Will the pound weaken again?

Pound to Euro Starts the Week off Steady

Sterling exchange rates hang in the balance once again following a day of poor performance in yesterdays session. The pound dropped close to monthly lows against euro while also losing value against the US dollar and a basket of other currencies. Sterling has opened this morning on a more positive footing.

The announcement that cryptocurrency giant Binance would not rescue their competitor FTX triggered a significant sell-off in the crypto markets. A number of asset funds are invested in the crypto sphere meaning a sell-off here led to a shift in global risk appetite.

Over recent months the pound has been gaining and losing ground as risk sentiment has shifted. A positive risk appetite has benefited the pounds value and any negative moods have generally led to the pound weakening. The dollar is the global ‘safe haven’ currency so unsurprisingly negative shifts in risk appetite lend support to the value of the greenback.
Key inflation and jobs data is due from the US this afternoon.

Inflation is forecast to show a yearly reading of 8% slightly lower than the last figure of 8.2%.

A lighter or heavier than expected inflation reading could affect the Federal Reserve’s interest rate policy moving forward. If the figure is light, the Fed may hike interest rates by less than previously expected. If the figure is heavy, the Fed will likely continue with their current rate hike cycle. The dollar has benefited from interest rate hikes, therefore, a light inflation figure could lead to dollar weakness.

Bank of England member Silvana Tenreyro is speaking in the afternoon and markets will be digesting any commentary around future monetary policy and the UK’s economic outlook.

Last week, the Bank stated that the UK would be heading for the worst recession seen in 100 years. Tomorrow growth figures are expected to show a contraction in the UK economy during the last quarter which supports the Bank Of England’s prediction of a recession. A reading of negative growth presents significant risk to the pounds value.

If you have a currency exchange involving the pound and any major currency and wish to discuss the markets and how they may impact the cost of your exchange in the near future, feel free to email me [email protected].

Will the Pound fall further due to recession fears?

GBPEUR Looks Vulnerable but Data Will Decide

Despite trading within a thin range against the Euro last week, the Pound experienced a pretty significant drop against the US Dollar as the week progressed, making the cost of buying US Dollars with Pounds a lot more expensive.

Sterling saw a fall of 3% over the week’s trading, and this was the biggest drop for the Pound against the US Dollar since late September. At the end of September the former Chancellor of the Exchequer gave the disastrous mini-budget which saw the rate of cable GBP/USD) drop below 1.10 and some financial commentators believe the rate could drop below this level once again in the not too distant future.

Last weeks drop comes at a time when both the Bank of England, and the US Federal Reserve Bank both opted to hike interest rates by 75 basis points.

The base rate of interest in the UK is now 3% and the decision to hike by 0.75 percentage points was the biggest hike in 33 years.

Normally, aggressive interest hikes could see the underlying currency strengthen as the currency becomes more attractive to hold funds in. This doesn’t appear to be the case this time and much of the reason behind this was the wording used by Bank of England members in recent interviews.

Due to the UK expected to enter a recession, some predicting the longest recession on record, the Bank of England has signalled that it won’t be hiking interest rates as much as some economic analysts are expecting.

The choice of words used by members of the BoE and the forward guidance offered could be key for the Pound’s value moving forward, against all major currency pairs so it’s worth looking out for these speeches if you’re interested in the Pound’s value moving forward.

If you wish to discuss an upcoming currency exchange with us you can contact me (Joe) on [email protected] directly. I will be happy to offer you a quote and explain how our service may help you save money when making currency exchanges. We also offer rate alerts to help keep you informed regarding price fluctuations.

BoE decision looms – where will the pound go next?

GBP EUR Drops After Bank of England Recession Warnings 

The Bank of England are set to announce their latest decision on interest rate policy at midday today. Inflation has become embedded in the UK economy and the bank are tasked at keeping inflation below 2%. The current rate of inflation is over 10%.

Interest rate policy is a key tool in managing inflation. A central bank will raise interest rates in an attempt to cool the economy down and bring inflation under control. The bank has raised interest rates at the last 8 meetings.

Today they are expected to raise rates by 75 basis points, which would be the biggest hike since 1989 taking rates to the highest level for 14 years. In theory, this should lend support to the pound and boost sterling exchange rates.

