Is the pound set to weaken?

Pound to Euro Starts the Week off Steady

Sterling exchange rates hang in the balance

Sterling exchange rates once again hang in the balance following a subdued start to the week. Yesterday, the pound recovered most of the gains lost during Tuesdays session, however, struggled to break much higher.

Data released on Monday triggered the sterling sell-off after the pound had risen to monthly highs against the dollar and the euro towards the end of last week. PMI data confirmed the UK services industry contracted last month, which is negative for the country’s economic outlook.

Earlier in the week, the CBI (Confederation of Business Industry) confirmed their belief that the UK recession will continue into next year. GDP figures released yesterday confirmed the eurozone economy is still growing. The EU economy grew 2.3% over the last year and 0.3% over the last quarter vs expectations of 2.1% and 0.2% respectively.  A continuation of positive growth in Europe could spell trouble for GBPEUR rates if the UK continues to plunge into a recession.

The pounds value is still closely aligned with global risk-appetite which is expected to dwindle in the new year as economies move closer to recession. Now could pose as an opportunity for those with sterling looking to buy foreign currency. Sterling is trading within range of multi-month highs against the euro, dollar, Aussie and Canadian dollar to name a few.

Today and tomorrow are light for economic data from the UK. We will see monthly jobs and PPI (inflation) figures from the US.

Next week will be key for exchange rates moving forward as the ECB, Fed, BOE and SNB all have their policy meetings. Difficult decisions loom for the ECB and Fed as inflation appears to have tailed off in both economies.

At Lumon, we have several different contract options that can help you minimise risk during uncertain times in the market. We can also set rate alerts and monitor the market for you.

If you have any upcoming requirement involving any currency, and wish to speak with a specialist, please feel free to reach out directly on [email protected]

Will the pound continue to rise in December?

Pound to Dollar Rate Pares Losses

The pound has recently touched fresh highs against both the Euro and US dollar, begging the question will the pound continue to rise in December? Financial markets had become slightly more buoyant in recent weeks leading to sterling bouncing back from the October lows.

If we cast our minds back to October and the Liz Truss and Kwasi Kwarteng ‘mini-budget’ fiasco, sterling has made a incredible recovery. We have moved near 20 cents higher on GBPUSD, from 1.03 to 1.22, and on GBPEUR near 10 cents, from 1.07 to 1.17.

In percentage terms this is a 19% move on GBPUSD and 9.3% on GBPEUR, truly remarkable shifts in two months. Whilst there is no ‘typical’ or guaranteed set of movements in the currency markets, more common movements across these pairings might be a few cents or low single digit percentages over such a period.

The figures above are definitely not in line with usual high to low movement on GBPUSD and GBPEUR currency pairings in two months, and reminds us how unpredictable and volatile the currency markets can be.

The shift in rates and sentiment has definitely stemmed from renewed confidence the UK will not be embarking on the potentially dangerous economic plans eschewed by Liz Truss, but it is also down to more global factors.

The US dollar has been a major factor and in weakening dramatically across the board against most other currencies, it has amplified the movements higher for sterling, in supporting a rise on GBPUSD. The US is appearing less likely to raise interest rates at quite the same pace as predicted, leading to the greenback retreating from its advances.

As the weaker dollar has dragged sterling higher, it has pulled the pound up against other currencies like the Euro. The key question is will this rally continue and actually if we look at the more recent movements this week and last, there could be signs that this recovery is stalling and struggling to break higher.

The Bank of England meet next Thursday and will discuss and outline their latest Interest Rate decision, where the potential for an interest rate hike could be supportive for the pound. However, whilst it is likely the BoE will raise interest rates, we do sometimes refer to these moments as ‘priced in’ where investors are already factoring said outcome in.

What might be more interesting is assessing what the pace of hikes or not will be for 2023, as investors try to gauge the potential for a further move higher, or not, for the pound next year.

December can be a tricky month for predictions  in the currency market with many bank holidays and thinner liquidity over those days, with increased potential for higher volatility because of these conditions.

