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.

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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.

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.

Will the Pound Rise again after Bank of England Predicts Prolonged Recession and Lower Interest Rates?

Pound to Dollar Rate Drops to One-month Low

The pound has been lower following the Bank of England announcement to raise interest rates by 75 basis points. This is actually counter intuitive, since typically, a rise in interest rates will strengthen the currency concerned.

The reason sterling has dipped, is that this record 75 basic points rise was actually predicted to take place, and therefore the market had ‘priced’ it into their calculations and assessment of the market.

Expectations ahead for the pound are now lower, with the Bank of England less likely to raise interest rates as high as previously predicted, and following their outlining of a deep and prolonged recession.

The pound could be in for some more turbulence if the economic outlook is now likely to deteriorate, there was already a fair amount of negative sentiment towards the UK’s economic outlook and this latest assessment from the Bank of England is unlikely to majorly alter the course for the pound.

Looking to the future, Rishi Sunak’s Autumn Statement scheduled for the 17th November could be an important time in the market. Investors will no doubt be monitoring this carefully for any signs of a change in policy, that might lead to a shift for the pound.

One of the key points for investors will be the extent to which Rishi plans to tackle the UK’s debt, and comes up with a plan to balance the books, in terms of UK government spending and taxation.

The markets have been more reassured lately that the present government is going to be more capable than the previous administration, of handling the UK’s economic situation. The pound dropped significantly when Liz Truss and Kwasi Kwarteng announced their mini-budget, it will be interesting to see just what direction the pound will take at the coming Autumn Statement.

If you have a transaction planned involving the pound, and wish to discuss the latest outlook and forecasts then please contact me.

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

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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]

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