Pound Sterling Weakness – Why Is The Pound Dropping So Much?

Sterling exchange rates have taken a huge hit over the course of the days trading, as the new chancellor Kwasi Kwateng’s mini-budget appears to have knocked the pound totally out of fashion.

The pound has lost over 350bps against the Dollar sitting in the 1.08 territory, whilst dropping to 1.12 against the Euro and hitting the lowest level against the Swiss Franc since 1974 sitting in the 1.06s.

There is now talk of an intervention and whether HMT will make an attempt late on Sunday night ahead of the Asian markets opening to stabilise the currency, should this not happen or not have the desired effect the Bank of England may need to step in again and look at an emergency interest rate hike less than a week after they raised rates by 50 basis points, which in all honesty wouldn’t look great.

Sterling really is taking some big blows out in the financial markets and it is tough to see how the pound will fight back, the lower Sterling exchange rates go, the more costs will spiral and the bigger the potential problem, so we are stuck in a really tricky situation of late.

I like to monitor the pound against a basket of major currencies and today was the biggest drop I can remember since the referendum, with a loss of over 10% in value against a basket of major currencies.

So where does this leave you if you have a large purchase to make be it personally or for your business overseas? The key in the coming weeks is being agile and ready to act.

We could still see a bounce back should we have an intervention or a rate hike, but you must also exercise caution that if this trend continues and you keep holding on it could be an extremely expensive decision.

If you have foreign currency to exchange back through sale of goods with your business or a personal property sale then you are probably reading this feeling pretty happy as your foreign currency has just become worth a lot more, but do be cautious not to get caught in the vicious circle of waiting and waiting then finding it bounces back and it is too late, this is a common occurrence with people in my experience.

I have been helping people move money around the world for 15 years now, if you would like to discuss the pound’s sudden loss of value or chat about a potential trade you need to carry out then feel free to email me, Daniel Wright on [email protected] and I will be happy to get in touch with you personally.

You can also set rate alerts, follow the markets, request quotes and view graphs/charts here on Pound Sterling Forecast so feel free to take a look around the site and we hope it is helpful.

Will the pound keep rising against the Euro and when is the best time to buy Euros in September?

A Rollarcoaster Week for GBP EUR - Weekly Review June 18th 

The pound to Euro exchange rate has bounced back from the recent lows rising above 1.16 and making a brave challenge for 1.17 in the last 24 hours. Some fresh confidence that finally, the British government is going to do something about the awful cost of living crisis facing the UK has seen investors take advantage of the recent lows of sterling and buy in some speculative positioning.

It might be argued that all this has done is stem the tide of a majorly depreciating pound, but however you look at it, it has bounced back presenting an opportunity to buy Euros some market watchers might have thought had passed. At its more recent lows of 1.14s, the pound is over 5 cents lower from the almost 1.20 level we hit at the turn of August.

This sudden turn of events shows just how quickly market sentiment can change, and how expensive it can be to hold out for that little bit extra when considering a large volume currency purchase. The reality is no one can say precisely what the market will do next, but with careful analysis of the facts and an educated assessment of previous behaviors, you can make an insightful decision that is based on something.

Whilst sterling has bounced higher on the news that Liz Truss will seek to help with the cost of living crisis, we are awaiting firmer details and this will perhaps not be an overnight change. The current inflation the UK is experiencing is now deep-rooted, with a shift back to more acceptable levels likely to take many months if not years. The problems of inflation are everywhere to see, with less spending power available for consumers, which is already impacting economic growth and presenting headaches for the Bank of England.

This issue, whilst not unique to the UK and sterling, has more seriously affected the UK because consumers have been more exposed to the higher inflation than in some other European countries where more is done to temper higher energy costs through state intervention.

Looking at some of the predictions for GBPEUR ahead, we can see a fair range with some analysts seeing back towards 1.20, others anticipating a move below 1.10 over the next 12 months. This reflects the great uncertainty over just how the market will react to some fairly monumental changes in interest rate policy for both the UK and Eurozone, as well as in the United States all against a backdrop of potential recessions and worryingly high inflation.

As an FX dealer for 13 years at one of the UK’s longest-established FX brokerages I would be very happy to share much greater insight into the forecasts ahead, and work with you to develop a strategy to help maximise your currency exchange. At the very least I might be able to give you some peace of mind and reassurance, from a chat with an expert over why rates are where they are, and what we can expect in the future.