However, the pound has found little support following the last few interest rate hikes. This is because the bank has followed these decisions with negative commentary regarding the UK economy.

There could be significant downside risk for the pound if the bank raises rates by less than 75 points or if they suggest that they will slow down their current cycle of rate hikes. It has been widely reported that the bank will raise at this meeting so movements may already be ‘priced in’ to the current rates.

The pound finished yesterday’s session softer across the board following the Fed’s interest rate announcement. US interest rates are now at 4% following another ‘jumbo’ 75-point hike.

The dollar gained value against a basket of major currencies, including the euro, pound, aussie and loonie. Cable (GBPUSD) lost close to 1%.

A transfer of £100,000 is buying $2500 less vs the highs of the week. USDEUR pushed close to the 1.02 handle.

Today could prove key for sterling exchange rates moving forward and it would be wise to expect significant volatility surrounding the event.

If you would like assistance managing your currency risk or any future international transfers, please feel free to reach out to me directly at [email protected]. Please reach out this morning if you require assistance ahead of the bank’s decision.

Sunak’s presence steadies the Pound for now, but what do the experts predict for the Pound?

GBP AUD Slumps After UK Cabinet Resignations 

Rishi Sunak’s presence as Prime Minister has so far steadied the Pound after one of the most volatile periods for the Pound in recent years. The end of September and beginning of October was perhaps the most volatile period of trading for the Pound since February 2020 when the seriousness of Covid became evident. Prior to this period of volatility, the vote in favour of Brexit during the summer of 2016 was perhaps the most volatile time for the Pound.

Those of our readers hoping for a stronger Pound will be pleased to see the impact of Prime Minister Sunak so far, as markets have steadied and the Pound is trading around the highest levels against the likes of the Euro and US Dollar in the past 2-months.

The upward movement for the Pound is notable after cable (GBP/USD) hit the lowest levels since the mid 80’s at the end of September when the pair traded close to parity.
Exchange rate predictions for the Pound have varied owing to the dramatic market movements recently.

Goldman Sachs, a US based investment bank have predicted that the Pound’s prospects are now better now that Sunak has been appointed UK Prime Minister. Jeremy Hunt stepping into the role of Chancellor has also steadied market perceptions of the UK’s fiscal policy after the period of turbulence and cohesiveness when former PM Liz Truss and former Chancellor Kwasi Kwarteng held the positions.

Despite Goldman Sachs raising forecasts for the Pound, the levels they expect to see the Pound trading at are lower than the current trading levels so those of our readers planning on making a Sterling currency exchange should bear this in mind.

There will be a policy update from the Bank of England on Thursday, so financial markets are likely to look to this meeting for hints of the BoE’s monetary policy moving forward. The current expectation is for 0.75 on Thursday and a tightening of monetary policy in order to curb rising inflation levels.

If you wish to discuss an upcoming currency exchange with us you can contact me (Joe) on [email protected] directly. We will be happy to offer you a quote and explain how our systems may help you save money when sending funds abroad. We also offer rate alerts to help keep you informed regarding price fluctuations.

Pound Sterling Forecast – Sterling starts the week on the front foot

Sterling exchange rates have started the week off fairly positively against most major currencies, most notably continuing the strong finish to last week against the Euro, with GBP/EUR now sat above 1.1650.

The reason this pairing in particular has moved in Sterling’s favour more than others is down to the ECB (European Central Bank) interest rate decision and press conference delivered by Christine Lagarde on Thursday.

The ECB did raise interest rates as expected, however there was a slightly dovish tone around this hike, there were suggestions that further hikes would be more data driven than nailed on, and this has led investors and speculators to perhaps hold off on Euro for the time being whilst they wait and see the tone of both the Federal Reserve and Bank of England, both of whom have interest rate decisions due out this week on Wednesday and Thursday respectively.

Expectations are for both to hike by 75 basis points, but as with the ECB meeting it will be the tone in the subsequent statements that will be of most interest to investors assuming there are no great surprises in the decisions later this week.

With the mini-budget being scrapped and a full budget being announced for Thursday 17th November it will be hard for the Bank of England to be able to fully lay out fiscal plans moving forwards as they will not know what the Government are set to do.

