Pound hits record low against the US Dollar, and drops significantly against the Euro

GBPEUR UK election: Why haven't pound to Euro exchange rates fallen?

Yesterday was a very difficult day for the Pound as financial markets appear to have lost faith in both the Bank of England’s monetary policy and the new cabinet’s mini budget.

Last Thursday the new Chancellor of the Exchequer, Kwasi Kwarteng announced his mini-budget outlining plans for a raft of tax cuts. Then over the past weekend he pledged further tax cuts in order to try and reinvigorate the UK’s stalling economy and attempt to counter the increasing inflation rates not seen in decades.

His plans and comments have undermined confidence in the UK, and early on Monday morning the Pound dropped by almost 5% hitting an all-time low of $1.0327. There was also a significant drop for the Pound against the Euro, with the GBP/EUR rate dropping as low as the 1.08’s which is over a 6.5% drop in just the past month.

The drop against the Euro has left the GBP/EUR rate trading at the lowest levels since December 2020.

Will the Pound rebound from its current levels?

After such a drop financial markets and investors will wonder whether the Pound can recover from its current levels. Some financial forecasters believe the Bank of England will be forced to make an emergency interest rate hike to try support the Pound’s value.

Yesterday the BoE warned that it could hike by as much as needed and these comments appear to have given the Pound some support for now, with the selling off of the Pound halted for now.

Economic updates are likely to take a back seat whilst the pressure mounts on Kwarteng so soon into his new role. Political commentators also believe that the errors from Kwarteng and pressure on the Pound could seriously damage the Conservative Party’s chances of winning the next election.

Further political instability could potentially undermine the Pounds value as we’ve seen recently.

If you are looking to make a currency transfer either from or into the pound in the near future and you would like to talk through the options with me then feel free to get in touch. You can email me directly at [email protected] and I will be happy to have a chat with you about your specific situation.

You can also set rate alerts and sign up for daily emails via this site should you wish to be kept informed of the latest movements.

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.

Fed hikes interest rate by 75 basis points with key BoE meeting looming

Yesterday evening the US federal reserve raised interest rates by 75 basis points. Raising the policy rate from 2.5% to 3.25%.

This is the third 75 basis point hike in as many meetings by the Fed, highlighting again their intention to take a strong stance on inflation levels that have spiralled out of control. “The committee is strongly committed to returning inflation to its 2% objective,” the Fed said in a statement. Markets now expect US interest rates to finish the year above 4%. For context they began the year at 0.25%.

The cable rate (GBPUSD) fell by a cent immediately, following the Fed’s announcement to a new 37-year low of 1.1235. The pound did stage an initial fightback; however, we open the day trading in the lower 1.12s, having hit a new low of 1.1211. £100,000 now buys $6000 less vs a month ago. Will we see cable test the 1.10 handle in the coming weeks?

The dollar strengthened against every other major currency during yesterday’s session but what does this mean for the pound? Although cable fell, GBPEUR gained close to half a percent, presenting a window of opportunity for euro buyers. Although the pound gained value against the euro. This was not driven by positive news coming from the UK and perhaps was driven by the euro’s weakness against the dollar.

USDEUR is the most traded currency pair globally and the euro lost more than 1.25% against the dollar during the day. The pairing climbed close to 1.02 following the fed, 20-year highs for the dollar.

Other than the increase against the euro, the pound lost value against a number of major currencies. GBPAUD is trading close to 5-year lows, with GBPCHF trading at 48-year lows and GBPCAD at 12-year lows. GBP sellers will be hoping the Bank of England lends support to the pounds value which is now one of the worst performing major currencies in 2022.

As mentioned in my article last week, the Bank of England will announce at midday today whether interest rates are going up by 50 basis points or 75 basis points. With a recession looming, the bank will not want their decision to cause the UK economy to cool off too quickly.

The market shows a 70% probability of a 75 basis point hike and a 30% probability of a 50 basis point hike. It is expected that the 9 members of the MPC (monetary policy committee) may have differing views and be split on whether to raise rates by 25, 50 or 75 basis points.

GBP sellers will be hoping for a bullish 75 basis point hike which could lend support to the pounds value. However, with the energy crisis expecting to continue into the winter months, some commentators believe the Bank can only limit the damage caused to the pound.

