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Sterling weakness

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.

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.

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 to US Dollar forecast: Best time to sell US Dollars for Pounds in 2019

GBP USD Exchange Rate Rebounds Above 1.31

Best time to buy Sterling with US Dollars

Pound to US dollar exchange rates are at the best time to sell the US dollar all year. The pound has weakened against the greenback on Brexit uncertainties, as investors remain nervous about which direction Brexit taking. The US dollar is also stronger as it appears the euro will remain weak, which has pushed EUR/USD lower.

Investors abandoning Euro

A key factor often on GBP/USD exchange rates is the behaviour on the EUR/USD pairing, as investors seek to abandon the euro with the market predicting further woes ahead for the single currency. Mario Draghi, the President of European Central Bank, has spoken this morning and pointed out that the ECB’s QE program, has ‘considerable headroom’.

QE or Quantitative Easing is a form of monetary policy whereby the central bank seeks to inject liquidity in to the financial system through the purchase of government debt, to help stimulate the economy. After a period of sluggish growth, QE has helped the Eurozone economy to pick up but now with Inflation low again, the ECB might be forced to act once again.

Global tensions affecting Pound to US Dollar rates

This has seen the euro weaker against the US dollar, which has weighed the USD down against the pound. Another factor on the exchange rate is the concerns that have been held over future direction of US monetary policy, with investors initially nervous of the US cutting rates, but now reassured by the fact the Eurozone could be embarking on more easing.

If you have a currency transfer involving the pound and the US dollar, there are a number of global events which are influencing the pairing, as well as the conventional Trade Wars, Trump and Brexit news.

GBP/USD levels sit just above 1.25 on the interbank rate, the lowest since Jan 3rd 2019, if you have a transfer buying or selling and wish for some practical information on appropriate strategy and the best exchange rates, then please do not hesitate to contact me directly.

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.

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.

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].

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Where interbank exchange rates are referenced within the website these should only be used as a guide on the performance of a market. These rates are not indicative of our exchange rates – please contact us for a quote.