rate announcement is tomorrow with predictions of no change from the current 0.5%. With the Interest Rate being such a strong indicator to economic strength (or weakness!) it can have a profound affect on the rates of exchange. Although I don’t believe that the rate will be changed, the Bank of England are dealing with an economy that has essentially over performed against its targets. Mark Carney (BofE governor) set his ‘forward guidance’ plan for a rate increase in line with UK unemployment figure. The UK has hit this target one year ahead of schedule, leaving Carney with a tough decision as to whether or not it is too early to raise the rate. The MPC consists of 9 members who would need to vote in majority to make the change. Watch this space for any market murmurings that could move GBP EUR.

GBP EUR rates have fluctuated substantially this week already, and as I alluded to even data in the US can affect the rates of exchange!

Please feel free to drop me a line directly ( ) should you wish to discuss an exchange, or give the trading floor a call directly and ask for me! 01494 787 478.

Andrew Bromley