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Sterling strength

Will the pound weaken again in October?

The pound suffered some particularly volatile movements last week, with GBPEUR rising and falling 7 cents, and GBPUSD 9 cents. This relates to around 6% worth of movement on GBPEUR and 8% on GBPUSD.

Such movements just highlight how volatile currency can be, and indicates why any clients looking to buy or sell the pound should be very conscious of the current market, and some of the particular attributes and behaviour of a currency, that can influence such sharp rises and falls.

This week the Conservative Party Conference will see Liz Truss deliver the closing speech on Wednesday which could be a market mover. Whilst investors were forewarned and had some expectations of the ‘mini-budget’ that took place the Friday before last, the extent of the volatility did appear to take many by surprise.

In a sign of the less than coherent narrative coming from Downing Street, Kwasi Kwarteng has this morning announced he will be reinstating the 45 p, top rate of income tax. This is following a series of public displays of concern from MP’s and cabinet members alike.

Kwasi and Liz have shown they are willing to listen to their own party, and also the public, but does this not also display a weakness and uncertainty over the confidence they supposedly had in their economic agenda?

The pound has been weaker because of the economic uncertainty over the new government’s plans. The huge increase in public spending, via tax cuts is widely seen as an ill move considering the delicate nature of the economy at present.

Investors are concerned that the UK is taking too big a risk with the tax cuts, and a more sensible approach on fiscal policy, to help balance the books is preferable.

Only time will tell, but with the Bank of England being forced to react to the potentially inflation boosting tax cuts, there continues to be a loud conversation around not only the conflict the government now has with the Bank of England, but also whether the government has got the UK on the right path.

Can we rule out further sterling weakness? For now, we definitely cannot as the currency markets react to the unfolding of this ever changing situation.

As well as the Liz Truss speech, we could expect other comments from government or MP’s this week, any of which might influence sentiment towards the pound.

We also have a whole host of new economic data as it is the beginning of a new month. A key piece of news this week will be the latest ‘US Non-Farm Payroll’ data, and unemployment report.

The US dollar has a big influence on the pound and also the Euro, and movements on the back of this news can influence EURUSD rates, which in turn often affect GBPEUR and GBPUSD levels.

Are you planning any currency purchases in October, buying or selling the pound? Will the pound weaken in October is a very valid question, and we can share with you the latest news and sentiment to help with any decision making over your FX payments.

For more information and to discuss strategy for any transactions you are considering, please contact me Jonathan on [email protected]

Thank you for reading and we look forward to hearing from you.

 

 

 

 

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.

Click here to contact us today.

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]

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.

Has the pound recovered? BoE announce emergency intervention

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

The pound and UK financial markets have been in turmoil over the last few days following the governments mini-budget announcement on Friday, where they pledged to cut taxes by billions of pounds. The budget is un-costed and will have to be debt-financed to cover the cost of the cuts.

Monday’s session, saw cable (GBPUSD) drop to all-time lows, with GBPEUR rates hitting 2-year lows at the worst point of trading. The pound recovered throughout the day yesterday, and at one point was 1.5% up against the dollar. Some of these gains have been lost overnight.

Yesterday, the Bank of England announced that they would intervene in the government bonds market to stabilise a collapse in the price of bonds. They said the decision to buy government bonds was caused by ‘a material risk to UK financial stability’. The pound fell initially post announcement before recovering close to levels seen at the start of the day.

A weaker pound increases the cost of imports of services and goods. Businesses will ultimately have to pass on the increase in cost to consumers which will further fuel inflation. The Bank of England are under pressure to keep inflation under control and protect the value of the pound.

On Monday, the bank confirmed they stand ready to tackle inflation with all tools available but will not hold an emergency monetary policy meeting. The next meeting is set for 3rd November. Markets are now beginning to expect a ‘super hike’ from the bank, meaning they may raise by more than 1% or 100 basis points.

There is now a serious risk that the UK is going to face a deeper and longer recession than expected which would be negative for sterling. If the bank does announce a ‘super hike’ in November, then interest rates in the UK will have risen far sharper than expected even a few months ago.

The increase in the cost of borrowing will drive up mortgage prices for everyday Britons. Household disposable income will therefore decrease as people pay more cover their rising mortgage and energy bills. As disposable income decreases so does the amount of money being spent in the economy, and this will negatively impact growth.

GBPEUR hit 1.05 the last time the UK was in a recession. £200,000 now buys €12,400 less than a month ago. If the pound were to drop to 1.05. £200,000 would buy €13,000 euros less than today.

Labour leader Keir Starmer and even some Tory MP’s are calling for the budget announcement to be reversed. This would be a spectacular U-turn for the Truss government and is not expected. However, a reversal in policy would likely hand aid to a struggling pound.

If you have any upcoming requirement involving the pound and would like some assistance, do feel free to reach out to me directly at [email protected]. There are several tools available that can help protect you from currency risk and help build a payment strategy that works for you.

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.

Pound Sterling stages comeback following Bailey comments but remains fragile

Pound to Euro Gains After Weaker German Retail Sales

The pound enjoyed a positive session yesterday with gains against every major currency. However, the gains only brought sterling exchange rates back to similar ranges seen for the last few days. Sterling opens the day slightly softer across the board. 

Governor of the Bank of England Andrew Bailey prompted a sterling sell-off late into Tuesday’s session. He stated that the bank would remove its current emergency support for the UK bond market on Friday and that pension funds heavily invested in UK government bonds (known as gilts) had three days to get their act together. 