If you are considering an exchange this side of Christmas, or looking to understand some strategy and insight for 2023, we can provide guidance and share the latest market commentary to help your decision making.

We also have a range of options to help with the timing and execution of your FX transactions, to help manage your exposure to risk and capture any volatility that is in your favour.

Thank you for reading and please contact me to learn more.

Jonathan

[email protected]

Will Sterling continue to rally after hitting annual lows just a few months ago?

Sterling exchange rates have rallied in a dramatic fashion after hitting both annual, and record lows in some cases, as recently as just 3-months ago.

During late August and early September, the Pound was in the headlines for all the wrong reasons when the disastrous and poorly planned mini-budget was announced. In the wake of the Chancellor at the times updates, the Pound fell to its lowest levels against the US Dollar on record and also stuck annual lows against the majority of major currency pairs.

Since then, Sterling has recovered much of the losses and even rallied in some cases with the rate of GBP/USD, known as cable within financial markets hitting a 6-month high and finding itself in the news for more positive reasons this time.

Not only has cable climbed in dramatic fashion (GBP/USD has climbed by around 14% since hitting 1.0350), but the GBP finds itself trading a long way from it’s annual lows against most major currency pairs such as the EUR, AUD, CAD and the NZD for example.

Moving forward the Pound’s performance will be hard to read as financial commentators with a bearish outlook for the Pound are putting the GBP/USD movements down to USD weakness rather than Sterling strength.

Personally I think when you factor how Sterling has climbed against multiple other currencies, we cannot rule out a more optimistic outlook for the Pound and the UK economy now there is a more stable government in place.

The next year isn’t expected to be plain sailing for the UK economy as a long but shallow recession is expected by financial commentators. I think the positive reaction to the spending plans of the new PM Rishi Sunak and Chancellor Jeremy Hunt have eased concerns for the UK though, and this is why we could see Sterling continue to climb especially if the Bank of England continues to hike interest rates to counter inflation.

The next interest rate decision from the BoE will take place on the 15th of December, which is next Thursday as these decisions are usually released on Thursdays.

If you wish to plan around this update, and would like to discuss exchange rates and timings, I will be happy to offer you a quote and try to help with timings.

You can contact me (Joe) directly on [email protected] and I will be happy to offer any insight we can, and provide you with a competitive quote.

Sterling back on the front foot – will the rise continue?

Sterling back on the front foot – will the rise continue?

Pound sterling has started the days trading on a positive foot gaining ground against a basket of major currencies. GBPEUR is trading within half a cent of the three-month high. Cable (GBPUSD) is trading close to four-month highs.

A transfer of £100,000 is buying $17,000 and €8000 more vs the low of the last three months. Now could present a window of opportunity for those looking to buy foreign currency with sterling.

Figures released yesterday showed that inflation has begun to slow in the eurozone. Inflation is still extremely high at 10% and well above the ECB’s target 2%. However, the markets were expecting a reading of 10.4% following last months figures at 10.6%. The lighter than expected figure puts less pressure on the on the ECB to aggressively hike interest rates moving forward.

Sterling continues to be bound to global risk sentiment. Yesterday, Fed Chairman Jerome Powell suggested that the current rate hike cycle could be coming to an end in the US. These comments are positive for the US and global economic outlook.

The US dollar tends to gain value at times of economic uncertainty and lose value when investor sentiment is positive. A weaker dollar has pushed cable and GBPEUR higher. EURUSD (the most traded currency pair globally) is trading close to five-month highs. Another signal that risk appetite is beginning to improve.

€100,000 is buying $7000 more vs the low of the last month.

If you have an upcoming currency requirement and would like to be kept informed of developments, please feel free to contact me directly on [email protected].

We have a number of tools available at Lumon to help minimise your currency risk, via market orders, forward contracts and rate alerts.

What the pound weaken or rise in December?

