UK avoids recession – will the pound strengthen moving forward?

Pound Sterling has been range-bound against many of its major counterparts over the last two weeks. Most notably, GBPEUR which has traded within a cent from the high to low. Cable (GBPUSD) has traded within a 2-cent range and struggled to find support above the 1.25 handle.

The pound has strengthened in value due to the revised UK economic forecasts, however, it would seem the positivity has ended here for the pound and that new data will be needed to push the pound out of its current range.

This morning UK GDP figures confirmed that the economy was stagnant and did not grow month-month to February. The data confirms that the UK economy is not shrinking and therefore rights off the possibility of a technical recession but also shows a slow down in activity from last month where the economy grew by 0.4%. GDP could hinder the value of the pound given that markets were expecting a growth reading of 0.1%.

Weakly jobs data and monthly inflation (PPI) data will be released later today in the US which will be watched closely by the Federal Reserve. Yesterday, CPI showed another slowdown of inflation in the US which feeds into the narrative that the Fed’s current rate hike cycle could be over. This has lent support to the value of the euro and pound against the dollar. There could be further dollar weakness if another inflation reduction is confirmed.

Bank of England Chief economist Huw Pill will be speaking today, and markets will keep a close eye out for any comments on future monetary policy. The European Central Bank are behind the BoE in terms of interest rates. If the BoE stop raising rates and the ECB continue, then there could be downward pressure on the pound.

If you have a currency exchange involving the pound and any major currency and wish to discuss the markets and how fluctuations could impact the cost, please contact me at [email protected].

Will the pound continue to rise against the US dollar and Euro?

GBP EUR Exchange Rate: Weekly Review July 16  

Sterling has been performing much better lately after improvements in the UK’s economic outlook combined with expectations that the Bank of England will be looking to raise interest rates sooner and potentially higher than previously expected.

Looking to the latest interest rate outlook, the Bank of England has been earmarked to raise interest rates in the future at some stage but this might well need to happen sooner than expected.

Overall, UK interest rates are not set to be raised until the next meeting in early May, which could be a key time for both the pound, but also the Euro and the US dollar too, with expectations for both central banks there, the US Federal Reserve, but also the ECB (European Central Bank) also predicted to raise interest rates.

The raising and lowering of interest rates is one of the biggest factors driving the strength and weakness of a currency, and whilst the pound has been stronger at times in the last year because of this, we do need to factor in the fact the other central banks globally are also looking to raise interest rates too.

Therefore, whilst the pound has been stronger, these other currencies have also been stronger. The Euro is notably much stronger against the US dollar, and for example the Australian dollar compared to more historical levels.

The rest of April has some important data releases which will influence economic and market sentiment, and might well see some changes in the economic outlook and could shape the decisions that are coming up.

Expectations ahead are far from clear but clients looking to buy or sell the pound in the future should be aware of a number of mixed forecasts from some of the big banks in their predictions.

With no clear direction being established either way on the predictions front, careful consideration of all of your options and the potential for something unexpected might be the best way forward.

Thank you for reading and if you wish to learn more, please do not hesitate to contact me directly to discuss in more detail.

Jonathan Watson

[email protected]

Pound rises as UK economic sentiment improves

Pound rises as UK economic sentiment improves

The economic outlook for the UK at the start of 2023 made for grim reading and encouraged the sterling sell-off that began just before Christmas. Last summer, the Bank of England released economic forecasts that suggested the UK was going to face a long a deep recession, entering negative growth towards the end of 2022 and not recovering until 2024.

Since then we have seen the fall of ‘trussonomics’ and new leadership at the very top of government. Jeremy Hunt as Chancellor of the Exchequer stated from the outset that his plans for the UK would be fiscally responsible which helped aid calm the turmoil in the financial markets caused by Truss and Kwarteng.

Since the turn of the year economic data from the UK has been less negative than the Banks suggestion. Most recently, yesterday where services PMI data was higher than expected at 52.9. Signaling a clear expansion for the UK services sector and providing a boost to sterling exchange rates. Cable (GBPUSD) is trading within range of the 1-year high and breached the 1.25 handle on Tuesday. GBPEUR is within range of the 3-month high, comfortably above 1.14 at the time of writing.