The banks initial intervention in the gilts market provided respite for sterling exchange rates after the pound hit all-time lows against the dollar and multi-year lows against the euro, therefore, the removal of the current intervention is seen as negative for the pound and could cause more volatility. 

A number of bankers reported yesterday that they believe the BoE will adapt a more flexible approach to allow pension companies more time to re-organise their portfolio’s risk. This is likely why the pound recovered yesterday with traders calling the banks bluff.  

It would be wise to expect more volatility for the pound towards the close this week as we discover whether the bank will stick to Baileys indication on Tuesday. Markets remain susceptible to any commentary that could be seen as negative for the UK’s economic outlook. 

GDP figures show that the UK economy shrunk in August by 0.3% which adds further speculation that the UK is heading for a recession. Sterling fell to 1.05 against the euro the last time the UK was in a recession. 

Questions remain over the government’s ability to pay for the billions of pounds worth of tax cuts that were announced in the mini-budget. Liz Truss confirmed yesterday that the government would not cut public spending. These comments will do little to support the value of the pound. 

What to expect from today’s session? 

BoE member Mann will be speaking around midday and the markets will look to decipher any commentary on policy that could impact the pound. There are also some key data releases in the US (Consumer Price Index and Jobless claims) that could cause volatility for cable rates (GBPUSD) and USDEUR. 

If you have an upcoming currency requirement and are interested in hearing about how the current volatility could affect you, please feel free to reach out to me directly via [email protected].

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] and we will be happy to help you.

Will the Pound Continue to Rise as Rishi Soothes Market Nerves?

GBP USD Exchange Rate Falls to Two-Year Low Amid Political Uncertainty 

The pound has been performing near the top of the recent ranges as the new UK Prime Minister Rishi Sunak takes office. Sterling has rebounded back into the 1.15s on GBPEUR and GBPUSD, presenting much improved times to buy a foreign currency when selling the pound.

As Rishi himself has stated, the UK faces some major challenges with inflation running at 10% and fears over stagnation and recession likely to harm the economy ahead. Rising interest rates are going to increase borrowing costs for millions of consumers and also businesses, who will have much less disposable income.

Looking ahead for the pound and the UK economy there are some major challenges that mean sterling is not out of the woods and future GBP weakness cannot be ruled out. By that measure, this latest improvement could be well worth considering, as this current enthusiasm for GBP might not last.

Whilst we cannot ever say exactly what is around the corner in the FX markets, we do know there are some big issues to resolve, that left unchecked could see uncertainty rising once again.

Keir Starmer, the leader of the opposition is still calling for an election, and whilst this does not appear so likely now, were there to be a further deterioration in the UK’s political situation it is a possibility if a vote of no confidence is held.

Sterling has proved quite resilient since the mini-budget fiasco at the end of September that saw the pound majorly sold off. Rising interest rates and intervention by the Bank of England in the gilt markets has restored confidence for now.

There is still no majorly clear direction being established and whilst the pound is higher, you can make a reasonable case for travel in either direction based on different analysis which I would be happy to share with you and discuss in more detail.

For more information on where the pound is headed, and what you can do to mitigate the uncertainty, please feel free to contact me directly on [email protected]

Thank you for reading.

Jonathan

Will Liz Truss speech sink the pound today?

GBP EUR Exchange Rate: The Week Ahead August 15th

The pound could be in for another rollercoaster ride today, as investors will learn of Liz Truss’ latest plans for the economy ahead. Delivering her speech on the closing day of the Conservative Party Conference, markets will once again get to deliver the verdict on how it feels the Government is doing.

Sterling has made a very impressive rebound from the recent lows, with GBPEUR back over 1.15 and GBPUSD 1.12 in the last 24 hours. If we forget last week, these rates are near the bottom ranges of where sterling had been trading in September.

However, last week’s absolute lows make 1.12 on GBPUSD and 1.15 on GBPEUR look like some very attractive buying rates for sterling holders.

GBPEUR levels hit 1.07, that means on a £200,000 purchase of Euros, you would at yesterday’s highs achieve an extra €16,000. For a £200,000 purchase of US dollars, you would be receiving an extra $18,000 in the same equations using rates of 1.03 to 1.12.

Such dramatic rises and falls are rare in the FX markets, but do happen and remind us of how the unexpected can occur, triggering excessive movements.

The unexpected nature of the FX markets is one of the key reasons to be prepared when considering and desiring to purchase at a better rate. Simply saying ‘I want to wait until the rates gets to x or y’ is not always the best plan.

This is because, if you are trading on a large amount of money, you will often have to take some extra steps to be ready to buy. You will then also have the problems of whether or not you are truly getting the best rates of exchange, from a competitive source, that allows you to maximise your exchange.

If you have a currency exchange to make, and wish to ensure you have all the correct information about the FX markets to make a decision, please feel free to contact mw to discuss strategy.

I have worked as a FX dealer for 13 years, and can provide market insight and information, to help you make an informed decision with regard to buying or selling the pound. So, if you are looking at business payments, buying or selling Euros or USD (or any other currency), or maybe you have a property investors looking to repatriate funds from overseas, please feel free to get in touch for a balanced assessment of the outlook, your options and to benchmark any currency rates offered.

Thank you,

Jonathan

[email protected]

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