Sterling has been a mixed performer, of recent weeks rising and falling in the last few weeks as a range of factors dictate direction. Whilst overall, the pound has been performing more strongly since the lows of September and October, we are still well below some of the higher points of 2022.

Sterling of course suffered at the hands of the Liz Truss and Kwasi Kwarteng administration and the infamous ‘mini-budget’ that saw multi-year lows for sterling against the US dollar of 1.03 and GBPEUR of 1.07.

Recent movements higher have been over 1.21 on GBPUSD and 1.16 on GBPEUR, representing a clearly much greater performance. This is in part down to rising confidence that the UK economy is on a better footing under the new administration of Rishi Sunak, and also Jeremy Hunt as Chancellor.

Sterling has as we finish November been a little weaker however, as investors become cautious once again to the economic outlook for the UK. The Bank of England has predicted a long and deep recession for 2023, which might well extend into 2024.

Looking at December in more detail, December 15th is the latest Bank of England interest rate decision, which can often be a market mover. With the UK having embarked on a series of interest rate hikes in the last year, December will mark the one-year anniversary since the UK first launched its latest rate hike cycle.

The pound has been better supported because of higher interest rates, since typically speaking, the higher an interest rate, the stronger that currency will often be. What will be interesting is the commentary from the Bank of England, to see what kind of pace of hikes they anticipate for 2023.

With inflation worryingly high for the UK, policy makers have had a very tough job to ensure that they are tackling rising prices, but also not totally choking off what economic recovery is out there.

Sterling has been written off by many investors and forecasters in recent weeks, but could we be in for some surprise upside in the busy December trading period?

If you have a transaction to consider in the coming weeks and months, we can offer market insight and guidance as to relevant strategies for your consideration as to which might suit you best.

Please contact me Jonathan for more information.

[email protected]

GBP exchange rates climb despite warnings regarding the UK economy

GBP AUD Consolidates with UK Employment Due

The Pound begun the week in a volatile fashion yesterday, and traded in over a 1-cent range against the Euro after testing the 1.1650 handle once again.

We have now seen the GBP/EUR exchange rate test trading levels around 1.1650 at least 4-times in the last 3 months with yesterday being the latest example of this pattern. Yesterday morning during the earlier hours of trading GBP rebounded from the 1.1650 once again demonstrating that there is resistance at this level, so if you’re planning on making a transfer involving GBP/EUR, it’s worth keeping an eye out for this particular rate.

Sterling has also climbed recently against the US Dollar, which is based on a combination of Sterling strength coupled with US Dollar weakness.

As risk sentiment globally has increased recently, the US Dollar has cooled off after benefiting earlier in the year from concerns of economic downturn.

There is also uncertainty as to how much higher the FED Reserve plans on hiking interest rates, which could be another reason for the dip in the Dollars value.

This morning’s focus on the strengthening Pound may come as a surprise for some of our readers as just last week there were warnings regarding the UK economy over the next year. The OECD (Organisation for Economic Cooperation and Development) last week reported that the UK will suffer the biggest downturn in economic growth out of all the advanced economies.

Of the G7 group of countries, both the UK and Germany are predicted to contract but the UK is expected to contract by the greatest amount of all 7 countries. For reference, the G7 is made up of the US, UK, Canada, France, Germany, Italy and Japan.

Next year the UK economy is expected to drop by 0.4% followed by an increase of just 0.2% in 2024.

Last week the OBR (Office for Budget Responsibility) also predicted an economic contraction for the UK next year. The OBR’s prediction is for a steeper drop of 1.4% so the Pounds strengthening late last week and yesterday morning may be short lived should the UK economy show signs of shrinking at a greater level than the current predictions.

If you wish to discuss an upcoming transfer involving the Pound and would like to discuss timings and exchange rates do feel free to get in touch with me (Joe). You can email me directly on [email protected] with any questions you may have regarding our currency exchange service also. We can also set up rate alerts and automatic orders if you’re targeting particular trade levels along with other useful tools.

Will the Pound continue to improve against the US Dollar?