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Will Sterling continue to recover following last week’s dramatic sell-off?

Pound to Dollar Rate Drops to One-month Low

Yesterday the Pound begun the week in a strong fashion, following on from its recovery towards the end of last week.

During last week’s trading session the Pound traded within an 8% range against the US Dollar and the trading range for GBP/EUR wasn’t far from this kind of dramatic trading range either. I would say that it was the most volatile week of trading since the Brexit vote took place back in June of 2016.

The Pound begun to fall in value in the fall-out from the Chancellor of the Exchequer, Kwasi Kwarteng’s mini-budget report when he announced that the government planned to scrap the higher tax bracket of 45p for higher earners. Financial markets were concerned with this plan along with a number of other announcements from Kwarteng and the Pound begun to tumble as a result.

The decision to go back on this plan, along with rumoured Bank of England buying up of long term bonds to stabilise the Pound’s value and financial markets has helped the Pound recover after it hit the lowest levels in history against the US Dollar, and the lowest level against the Euro in almost two-years.

Although the Pound has now recovered against the Euro and also recovered some of the losses against the US Dollar, moving forward there remains a number of underlying issues which could put further pressure on the Pound. The Conservative Party are facing a number of challenges as there didn’t appear to be a clear consensus between them regarding the financial announcements at the mini budget. Also, Labour is leading in the polls by a considerable margin so there could be political uncertainty in future which could put pressure on the Pounds value.

When markets are moving this quickly, and political updates are having such an impact on the value of the Pound it can be difficult to know when to make currency conversions and that’s where having a currency specialist on hand to keep you updated can be helpful. We can provide you with market updates and also help set up rate alerts to keep you informed.

For further information please feel free to contact me directly on [email protected]

Bank of England and mini budget – The impact on Sterling exchange rates

 GBP EUR Higher After Inflation Hits Another High 

The Bank of England increased interest rates for the 7th time in a row by 0.5% to take the base rate up to 2.25%, which was the biggest single rate hike in years. This caused the Pound to fall briefly against both the Euro and US Dollar as there were some predictions that the Bank of England may have raised rates by as much as 0.75%. As this didn’t happen the Pound plunged almost immediately after the announcement but managed to reverse some of the earlier losses later in the afternoon.

However, as of Friday morning, the Pound has struggled against both the US Dollar and the Euro and we are due to have the announcement from the Chancellor later today which is likely to cause more movements for GBPEUR exchange rates as well as GBPUSD exchange rates.

Currently, the US Dollar is close to its strongest level in history vs the Pound highlighting the real problems that the UK economy is facing whilst in the midst of a cost of living crisis. Indeed the GBPUSD exchange rate is at its lowest level seen since 1985 creating some excellent opportunities for those people looking to exchange US Dollars into Sterling in the short term. I have personally seen a rise in enquiries of clients looking to move money from the US to both the UK and Europe

The mini-budget is due out later with Chancellor Kwasi Kwarteng due to announce online tax cuts as well as dropping the planned rise in corporation tax. The economy and currency markets will be waiting with baited breath to see the impact of the announcement so pay close attention to the statement later on today.

If you have a currency transfer to make and would like a free quote then contact me directly [email protected] I have worked in the industry for 19 years and I’m confident of being able to help you.

Will the Pound to Euro improve this month?

Pound Euro rate improves over 2 week period

The Pound Euro rate has now improved after the mini-budget disaster almost two weeks ago caused chaos for Sterling.

The Pound Euro rate was trading above 1.15 for a brief period of time earlier this week before slowing losing some of its recent gains.

The Chancellor said on Monday that he wants to boost growth as well as cutting taxes.

With parliament due to return on 11th October we could see further movements for GBPEUR rates depending on the reaction.

The new fiscal plan is due to be announced on 23rd November. Hopefully, after some review by the Office for Budget Responsibility we could some calming of the markets later next month.

Bank of England and interest rates

The Bank of England had its hand forced by the mini-budget which meant that it had to support pension funds who were at risk following the statement made by the Chancellor.

The Bank of England are expected to keep raising interest rates for the foreseeable future in order to combat inflation which has been hitting close to 10% recently.

The target for inflation is 2% so the typical way of reducing inflation is to raise interest rates.

However, as inflation has been caused by the pandemic as well as the issues in Ukraine it will be difficult to see inflation come down as quickly as the central bank would like.