It does seem that the markets are seeing some stability back for the UK with Rishi Sunak as PM and Jeremy Hunt as Chancellor, so it wouldn’t surprise me to see the pound have a solid week and in fact a better few weeks ahead, it does seem that despite the circus act we have had over the past few months we do now have a safe pair of hands steering the ship and that the cabinet that is in place are giving the markets a little more confidence.

The Federal Reserve meeting is on Wednesday evening for those with an interest in USD, and the BOE meeting is at midday on Thursday, this could send the pound either way against all majors so it most certainly is one to keep an eye on.

Finally, on Friday we have the Non-Farm payroll data out in the US, you may not think this is of great significance, but it can be a big market mover for all major currencies as it measure the number of people in non-agricultural employment in the US and is taken as a barometer as to the health of the US economy. They take non agricultural measures due to the seasonality that brings so to keep the data  as realistic as possible, and straight after the release it can lead to a flood of money into or out of the Dollar, it also impacts investors and speculators risk appetite so keep a keen eye on this market information early on Friday afternoon.

If you have a currency exchange to make and you would like to get a comparative quote or to discuss your options/the markets with a highly experienced broker then feel free to contact me directly. We make sure we acts as the eyes and ears on the market for our clients which can make a huge difference to the cost of a large purchase overseas or the amount you receive when bringing a large sum back.

Feel free to email me directly on [email protected] or click here to make an enquiry directly on the site and we will be happy to get back to you personally.

Sterling remains stable after ECB interest rate hike

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

The European Central Bank (ECB) confirmed yesterday that interest rates in the eurozone would be raised by 75-basis points. Euro sellers would have been hoping for a bounce in rates following the decision, but the single currency softened against a number of major currencies.

It is likely that a 75-basis point hike was already priced into the rates with the figure well reported a couple of weeks ahead of time.

The decision proved positive for GBPEUR, with the pound pushing close to monthly highs. Bar the 17th of October, yesterday’s high was the best level seen for more than 6 weeks.

A transfer of £200,000, is buying €11,000 more which can make a significant difference to costings when purchasing a property overseas.

Now could prove a window of opportunity for sterling sellers as the UK’s economic outlook is not positive. The pound is likely to be impacted once again by decisions made in Westminster. Reports are growing that the government could announce tax hikes during next month’s budget to combat the issues faced with managing public finances.

The UK is already facing a cost-of-living crisis with households spending more on energy, food, and fuel. This has decreased consumers disposable income leading to poor retail sales and a reading of negative growth in August.

Tax hikes would be another squeeze on disposable income which could lead to a deeper and longer recession in the UK.

The dollar gained back some of the ground it lost during Wednesday’s session. GDP came out at 2.6% vs expectations of 0.35%. The US economy is still managing to grow despite the global economic crisis. Initial jobless claims were also lighter than expected.

Positive economic data means the Federal Reserve will not be discouraged to raise interest rates as planned to combat high inflation. A hawkish Fed on Wednesday could push USDEUR and USDGBP back to levels seen earlier this month.

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]

Pound Sterling strikes back against the Dollar as ECB decision looms

Pound to Euro Gains After Weaker German Retail Sales

Cable rates (GBPUSD) climbed to 6-week highs yesterday as the pound continued its comeback following the announcement of Rishi Sunak as the next Prime Minister. The pound also enjoyed improvements against the euro and the Canadian dollar. Gaining more than a 1% against the latter by close of play. Sterling opens the day a little softer.

Political instability can weigh heavy on a currency and the last few weeks have been far from stable in the UK’s political arena.

Jeremy Hunt was re-confirmed as Chancellor of the Exchequer, however, the Halloween budget planned for Monday has been delayed until the 17th of November. The budget will set out how the current administration plan on repairing the country’s public finances.

Sterling strength against the dollar is positive for the UK but analysts are expecting this to be short lived. During yesterday’s session the dollar fell against a basket of currencies as global risk appetite increased. The greenback lost more than 1% against the euro, pound, yen, aussie and kiwi.

The US Federal Reserve have their interest rate decision next Wednesday and a hawkish fed could once again cause risk appetite to tumble. Market commentators are expecting the Fed to hike rates by 75-basis points.

ECB Rate Decision

The European Central Bank have their monitory policy meeting today and will announce their latest position on interest rates this afternoon.

Traditionally the ECB are cautious when it comes to monetary policy. The Bank of England and Fed began raising interest rates far earlier than the ECB. The ECB raised rates by 75 basis points at their last meeting which was the biggest hike on record.

