Why Are Sterling Exchange Rates So Low? Why Is The Pound Dropping?

Sterling exchange rates have taken another huge hit overnight as the trend of weakness for the pound continued straight at the start of the open on the Asian markets last night.

The Pound dipped all the way down to the 1.02s against the Dollar and the 1.07s against Euro as investors and speculators rushed to drop the currency and this caused a great deal of weakness.

So why are Sterling exchange rates dropping?

Since the announcement of the mini-budget and Kwasi Kwarteng’s plans to cut taxes we have seen sterling exchange rates lose value quite significantly, the reason behind this is that investors do not fully back the plans and feel that the sheer level of Government borrowing required will cause damage in the future.

They believe that this approach isn’t sustainable and that we could find ourselves in some pretty hot water as an economy in the months and indeed years to come with the plans that have been out in place.

If you then couple this with the Bank of England being much slower and less aggressive regarding interest rates compared to other Central Banks around the world there is a feeling of fear that this time around the Government and Bank of England may have got their choices wrong.

Mr Kwarteng has added further comments over the weekend that this is not the end of the cuts and that he actually plans more, which has quite frankly spooked the markets further. Government bonds jumped by their highest increase on record on Friday, and with Sterling exchange rates dropping but Government bonds rising it presents quite a nasty recipe.

The lower the pound goes the larger the cost of living crisis for consumers in the UK too. We are great at services here in the UK and a large portion of our economy is made up from the service sector, financial services as an example, however, what that also means is we import a lot, with the pound now substantially lower than it was even a few weeks ago, the cost to buy in these goods and indeed a lot of our energy and fuel heading into the winter is spiraling out of control.

So we are faced with costs going up for business’s, consumers without that extra spare cash in their pockets and an expectation of a fairly long and challenging recession which is likely to last through 2023.

The Government have tried to stem this by putting more money into people’s pockets, but the expectation is that this could be like putting a plaster on a very deep cut, it likely needs a lot more care and attention than that, and just borrowing more and more is not going to be sustainable.

We have an extremely interesting week ahead and the markets could swing wildly just off the back of comments from members of the Bank of England, Politicians or anyone with direct involvement in this crisis, so you need to be fully prepared to act swiftly if you have an exchange to carry out.

Strangely, and to add a positive to this report we have had news that house prices are still rising in the UK with a 0.7% month on month increase reported by Rightmove today, the strongest pace in four months, so one area is still performing ok.

Later today we have Christine Lagarde testifying to lawmakers and being the Head of the European Central Bank we may see further indications on their plans to tackle inflation and what their next move will be on interest rates, so for anyone with an interest in Euro do expect some movement of the back on this.

If you are looking to make a large currency exchange in the coming hours, days, weeks or months and you would like to talk through the current sell off and what it means for you/what your options are, feel free to contact us here at Pound Sterling Forecast today.

You can email me (Daniel Wright) directly on [email protected] or you can click  this link and one of our team will get in touch in due course. Should you prefer to set up daily rate updates or to set a rate alert then feel free to do that within this site too.

I hope you have a great day, its going to be a volatile week!

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.

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 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 Forecast – The Week Ahead for Sterling Exchange Rates

GBP EUR Could Head Lower After Growth Revisions

First and foremost it has been a tough start to the week in terms of economic data, which has led to a drop-off against most majors.

Growth figures for the month came out at 0.2% instead of the predicted 0.5%, Industrial and Manufacturing production figures also missed the mark, which again just adds more fuel to the fire that a long and challenging recession is fast approaching for the U.K.

Our condolences to the Royal family after the terrible news that Her Majesty had passed on Thursday of last week, I personally popped to Buckingham palace after a day at the test match on Saturday to pay my respects and the atmosphere there was really something to take in, what a fantastic lady and a real inspiration on how to conduct yourself through both good times and bad.

It is important to note from a currency perspective, that there are a few changes that readers should be aware of, first and foremost we will have a Bank Holiday in the UK on Monday 19th September for the funeral, and secondly, the Bank of England have now postponed their interest rate decision, so it will take place on Thursday 22nd July as opposed to this coming Thursday.

Economic data this week

Even with the BOE moving the interest rate decision we still have plenty of important data out this week, starting with unemployment and average earnings figures tomorrow morning.

Unemployment is expected to remain at 3.8%, however, should this data also miss the mark it could cause another testing start to the day for the pound.