Sterling’s position has certainly improved and the outlook is more positive. However, the economic data does not suggest that the economy is going to fly in 2023. Projections from the OBR still show the UK economy contracting by 0.2% although a recession will be avoided.

Markets will be closed across much of the world tomorrow and Monday for the Easter weekend although we could still see volatility following tomorrows Nonfarm payroll data from the US. Tuesday morning will also be one to watch with the release or Eurozone retail sales figures.

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].

Sterling remains in the balance – will growth figures strengthen the pound?

Sterling remains in the balance – will growth figures strengthen the pound?

Sterling exchange rates have remained relativity balanced this week. The pound was boosted against the dollar last week following a ‘dovish’ hike from the Federal Reserve. The Bank of England also raised rates which helped support the pound against the euro. Following the latest release of services and manufacturing PMI data, GBPEUR has been range bound between 1.1340 – 1.14. Cable (GBPUSD) has been a little more positive for sterling sellers reaching highs of 1.2360 but remaining within the 1.22 – 1.2360 range.

The economic calendar is busier later today and tomorrow with several key events to look out for. Eurozone consumer confidence could cause volatility for pairings involving the single currency. EURUSD is the most traded currency pair globally meaning significant shifts in value can affect other pairings. US growth (GDP) data could provide support for the dollars value if the reading is higher than expected.

For the UK and GBPEUR, tomorrow could prove important for exchange rates moving forward. Quarterly GDP figures will confirm whether the UK’s economy grew or shrank. A negative reading here would surprise markets and weaken the value of the pound. A positive reading could push sterling higher and out of its current range.

Eurozone inflation data will be watched closely by the European Central Bank. The ECB like many other central banks have been raising interest rates in attempt to bring inflation under control. They raised rates by 50-basis points this month which lent support to the euros value. If inflation is falling, the ECB will be under less pressure to raise rates again. If it is elevated, then they will likely continue their current rate hike cycle. A lower reading could be seen as negative for the euros value and therefore provide a boost for GBPEUR.

If you want to be kept up to date with developments and achieve market-leading exchange rates please contact me directly on [email protected].

GBP exchange rates climb after positive comments from BoE Governor Bailey

GBP exchange rates have begun the day on the front foot after some positive comments from Bank of England Governor Andrew Bailey yesterday evening.

He stated that hiking interest rates again remain a tool at the Bank of England’s disposal to tackle rising inflation.

Last week it emerged that UK inflation levels surprisingly remain above 10%, when markets had forecast a fall below this threshold for the first time since August last year. This pushed GBP exchange rates higher as the chances of additional interest rate hikes increased as a result of the surprisingly high inflation levels.

The comments from Governor Bailey last night tie into this expectation, so his comments underlining the potential for additional hikes have unsurprisingly pushed the Pound slightly higher.

Governor Bailey also reiterated his faith in the UK banking system and claimed that it’s ‘resilient’ and that this will allow the BoE’s monetary policy to focus on tackling the high inflation levels. The BoE’s target is 2% so the current rates above 10% are in focus, especially as the cost-of-living crisis has become such a talking point when discussing the UK economy.

There are no major economic data releases due out today for the UK although Friday has the potential to be a busy day, due to the raft of economic data releases due out. UK GDP figures will be released early in the morning, along with German Retail Sales figures and Employment data. EU Inflation will also be released at 10am which could influence GBP/EUR exchange rates, and in the afternoon there will be some data releases out of the US so it could be a busy end to the week for currency markets.

If you would like to discuss an upcoming currency exchange involving the Pound, please feel free to get in touch with me (Joe) on [email protected]

We will be happy to offer quotes and explain the different contract options our currency brokerage offers, and look into the upcoming economic releases which could impact the currency markets.

Will the Bank of England help or hinder sterling exchange rates?

GBP EUR Rallies After Bank of England Rise in Interest Rates

Will the Bank of England help or hinder sterling exchange rates?

Last night the US federal reserve raised interest rates by 25-basis points against a backdrop of financial instability in the US banking sector. US interest rates are now at the highest since 2007. At the start of the week many had expected the Fed to hold rates at their March meeting. The SVB banking failure caused concern throughout the sector and further interest rate rises could inflict more pain on troubled banks.