The mortgage market in the UK also came under a lot of pressure with many mortgages being pulled off the market.

This has caused problems for lots of borrowers at a time when energy prices are also rising.

Tomorrow Bank of England member David Ramsden will be speaking so keep a watch out for his comments.

This may provide further insight as to what is happening with policy and therefore GBPEUR rates.

If you would like a free quote when sending Euros then please contact me directly Tom Holian [email protected]

 

 

Pound at its lowest against the Euro in 19 months, and 37 years against the US dollar !

The pound is notably weaker today following the release of the latest UK Retail Sales numbers showing a surprise fall of 1.6%, which makes the economic slowdown anticipated, and likely recession ahead seem much worse than thought for Britain.

As I write, GBPEUR levels have dropped to a 19-month low, with the day low at the time of writing 1.1399 on GBPEUR and 1.1350 on GBPUSD. The cable level is a 37-year low, the worst for sterling since 1985 against the US dollar. I am often asked if it is a good time today to buy or sell, today appears to be a very good day to buy the pound if you are selling US dollars or Euros, it can easily be argued.

Any sense of calm and peace we had seen following Liz Truss’ announcement over an energy price freeze recently has ultimately proved short-lived. As a matter of fact, with the weekend approaching and a very busy week next week, we could be in for a turbulent time once again for sterling, particularly with financial markets closed on Monday for Her Majesty’s funeral.

This means there is less time for markets to digest news, and it increases the urgency of decisions, knowing that time is short. Next week is a crucial week with the latest Bank of England and US Federal Reserve Interest Rate decisions, plus Liz Truss’ mini budget that could very easily shape sentiment ahead for the pound.

Going back to today’s data, the British consumer is a major component of economic growth for the UK, so the poor numbers today are quite worrying for the economic outlook ahead. And this information seems highly likely to feed into any narrative by the Bank of England next week.

The Federal Reserve in the US will absolutely be one to watch too, as markets often follow the lead of the Fed, the expectation is for rising inflation stateside to trigger further sharp rises in interest rates, which may only serve to increase volatility as traders and market participants have to react to the ever-changing story on both sides of the pond.

If you are considering any FX payments shortly or longer term involving the pound, EUR, US dollar, or any other currency, now might be a good time to assess your strategy following these latest developments and with so much out there globally to move the FX markets.

For a more detailed discussion of your requirements, please call or email me directly on [email protected] for a one-to-one over what might be best.

You can also set rate alerts, sign up for our daily rates email or request a quote via this site.

GBP/EUR continues to trade at annual low with BoE meeting in focus in week

In the early hours of this morning, the Pound to Euro exchange rate hit a fresh annual low of 1.1385, which is the lowest level the pair has traded at in close to 20 months.

The weak start to this week’s trading follows on from a 1.25% drop last week, after Friday’s sell-off pushed the Pound lower off the back of some concerning economic data for the UK.

UK Retail Sales were expected to have dropped by 0.5% in August, but data released on Friday showed a drop of 1.6% month on month. With the cost-of-living crisis a mainstay in the news a drop-off wasn’t a surprise but it was the size of the drop that shocked the currency markets and pushed the Pound lower across the board of major currency pairs.

The Office for National Statistics confirmed that all retail sectors were affected and economic reports such as Friday’s confirm that the economy is likely to slide into a recession.

There are hopes that the newly appointed Prime Ministers’ announcement of a two-year cap on energy prices will help ease the cost-of-living crisis and boost spending but the announcement came this month so moving forward retail sales figures are likely to be followed closely and could impact the Pound’s value as we saw on Friday.

This week both the FED Reserve in the US and the Bank of England here in the UK are expected to hike interest rates. There could be further market movements for the Pound as there is uncertainty regarding how much the Monetary Policy Committee will decide to hike interest rates by.

At the last meeting, the BoE hiked by 0.5% and although it’s likely that they will do the same again, the voting patterns haven’t been unanimous with some favouring a 25-basis point hike and others 75 basis points so this Thursday’s release is certainly worth looking out for.

Should you need assistance with a large currency conversion for the purchase or sale of a property overseas and you would like to discuss these market movements in more detail, please feel free to email me, Joseph Wright on [email protected], and I will be happy to have a chat with you.

You can also request a quote anytime you wish if you would like to compare to your bank or current broker.