For those with an interest in the Dollar, we have US inflation figures out tomorrow afternoon which may impact the Federal Reserve’s next move on interest rates.

Wednesday is an important day for inflation in the UK, with all inflation figures coming out first thing in the morning. The sheer level of inflation is having much wider implications on the U.K economy and is also being pushed up by the weakness of the pound.

Expectations are for a small rise but anything different from that not only could impact how the Bank of England acts next week but could also cause an extremely volatile morning for Sterling exchange rates.

The BOE is currently expected to progress with a 75 basis point hike at next Thursday’s meeting, anything to firm that up more or to potentially alter expectations will move the pound accordingly.

Thursday is now a little quieter with the BOE decision being moved, we have US retail sales in the afternoon for those following the Dollar.

Rounding off the week we have UK Retail Sales on Friday, with energy prices rising and the general cost of living being such a big problem in the U.K it is unlikely consumers have been out spending too much so expectations are for another drop-off in Retail Sales which might give the pound a poor end to the week.

If you have a pending currency exchange to carry out and you would like to speak to one of our traders about upcoming news that may impact the cost of your transaction, feel free to email me (Daniel Wright) directly at [email protected] or click here to make an enquiry on our website and we will be in touch with you shortly.

Pound jumps on expectations that Liz Truss will announce huge economic plan – Sterling strength against all major currencies

The pound has struggled to find many positive days in recent weeks, however, over the course of this morning we have seen sterling exchange rates creep up against all major currencies.

The majority of this can be put down to a minor shift in sentiment and that investors and speculators alike appear to have some confidence behind the expected economic plans being muted by new Prime Minister Liz Truss.

Expectations are for an economic package of £130 Billion to be announced in due course which would include the capping of energy bills (a huge talking point as discussed in yesterday’s post), bolstering economic growth (extremely important with a recession looming), and limiting inflationary pressures.

All of this support can only be deemed as a good thing presently but the devil will be in the detail, whilst the pound has received a slight uptick off the back of the initial words it is likely that the markets will be waiting to find out the true plans before we see what this truly means for Sterling exchange rates.

One area that may cause turbulence for the pound is that new PM Truss plans to review the Bank Of England’s mandate during her campaign, this will likely cause uncertainty for the pound as and when more information comes out as two of the biggest market movers for a currency can be political and economic uncertainty, and with a storm cloud brewing between the Government and Bank of England, this would likely cause both political and economic uncertainty so it is certainly one to watch out for moving forwards.

Anyone with an imminent trade should have a keen eye on the markets this week and be prepared for anything, as news on the plans for the new PM will continue to filter through over the course of the week causing volatility for the pound.

If you do not have time to watch the market (which moves by the second) then let us help you with that, we watch markets all day every day and have a variety of tools to help you avoid adverse market movements making your transaction more costly. Email me (Daniel Wright) today by emailing [email protected]com and we will be happy to help you.

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.

Sterling exchange rates continue to slide – How low can the pound go?

GBP to EUR Forecast: Will Sterling See Further Losses Against the Euro?

Sterling exchange rates have seen further losses against both Euro and Dollar over the course of the trading week, as investors and speculators alike have made it clear there is a lack of confidence in the Pound at present.

With the cost of living crisis bearing down on the UK economy and a prolonged recession on the cards we have started to witness a move away from the pound and it appears that it is being treated much more like a riskier currency rather than a safe haven in the current climate.

With the energy cap being hiked once again and a further hike in the cards early next year, consumers are facing a really tough winter in the UK, and it is likely this will result in extremely tight purse strings and limited spending. When people on the street aren’t buying as many goods and services this tends to filter through to economic data and with the markets generally moving on expectations as well as fact, investors clearly don’t expect the UK economy to perform particularly well in the months ahead.

Let’s not get away from the fact that this problem is not concentrated on the UK, and will also impact the Eurozone and US, however the reason it is hitting the pound harder at present is that currently Eurozone data is holding firm and the Federal Reserve in the States are taking on an extremely aggressive approach to interest rates, leading to the Dollar becoming an attractive currency to hold.

The pound in fact was the worst performing major currency in August, and is close to testing yearly lows against both Euro and Dollar as I write this. If this trend continues then the pound could dip into the territory of being the worst performing major of 2022 within a matter of weeks.

Goldman Sachs have now predicted that inflation could peak at a whopping 14.3% in the UK and that the economy could contract by 0.6% in 2023, so the outlook as a whole is not great.