Cable (GBPUSD) benefitted following the Fed’s announcement and immediately rose to 7-week highs presenting a great opportunity for dollar buyers. EURUSD also rose to a 7-week high amidst the expectation that there will be no further rate hikes from the Fed. Some commentators are expecting the Fed to start cutting interest rates in the latter half of 2023 which is piling pressure on the dollar.

The Fed’s dovish statement is positive for sterling and future exchange rates against the dollar and other dollar-based currencies; however, a lot will depend on the tone of the Bank of England this afternoon. The BoE have their March meeting and expectations are for interest rates to rise by 25-basis points.

GBPEUR has begun to lose value in the lead up to this meeting and is trading close to 2-week lows as of this morning. This could be a window of opportunity for euro sellers.

If the bank takes a similar dovish tone to the Fed, then we could see further pressure on the pound. UK inflation is still extremely elevated at 10.4% which suggests the banks previous hikes have not yet had the intended impact. Future interest rate rises may be needed in the UK to bring inflation under control and markets will be looking for any suggestion on this from the bank.

Tomorrow morning is packed with significant economic data releases. PMI data from the UK, Eurozone, and US along with UK retail sales and US durable goods orders.

If you want to be kept up to date with developments and achieve market-leading exchange rates please contact me directly on [email protected].

Sterling exchange rates climb in the lead up to tomorrow’s Spring Budget

Sterling saw gains yesterday to start the week and this trend has continued this morning, with GBP/EUR almost reaching 1.1400 earlier today.

A break above 1.1400 would be a 2-week high and interestingly the GBP/EUR pair have found resistance the last 3-times this level was tested.

Despite tomorrow’s Spring Budget expected to be far less eventful than the Spring Budget last year, the financial markets are still cautious of the impact the Budget can have on financial markets so it’s worth being aware that the Budget takes place tomorrow.

Back in Autumn of 2022, the fiscally lavish roll out of plans by the Chancellor of the Exchequer Kwasi Kwarteng under a Liz Truss conservative government had a dramatic impact on GBP exchange rates.

The Pound fell to the lowest level against the US Dollar in roughly 35 years at the time, and dropped to an annual low of 1.0800 against the Euro.

Jeremy Hunt is now Chancellor after being appointed by Truss to replace Kwarteng last year, and Rishi Sunak opted to keep him in the role after he brought calm to the markets when appointed. Tomorrow he’s expected to announce plans for 12 new investment zones in the UK’s most budding industries and generally play it safe after the fall out from the last Budget.

Despite these expectations, GBP has strengthened in the lead up to the budget so it will be interesting to see if there’s a response to any unforeseen announcements tomorrow.

Aside from the Spring Budget economic data this week is light. On Friday the Consumer Inflation Expectations are due for release at 9.30am but apart from this economic data is light.

If you would like to discuss an upcoming currency exchange involving the Pound, or any other major currency pairs please feel free to register your interest with me (Joe) on [email protected]

I will be happy to provide quotes and insight into any upcoming data announcements that could impact your plans, and also discuss the numerous contract offers our brokerage provides our clients.

Sterling under pressure against the euro and dollar – will the pound weaken further?

Sterling under pressure against the euro and dollar – will the pound weaken further?

Sterling exchange rates have once again come under pressure following comments from Fed chairman Jerome Powell and Bank of England member Catherine Mann regarding future interest rate policy.

GBPEUR is trading within range of the 5-month low, which makes now an opportune time for euro sellers. A transfer of €100,000 is buying £3500 more vs the 5-month high for GBPEUR. Cable (GBPUSD) has also clawed back and is very close to the 2-month low. A transfer of £100,000 is buying $6000 less than the 2-month high.

At Lumon we have access to several tools that can help private clients and businesses navigate the volatile market and protect against currency risk. If you have an upcoming exchange involving the pound or any currency please reach out to me directly on [email protected] to set up a no obligation chat.

Several readings of key US economic data have been stronger than expected in recent weeks, the most notable being Non-farm payrolls which came in higher than 500K vs expectations in the 200K range. The strong data has handed the Fed further ammunition to continue raising interest rates.