A 75-basis point hike today could lend significant support to the euro, pushing EURGBP and EURUSD higher. The euro climbed to 6-week highs against the dollar yesterday.

Friday is a key day for European economic data with GDP and inflation figures being released, along with consumer confidence.

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.

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 Incoming Prime Minister Sunak bring stability for the Pound?

GBP EUR Exchange Rate: Weekly Review July 16  

The Pound begun the week in a strong fashion off the back of news that former Prime Minister Boris Johnson opted to pull out of the Conservative leadership contest.

Britain’s former Chancellor of the Exchequer, Rishi Sunak is now confirmed to step into the role of Prime Minister making him the youngest Prime Minister in around 200 years. Perhaps the uncertainty being lifted as to who would become Prime Minister was behind the boost in the Pounds value yesterday, although since then we have seen the Pound dip with GBP/EUR now trading around 1.1450 and GBP/USD just below the 1.13 handle.

Sunak will inherit a UK economy destined for recession. The economic slowdown coupled with the shock to financial markets following previous Chancellor Kwasi Kwarteng’s budget of tax cuts caused a dramatic sell-off in the Pound’s value roughly 1-month ago.

The reversal of those cuts aided the Pound but it wasn’t enough to keep PM Truss in her role so she stepped down after just 45-days in office making her the shortest-serving Prime Minister in the history of the UK.

The first few weeks of PM Sunak’s tenure could be crucial as we have just witnessed with the downfall of Truss after such as short time in office. How he adapts carries the potential to move currency markets and impact the Pound’s value so if you’re interested in the Pound’s value, UK policies may remain the key driver of the Pound’s value. His financial background could be what GBP needs but time will tell.

GBP/EUR has so far struggled to consolidate above 1.15 despite breaking above it twice in recent weeks following the sell-off late into September. Financial markets are pricing in two 0.75% hikes by the European Central Bank in both November and December, so the chances of any unforeseen bullish moves by the ECB are perhaps slim which could leave room for GBP strength relating to GBP/EUR, if Sunak has a positive start to his new role.

If you would like to be notified in the event of a price spike for the Pound against any other major currency pairs, do feel free to register your interest with me (Joe) on [email protected]

As a currency brokerage that specialises in overseas payments we will also be happy to offer you a quotation, as it may be the case that we can help you save money when making currency transfers. Please feel free to get in touch for further information.

Inflation rises to 10% as the government is under pressure – how will this impact the pound?

GBP USD Exchange Rate Plunges to Lowest Since September 2020

Data released yesterday confirmed inflation in the UK was once again back above 10%. These are highest levels seen in more than 40 years as the cost-of-living crisis intensifies in the UK.

What does this mean for the pound?

The Bank of England are tasked with keeping inflation under control and their target is 2%. With inflation spiraling out of control the bank has been raising interest rates to combat this. The raising of interest rates generally lends support to the value of the currency (the pound).

At the next monetary policy meeting the markets are expecting the bank to raise interest rates aggressively to try and bring inflation under control. If they do, the pound may find support against euro, dollar, and other currencies. However, if the bank raises interest rates by less than the markets expect then we could see sterling weakness.

Another key thing to consider, is the affect high inflation is having on public spending. As consumers’ pockets are squeezed people will have to cut spending in certain areas of the economy. Last week data confirmed the UK economy shrank in August and if consumers continue to spend less, we could see further negative growth. A recession in the UK would almost certainly spell trouble for the pound.

Political uncertainty can influence exchange rates and the UK has seen plenty of this over the last few weeks. Starting with the sacking of Kwasi Kwarteng, following the disastrous mini budget.

Truss claimed she was a ‘fighter and not a quitter’ during PMQs but yesterday, the recently appointed Suella Braverman resigned for using her personal email for ministerial business. Her resignation letter was critical of the government and suggested that time Truss should also acknowledge her mistakes.

There were reports of other resignations, the Chief Whip Wendy Morton, and her deputy. However, late last night the government confirmed they were still in post.

The crisis for Truss will continue today as the country debates which Truss, we will see next, the fighter or the quitter.

At Lumon, we have a number of 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 the pound, and wish to speak with a specialist, please feel free to reach out directly on [email protected]

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