Analysts predictions from the banks have suggested the pound could drop as low as 1.11 against the Euro and 1.13 against the Dollar in the next three months, so if you have a large overseas purchase to make it may be prudent to start looking at the opportunities available to you.

Needless to say, the currency market can change very rapidly so you can never rule out the pound fighting back, all eyes will now be on the winner of the conservative leadership contest (Liz Truss now sat at 1-20 to win) and what the plans are from the new Prime Minister to tackle the problems set out above.

If you have an exchange to carry out, feel free to contact one of our experienced and knowledgeable traders to discuss the outlook in more detail, and we will be happy to help you negotiate this tricky market.

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 rise or fall versus the Euro in May?

GBP EUR Exchange Rate: Weekly Review April 9th

The Pound to Euro exchange rate has risen on the back of loose expectations that the UK might be able to strike a deal between the Labour Party and the Conservative Party. There is now a feeling that with both parties doing so badly in the local elections, there is added impetus to try and form an agreement to deliver a Brexit of some description.

Will the Euro weaken in May?

The Euro has also suffered of late with the market sceptical of some of the plans by the European Central Bank to restore confidence in the Eurozone. With the European elections scheduled for the 23rd May, there is added pressure and focus over the outlook both politically and economically for the single bloc.

The Euro could now well face increased pressures as investors try to gauge which direction events will take. It is likely more populist parties will find support from the elections with an increase in dissatisfaction of Government noted across the EU.

If there is a belief that an agreement between the Conservatives and Labour can be found, the Pound may well find some strength against a possibly weaker Euro.

Sterling might now appear more fragile however, since there are still some major gaps between the two sides to come to agreement over. The uncertainty is the key piece of news in my opinion which is holding back the Pound, this could see the Pound to Euro exchange rate losing value.

Pound to Euro forecast: Will the Pound rise or fall in May?

I predict that the GBP/EUR rate will now remain in a precarious position as the market awaits further news on how the Brexit talks are going and the likelihood of any further progress. Speculation too, around the outcome of the European elections will also I believe keep the pair in a rather volatile state.

GBP/EUR rates have improved for buyers, but could quickly lose value. If you are looking to buy or sell Euros against the Pound, please feel free to contact me to discuss the latest strategy and forecast to help maximise the position. You can send me a message directly using the form below. I will respond personally.

Pound to Euro forecast ahead of European Elections

GBP EUR Lower Despite Weaker Euro Data 

The Pound to Euro exchange rate remains sensitive to Brexit developments following the Parliamentary Easter recess.

GBP/EUR rates made some small in-roads following the Easter weekend but the markets are now poised for any significant developments in the coming days. Much attention is moving to the European elections to be held 23rd May and the Government has already put the structure in place for this to go ahead with polling cards already sent out to the electorate.

There is likely to be considerable volatility for GBP to EUR rates on the back of any developments in these European elections and could change the shape of how the electorate vote. With the recent emergence of the Independent Party as well as the Brexit Party headed up by Nigel Farage there could be something of a revolution in British politics.

The uncertainty in the British political system is creating a major headache for sterling exchange rates and this looks set to continue for some time yet.

Any compromise between the Labour and Conservative parties over some form of customs union to reach a deal on Brexit could see a rally for the Pound vs the Euro. This outcome however remains questionable and Prime Minister Theresa May has repeatedly said that freedom of movement with the EU must come to an end. The deadlock in Parliament may remain stuck for a long period considering the EU has granted Britain an extension to the Article 50 process until 31st October 2019 leaving an uncertain period ahead for GBP vs EUR.

Economic data could prove important for Pound to Euro rates this week

UK mortgage approvals from the British Bankers Association are released on Friday and could give some indication of the state of the British housing market. It is normally the construction and housing sectors which are the first to collapse ahead of a downturn and so these numbers are eagerly awaited. Recent data has shown the London property market still falling amidst overall uncertainty over Brexit.

In the EU it has been heavily reported that the economy is not performing well with a recession in Italy and underlying problems in Germany stemming from industrial production and manufacturing. The economic outlook in the EU isn’t that strong either and so any progress with Brexit could see material gains for GBP against the EUR.

If you would like to discuss Pound / Euro rates in more detail or have a currency transfer to make please feel free to get in touch with me using the form below and I will respond personally:

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