Powell believes the Fed need to do more to cool down the US economy and reduce inflation and therefore may need to raise interest rates higher than expected. Non-farm payrolls for February is released tomorrow and expectations are for 203K. A higher than expected reading here will likely boost the dollar and weigh on sterling.

Sterling’s position and future prospects have been weakened by comments from the BoE. Catherine Mann said on Tuesday that we should expect further downward pressure for the pound if the markets had not ‘priced in’ the hawkish tone from the Fed and ECB. The ECB are also expected to continue raising rates in the coming months which has supported the euro against the pound.

The next BoE meeting is March 23rd, the pound may come under more pressure if the Bank confirm the end to their current rate hike cycle.

Sterling exchange rates remain under pressure despite upbeat data releases

During yesterday’s trading session the GBP/USD exchange rate dropped below the key 1.20 handle, even if only for a brief moment but it’s a sign of the Pound coming under pressure regardless.

The Pound has also lost some ground against the Euro and after spending some time trading in the 1.13’s and testing 1.14, the pair are now firmly in the 1.12’s despite some better-than-expected economic data releases out of the UK.

There has been a lot of talk and media headlines warning of a recession within the UK owing to an economic slowdown coupled with increasing inflation levels and interest rates creating a cost-of-living crisis.

During yesterday’s economic releases there were some encouraging signs for the UK economy though, as the construction sector reported a strong rebound in fortunes. Activity within the building sector is measured by the CIPS Construction Purchasing Managers Index (CPI) and during February growth was reported, as the figure released was above 50. The fastest level of growth was reported in 9-months which for now will ease concerns of a long-lasting recession.

Car sales also jumped by 26% is another positive economic release, but despite these positive data releases the Pound remained downbeat and slowly weakened throughout the day’s trading session, breaking below 1.2000 against the US Dollar as previously mentioned.

This morning Halifax has reported that UK house prices grew by 1.1% during February which could calm concerns of a property market correction.

I have previously touched on how UK property prices can impact consumer spending habits so signs of stability within the property market are a positive for the UK moving forward. Once again though, this data has done little to boost the Pound which could be a sign of further weakness to come for GBP exchange rates.

Looking forward, Friday could be busy for GBP exchange rates as UK GDP figures will be released along with Industrial and Manufacturing data. Do feel free to get in touch if you wish to plan around this release.

You can contact me (Joe) directly on [email protected] if you wish to obtain a quote for an upcoming currency transfer you plan on making. We can also set up rate alerts and offer an overview regarding upcoming economic data releases which could impact currency markets.

Sterling loses positive gains – will the pound continue to weaken?

Sterling loses positive gains – will the pound continue to weaken?

Sterling exchange rates plummeted during yesterday’s trading session as negative sentiment surrounding the UK’s economy continues to weigh on the currency. Less than 24 hours prior, the pound was trading at 4-week highs against the single currency.

The pound had been boosted by the announcement that the UK and EU had reached a deal over trading arrangements in Northern Ireland known as the Windsor framework. Since the Brexit vote in 2016 the pound has lost considerable value against the euro and dollar. Sterling has often gained value when agreements have been reached with the EU, perhaps unsurprisingly given that the bloc is by far the UK’s biggest trading partner.

The Windsor framework is positive for the outlook of trade in Northern Ireland and therefore positive for the UK and the pound, however, the deal needs to be ratified in Westminster and may face criticism from back-bench tory MP’s and the DUP amongst other unionist parties in Northern Ireland.

Positive flash PMI data released on 21st February is another development that has recently improved the outlook for the pound. The data suggested that both the manufacturing and services industries are performing far better than expectation with the UK services sector expanding.

Does this mean the UK could avoid a recession in 2023?

The final reading for services PMI data is released tomorrow morning. If the data is strong once again then we could see a boost for the pound. Strong PMI data is not conducive to a recession so if this data continues to improve the UK may avoid a recession in 2023. UK GDP figures are next released on 31st March and will confirm how the economy is fairing.

Sterling remains under pressure despite the recent positivity for the UK and is trading within range of the 5-month low against the euro and within range of the monthly low against the dollar.

PMI data released from the UK and EU tomorrow could be a driver for rates moving forward. Later this morning there is a key release of Eurozone inflation data. A stronger than expected reading could further strengthen the euro against the pound.

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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