New Zealand Dollar weakens further as Global Dairy Trade auction falls lower than expectations

Pound Dollar rates hit 3 month high

The Pound vs the US Dollar is now trading at its best levels to buy US Dollars with Pounds since the end of August.

With the Pound improving this has created some good opportunities for those looking to convert Pounds into US Dollars.

The US Dollar has slowly begun to weaken following falls in US inflation recently as it appears as though the Fed’s policy of interest rates has started to work.

Inflation is still extremely high in the UK whilst the US has started to see a fall.

This could be attributed to the Federal Reserve’s aggressive stance with its interest rate policy during the course of this year.

Inflation has begun to fall in the US and there are expectations that the Fed may be considering a slow down in their pace of interest rate hikes.

The minutes from the most recent FOMC released this week suggest that policymakers are expected to slow down their pace of rate hikes which has caused the US Dollar to weaken.

Indeed, GBPUSD exchange rates are now trading above 1.20 and even started to trade above 1.21 during the course of this week.

The expectation for the next Fed rate hike is now 50 basis points compared to their recent 75 basis point hikes.

What will happen with US GDP?

As we move forward into next week we could see further movement for GBPUSD exchange rates on Wednesday.

This is when the US will release the latest US GDP figures for the third quarter.

As the world’s leading economy this will be closely watched by anyone with a US Dollar transfer to make so make sure you’re prepared to act quickly if the markets start to move late Wednesday.

If you have a currency transfer to make and would like a free quote then contact me directly and I look forward to hearing from you.

Email me directly Tom Holian [email protected]

Sterling hits two-month highs against the dollar

Pound Sterling Forecast – Sterling hits two-month highs against the dollar

The pound continued it’s positive start to the week during Wednesday’s session rising to a 2-month high against the US dollar and a 3-week high against the euro.

£100,000 is buying €3000 and $9000 more vs the low of the last month. If purchasing an overseas property or running a business with currency exposure. The pounds gains have significantly reduced the cost.

The last few weeks has been full of negative economic data for the UK. The Office for Budget Responsibility (OBR) believe that the UK economy is already in a recession.
Yesterday saw the release of monthly services and manufacturing PMI data in the UK and eurozone. PMI data measures the performance of both sectors and is a key barometer for the performance of an economy. A reading above 50 indicates an expansion while a reading under 50 indicates a contraction.

Last month, weak PMI data caused a sterling sell-off. However, Novembers data was less negative than expected with services PMI reading 48.8 vs expectations of 48 and manufacturing at 46.2 vs expectations of 45.8. The pound rose against a number of currencies including the euro and dollar following this release.

PMI data was also less negative than expected in the eurozone which helped the euro gain further ground against the dollar. The single currency has gained 7% against the greenback in the last 3 weeks.

Dollar weakness against euro and the pound is a signal that global risk-appetite is shifting once again. Over recent years the pound has become bound to risk sentiment. When investors are willing to take risks the pound rises in value. When they are not, the pound loses value.

The pound has opened the day slightly softer across the board. Economic data will be light over the next couple of days. There will be no data from the US due to the thanksgiving holiday.

At Lumon, we have several different contract options that can help you minimise risk during uncertain times in the market. We can also set rate alerts and monitor the market for you.

If you have any upcoming requirement involving any currency, and wish to speak with a specialist, please feel free to reach out directly onbuyinproperty= [email protected]

Sterling Hits Fresh Highs! Will the pound continue to rise this week?

GBPEUR Forecast – Internal Market Bill Drives GBP Lower

The pound has reached fresh highs against both the Euro and the US dollar in the last week, as weeks of general malaise and negativity for the pound seem to evaporate. The key question for many will be, is this going to continue?

GBPEUR levels have risen to three-week highs of 1.1582 in the last 24 hours, where we had seen a low of 1.1326 two weeks ago. The move on GBPUSD is more impressive, with the near 1.20 hit recently, the highest since August, a three-month high.