GBPEUR opens the day slightly softer, GBPCHF dropped by than half a percent this morning in anticipation of the SNB’s (Swiss National Bank) interest rate announcement. As expected, they have raised interest rates by 75 basis points, bringing their policy rate up from -0.25% to 0.5%. The SNB next meet in December, some commentators were expecting a supersized 100 basis point hike today and so the pound has clawed back all of the ground lost against the Swissie in the last 24 hours.

If you lave a large currency exchange coming up and you would like to discuss the markets in more detail, feel free to contact me on [email protected] and I will be more than happy to have a chat with you.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

US Inflation figures give Dollar a huge boost in Tuesday’s trading

The Dollar has had a really positive day of trading against both Sterling and the Euro, with a gain over 1% against both during the Tuesday trading session.

This is mainly down to higher than expected inflation numbers, overall CPI (Consumer Price Index) figures were released at 8.3% as opposed to expectations of 8.1% and given the Federal Reserve’s robust stance on interest rates this has heightened the chance of further aggressive rate hikes in the months to come.

For those that are not regular readers of this site, an interest rate hike is generally seen as positive for the currency concerned and a cut in rates can be seen as negative. The hike leading to a boost for the respective currency (in this case the Dollar) is down to the fact that is makes it more attractive to investors.

With the Dollar also known as a safer haven, we are witnessing a concoction primed to strengthen the value of the Dollar. Global uncertainty, energy prices soaring, recessions closing in and a war all are factors that would strengthen the Dollar in normal circumstance, add to that the Federal Reserve increasing interest rates at a faster pace that other Central Banks and it would be no surprise to see the Dollar continue the charge against most majors.

UK Inflation is released tomorrow morning and it is often said that when the US sneezes the UK catches a cold, so a strong figure posted by the UK could help the pound fight back for similar reasons to the above, however Sterling has very little safe haven status these days so seems to be swimming against the tide somewhat in the current market.

If you have the need to buy or sell Dollars wither for a personal or business transaction and you wish to discuss what lies ahead then feel free to contact me (Daniel Wright) personally on [email protected] and I will be happy to contact you for a chat.

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.

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.

GBP USD Exchange Rate Drops to Fresh Low as Truss Becomes New PM

GBP USD Exchange Rate Drops to Fresh Low as Truss Becomes New PM

The pound slid as low as 1.144 against the dollar on Monday – its lowest level since March 2020 – ahead of the announcement of the new Prime Minister.

When, as widely expected, it was confirmed that Liz Truss had beaten Rishi Sunak in the race to 10 Downing Street, the UK currency managed to claw its way back into the 1.15 range.

Truss has promised tax cuts and a new energy plan within the week, which could present the Bank of England with the conditions needed for larger or faster interest rate hikes to tackle runaway inflation.

Investors will be mindful, however, that higher rate expectations won’t guarantee the pound support amid forecasts the UK economy is on the brink of a recession.

A survey published on Monday provided further evidence that the UK economy is heading into a recession amid the deepening cost-of-living crisis. Data company S&P Global revised down its composite Purchasing Managers’ Index (PMI) for the services and manufacturing sectors to 49.6 from a preliminary “flash” August reading of 50.9.

This marked the first time the PMI had fallen below the 50 benchmark that denotes contraction in output since February 2021 when a second wave of COVD-19 was in full swing.

The services PMI for last month was revised down to 50.9 from the flash reading of 52.5.
“Demand for consumer-facing services such as restaurants, hotels, travel and other recreational activities is collapsing under the weight of the cost-of-living crisis,” said Chris Williamson, S&P Global’s chief business economist.

Dollar maintains its upward trajectory

The dollar remained in demand at the start of a new week that kicked off with US markets closed for the Labour Day national holiday.

Expectations that the Federal Reserve will persevere with its aggressive policy tightening path continue to support the US currency, especially after the release of better-than-expected nonfarm payrolls data on Friday.

Markets have priced in a more than 50% chance that the US central bank will lift rates by 75 basis points at its September policy meeting.

Looking ahead

The British Retail Consortium (BRC) like-for-like retail sales print hits the headlines overnight on Tuesday.

The ISM services PMI is published in the US on Tuesday and is expected to show activity in the sector posted a modest decline in August but remained in expansion territory.

Also slated for release in the US on Tuesday are the composite and services PMIs for August from S&P Global.

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