Will the Pound Remain Steady after Surprise Dip in Inflation ?

The pound has been relatively steady today following a surprise dip in the headline Inflation numbers. In welcome news across the country, the number came in at 9.9% higher year on year for August, versus the 10.2% numbers from last month for July. The important point is the number has been trending higher since the beginning of the year so this marks a turning point and could potentially signal a change in policy ahead. Inflation is very influential on interest rates, and interest rate policy by the Bank of England is crucial to the value of the pound.

Rising high inflation is damaging to an economy since as prices rise, it can limit spending by consumers and business, as they become more careful over their expenditure. The knock-on higher interest rates by a central bank can also limit spending and might cause a recession as has been predicted for the UK late this year or early 2023. Unemployment may also rise and there can be a general lack of confidence which is harmful to economic growth and consumer and business activity.

Whilst good news, this small dip in the Inflation figures doesn’t change the outlook hugely so far, the UK is still facing the highest Inflation levels amongst the leading economies in the world. Sterling is much weaker owing to the worries over recession ahead, and the damage being down to the UK economy by this high figure. The pound appears to be taking a bit of a breather this morning as the market digests this news, to decide if it is a genuine turning point, or just a dip before we do see moves higher. Knowing how cautious the Bank of England can be, they might need to see more evidence of a change to become more confident of a turning point.

It appears petrol prices are the main driver of the fall, with many underlying goods still rising. A key factor too will be Liz Truss’ energy bill freeze at £2500, so hopefully we can see Inflation now stabilise, but the market might need further evidence to trigger sharper moves and a real shift in interest policy ahead.

As mentioned, inflation and interest rates are very closely linked. And interest rates and the relative performance of a currency are also very closely linked, so all eyes will be closely on the Bank of England next week to see if they will deliver their expected 0.5% hike, with the potential for any commentary around the outlook having the potential to influence sterling exchange rates.

If you are looking to buy the pound with Euros or US dollars, following say an overseas property sale or investment, you are buying the pound with Euros near some of the best points in 2022 and since June. With the US dollar, the figures are more impressive, with the best points since 2020 and prior to this the 1980s. Sterling is trading very weakly at present, as markets remain fearful over just how the country will tackle the stubbornly high inflation and help stave off a deep recession that could harm economic growth in the future. It is a similar story against all the majors, including the Australian dollar, New Zealand dollar and the Canadian dollar and Swiss Franc.

If you are looking to sell the pound, to buy a foreign currency it has been challenging lately. However, it is worth remembering the pound was lower in recent years over Brexit. On GBPEUR, we were many cents less last year and in previous years with the 2020 lows reaching 1.05, some 10 cents below current levels. For GBPEUR, 2022 has been one of the better recent years, with rates in the mid to high teens, compared to low teens, and below and around 1.10 for much of 2020-2021.

If you are looking to make a currency exchange and would like to discuss some strategy ahead, I am a currency dealer with 13 years experience guiding both private client and corporate clients through the FX markets, providing strategy and guidance to help make an informed decision.

Thank you for reading and I would be very happy to take any questions or comments relating to this article or to discuss your situation in more detail. You can contact me directly on [email protected] or feel free to request a quote, set up an account or set a rate alert via this site.

Pound Sterling losses continue as cost of living crisis dominates headlines – New Prime Minister to be announced today

Pound to Euro rate continues to fall, making history in the process

Sterling exchange rates have continues to drift to kick start a new trading week, as the cost of living crisis dominates headlines across UK media.

With today being an important day for UK politics as we see the announcement of the winner in the Conservative party leadership contest, and ultimately who will be the new Prime Minister, they will almost instantaneously have to announce how they plan to combat what appears to be an extremely challenging winter for the majority of households and businesses.

It is widely expected that Liz Truss will be announced later today at 12:30 and all eyes from investors and speculators will be on her plans to keep people and certain business’s afloat as we face a difficult winter of rising costs, forced closures of retailers, and people simply having to choose between food on the table or heating the house.

This is still clearly impacting the value of Sterling exchange rates, and many feel that it will continue to impact them in the coming months too.

Capital Economics, a well-known independent economic research business has some fairly negative predictions out there for the pound, with expectations that Sterling will lose roughly 5% on a trade-weighted basis in the coming months. This essentially means they expect weakness against most majors, a 5% drop for GBP/EUR or GBP/USD would see Sterling drop below 1.10 as an example, so although it feels low now, if these predictions come true then there may be much further to fall.