The pound was weaker as many of us will know because of many issues, most fundamentally the policies of the Liz Truss and Kwasi Kwarteng administration in the UK which led to markets rejecting the pound in protest.

Sterling had clawed its way back as the Bank of England made clear they would be there to manage inflation through higher interest rates, although the prospect of interest rates rising too sharply was also sterling negative, in creating uncertainty and fear over the damage interest rates being too high would cause to economic growth.

Looking to the last couple of weeks, Rishi Sunak and Jeremy Hunt’s plans seem to be much better received although there is still plenty of caution. Rather than everything suddenly being rosy, it is more that their more measured and careful approach to public finances has calmed markets, where the previous Prime Minister and Chancellor combination scarred them.

Looking to the reasons behind the rise for the pound, we can return to some of the earlier points in my post, namely the big rise for GBPUSD. The US dollar accounts for over 60% of globally traded foreign exchange, and where we see large movements and changes in sentiment on the US dollar itself, it can influence movements on other USD pairings, including GBPUSD, which can then influence that paired currency against other currencies, ie GBPEUR.

The pound has therefore risen against the Euro and other currencies in part because of a broad weakening of the US dollar, which has dragged the pound up against other currencies, leading to its rise against other currencies like the Euro.

In answer to the question will the pound keep rising, it may well do. But it can be argued the UK fundamentals are the same they were a week or so ago, when the pound was weaker. The UK is still likely headed for a deep recession, the Bank of England has predicted that this could last for much of 2023.

Yes, the pound has risen, and yes, this might well continue. But it should be noted that the move higher is not because all of a sudden markets are much more positive over the UK’s economic outlook, it is also to do with more global factors. The risk of a move lower is therefore very present, and a majority of the FX forecasts we had surveyed did predict this over the coming months.

Understanding fully the reasons behind movements in the FX markets can lead to better information and in principle better more informed decisions. We can provide guidance as to what is happening, and in combination with a range of tools and options, help ensure you can approach the FX markets and any payments you need to make, with more confidence.

To discuss any strategy relating to a currency exchange and what lies ahead next for the UK and the pound, please contact me directly on [email protected]

I have worked as an FX dealer for 13 years, and helped thousands of private individuals and businesses plan and mitigate their foreign exchange risk.

How will the budget effect the pound?

Inflation figures released yesterday confirmed that prices in the UK have risen to a new 40-year high. The key CPI reading was higher than expected at 11.1% vs 10.7%. The pound remained relativity quiet following the announcement and closed the day slightly higher against most major currencies.

The Bank of England has been consistently raising interest rates since December last year to try and bring inflation under control. However, bank predictions suggest inflation will peak at 13% before levelling off and eventually falling in 2024.

Interest rates tend to support the value of a currency so one would expect high inflation to strengthen the value of the pound as markets price in future interest rate hikes. However, yesterday’s inflation data presents a real problem for the bank. Spiraling inflation poses a serious risk to economic activity but so does the prospect of interest rates being raised too aggressively.

High interest rates often lead to less investment and a decrease in household disposable income as the cost of borrowing for businesses and mortgage repayments increase.

Later today, Jeremy Hunt will announce the steps the government will take to manage public finances during these difficult times. The now infamous Truss/Kwarteng budget caused a large scale sell-off of the pound with GBPUSD falling to an all-time low. Sterling sellers will be hoping that today’s announcement provides more stability to the markets.

The last budget included tax breaks for the wealthy and an energy support package to help people pay cover bills this winter. This budget is expected to include large scale spending cuts and tax hikes that will bring a new era of austerity. In the short term this could lend support to the value pound. However, in the long term this could prove detrimental for the UK’s economic outlook and the value of the pound. The UK faces a recession, tax hikes could further compound this as disposable income drops leading to less money being spent in the economy.

If you have an upcoming currency requirement and would like to be kept informed of developments, please feel free to contact me directly on [email protected].

We have a number of tools available at Lumon to help minimise your currency risk, via market orders, forward contracts and rate alerts.

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