It has to be said that the markets can change very quickly and forecasts can be wrong, so it is key to retain the view that things could change, however economic data in the States and the Eurozone is way outperforming the U.K at present, and the drop off in the pound only adds fuel to the fire.

A lower pound means everything imported costs more, from food to gas prices, the lower it drops the higher inflation rises and the more people are paying for goods and services, I personally am noticing costs for almost everything rising and that will be down to many things, but also a lower pound pushing up fuel, transportation, energy and packaging costs for basically every product on our shelves.

The week ahead

We have the news on the new PM later this morning to kick start the week, and as mentioned previously I believe the plans laid out off the back of that could be key for the pound in the early stages of the week.

For those with an interest in Australian or Canadian Dollars, we have the RBA interest rate decision tonight and the Bank of Canada later this week on Wednesday.

Euro followers will note growth figures on Wednesday and more importantly the European Central Bank interest rate decision on Thursday, where the market expects an aggressive 75 basis points hike in interest rates, any change to this could cause immediate volatility, and the wording used regarding future fiscal policy in the press conference after is also likely to set the tone for how the Euro performs over the rest of the trading week.

Currency exchange to carry out and worried about market movements?

If you have an exchange to carry out, yet you are concerned about what is going on currently then feel free to get in touch with us today. We are experts in this field and whilst we cannot directly advise you we can help you negotiate these challenging times along with having a number of tools to assist you to avoid adverse market movement or to help you take advantage of a spike.

If you would like to discuss anything within this article in further detail feel free to contact me at [email protected] and I will be happy to help you.

Alternatively, Click this link and let us know your requirement and we will be in touch to discuss your options in more detail.

Will The Pound Keep Rising This Week?

The Pound has had a fairly good week or two against most major currencies, so I thought I would look at the probability that Sterling exchange rates would continue to gain ground against them over the course of this week.

Now that the Autumn statement has passed without any huge drama, unlike Kwasi Kwarteng’s attempt, there is a feeling that there is a little more confidence in the U.K and investors are starting to head back into UK stocks and shares, thus heightening demand for the Pound and increasing its value.

The week ahead is a really tricky one to work out, this is mainly due to the fact we have a short week in the U.S, with Thanksgiving over in the States on Thursday and very limited economic data across the globe for most of the trading week.

The key focus this week for the U.K and ultimately the Pound will be Wednesday, to be honest most of the main data for the week around the globe comes out on Wednesday and you may also see a little volatility on the Wednesday afternoon session as the U.S markets close off positions before they hit their Thanksgiving break.

Overnight on Tuesday we have the RBNZ interest rate decision over in New Zealand, for those looking to buy or sell New Zealand Dollars any change to the expectation of a 75 basis point hike could lead to sharp overnight movements for the NZD, or equally any surprising comments regarding future economic policy in the press conference thereafter.

Wednesday morning sees the PMI (Purchasing Managers Index) for the U.K for both services and manufacturing, so there will be a focus on this data to see how each areas has performed, expectation is for the pace of contraction to have quickened, we have similar data for the Eurozone and US with slightly better expectations but anything that differes from expectations or surprises the market could cause movements for GBP, EUR and USD over the course of Wednesday.

Wednesday afternoon brings a host of other data for the U.S ahead of thanksgiving, with durable goods, jobless claims and the FOMC meeting minutes all due out over the course of the afternoon.

I still feel that despite the pending recession and the gloomy outlook for the U.K that there is a little confidence returning due to the plans set out by the PM and Chancellor, and the fact that Sterling exchange rates are still reasonably low so the Pound can be acquired fairly cheap at present.

It would not surprise me to see the Pound continue to hold or even increase value this week, however any regular reader of this blog will be well aware that anything can happen and even a comment from a Bank Of England member or a surprise change in economic data could alter that expectation very quickly.

In such a volatile market it really is key you are watching rates very closely, if you would like assistance in doing so along with getting a comparison on any rate you are being offered to move money internationally then you are always welcome to contact me personally.

We pride ourselves on delivering up to date market information, award winning customer service and extremely competitive exchange rates, so if you feel you may not be getting any of this from your bank or current broker, then feel free to email me (Daniel Wright) on [email protected] and I will be happy to speak to you personally with absolutely no obligation to use us.

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