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Will the Pound continue to fall against the Euro & the US Dollar?

By
Joe Wright
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Sterling begun the week in a subdued fashion and traded within a very thin range throughout yesterday’s trading session.

There was little economic data released pertaining to the UK economy outside of housing data, which showed that property prices rose by just £14 between January and February which is the smallest increase reported by Rightmove since the property website begun recording property prices.

Throughout the day GBP/EUR barely broke a trading range of 25 pips, and this morning this trend of thin ranges has continued although there are some releases later this morning which could potentially impact GBP/EUR rates.

UK Services and Manufacturing PMI data will be released at 9.30am this morning and both are expected to show further contractions in the sectors. A figure below 50 demonstrates a contraction within the sector, and the expectation this morning is for Manufacturing to show 46.8 and for Services to show a figure of 48.3. These sectors collectively cover close to 90% of the UK economy so markets are likely to follow these readings closely.

The trend since the start of 2023 has generally been a declining Pound when we compare it to other major currency pairs such as the US Dollar and the Euro.

In December GBP/EUR was trading close to 1.1700 and now the pair are just over 1.1250, and trading within thin ranges as mentioned earlier within this blog.

The US economy is stronger than many had expected it to be and the European Central Bank (ECB) begun hiking interest rates at a later date than the Bank of England (BoE) and this has put pressure on the Pound against both currencies.

How the UK economy performs, and the approach by the BoE is likely to drive GBP values moving forwards. If you wish to be updated regarding GBP exchange rate changes do feel free to register your interest with me.

You can email me directly on [email protected] to register your interest in receiving market updates, and we can also provide you with competitive quotes if you’re planning on making a currency exchange involving most major currency pairs.

Sterling softens following fall in UK inflation – where will the pound go next?

By
Richard Nugent
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Pound to Euro Gains After Weaker German Retail Sales

Sterling softens following fall in UK inflation – where will the pound go next?

UK inflation data released yesterday morning caused a large scale sell-off of the pound. GBPEUR had climbed to two-week highs prior to the announcement and cable was back trading in the 1.21 handle. However, both pairings are trading more than a cent lower at the open this morning.

Inflation figures revealed a fall in both CPI (Consumer Price Index) and core CPI data. The headline figure fell from 10.5% to 10.1% vs expectations of 10.3%. While the core number reduced from 6.3% to 5.8% vs expectations of 6.2%.

What does this mean for Sterling’s value?

The better than expected fall in inflation will provide relief to the Bank of England that their current rate hike cycle is starting to have an impact on inflation. The bank have been raising interest rates for more than a year now to combat rampant inflation that remains close to a 40-year high.

If inflation was higher or equal to expectations then Andrew Bailey and the other MPC (monetary policy committee) members would have been under pressure to continue the current rate hike cycle.

The fall in inflation may cause a shift in the Banks current policy which would be negative for the pound. Strong retail sales data yesterday from the US has opened the door for further hikes in the US. Interest rates are likely to continue to rise in both the US and Eurozone which will boost the value of their currencies and weigh on the value of the pound.

Chief economist for the BoE Huw Pill is speaking later today and markets will look for any information given regarding future policy. Retail sales data is released in the morning and the expectation is for an improvement from last month reading of -1% to -0.3%.

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 continues to climb but will this week’s data releases reverse this trend?

By
Joe Wright
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Sterling has managed to climb back above the 1.1300 trade level against the Euro and so far this week, it’s managed to remain above this level thanks to some better than expected data released this morning.

The GBP/EUR rate fell below 1.1150 earlier this month when the Bank of England hiked interest rates as expected to a base rate of 4%, but provided a dovish commentary in the minutes afterwards which put pressure on the Pound’s value.

Sterling has recovered against the Euro, and the US Dollar to a certain extent but there are some key economic updates due for release this week which could undermine the current trend if the figures don’t meet expectations.

Earlier this morning data releases revealed that UK wages are growing, but not at the same rate of inflation levels. The Pound climbed though as the figure released beat expectations.

UK wages are growing at 6.7% and this is above the expectation of 6.5% which eases some of the pressure on the BoE regarding monetary policy.

Perhaps the key data release this week will be January’s inflation data which will be released tomorrow morning. We’re expecting to see a third consecutive fall which will ease inflationary pressures. The issue for the UK though is inflation levels remain in the double digits whereas inflation levels within the US and the Eurozone have now dropped below 10%.

The data is expected to show a drop from 10.5% to 10.2% so the easing of inflation pressures in the UK economy is gradual which is a concern for some economists. Any major deviations from the expected figures could impact GBP exchange rates so it’s worth following this data release.

If you would like to discuss an upcoming currency transfer you plan on making involving the Pound, or any other major currency pair for that matter, do feel free to get in touch.

You can contact me (Joe) directly on [email protected] and I’ll be happy to offer competitive quotes and discuss your options with you.

Sterling improves following NIESR report – where will the pound go next?

By
Richard Nugent
-

Sterling improves following NIESR report – where will the pound go next?

The pound enjoyed a more positive session yesterday following the release of the NIESR’s (National Institute of economic and social research) economic forecast for the UK in 2023. Their research contradicts the predictions that have come from the Bank of England for a lengthy recession and forecasts that the UK will avoid a technical recession in 2023.

Sterling was buoyed by the news which moved GBPEUR to a 7-day high, raising the rate from the 4-month low of 1.1135 seen on Friday afternoon. Cable (GBPUSD) also showed signs of improvement following a tough start to the week.

The dollar gained ground across the board following the Federal reserve’s interest rate decision on Wednesday with many expecting the Fed to begin ending their current rate hike cycle, however, positive jobs (non-farm payroll) data released on Friday has increased the probability of US interest rates moving higher than expectations. A strong reading of US CPI data next Tuesday will fuel the expectations of further rises and could support the greenback in the near-term.

A transfer of £200,000 is buying €2800 more vs the low last week, which may present a window of opportunity for sterling sellers that expect the negative rhetoric surrounding the UK to continue moving forward.

Economic data is light from the UK today, however, at 09:45, governor of the Bank Andrew Bailey and chief economist Huw Pill will be questioned by parliaments treasury select committee. MP’s will ask ‘is the Bank of England behind the curve on inflation?’ and what further measures will they take in order to combat the current economic crisis. Comments surrounding the economic outlook and future interest rate policy could provide volatility for sterling exchange rates.

Tomorrow morning is key for UK economic data with GDP, industrial production and manufacturing production all being released at 7am. The GDP reading could be a significant driver for sterling exchange rates moving forward. A negative reading would support the BoE’s forecast for a recession where a positive reading would support the NIESR’s report.

If you have an upcoming currency requirement and would like to be kept up to date with developments, please feel free to contact me directly on [email protected].

We have several tools available at Lumon that can help minimise your currency risk.

Sterling exchange rates are the biggest loser after last week’s interest rate changes

By
Joe Wright
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GBP EUR Holds Gains After House Price Data 

Although recovering to a certain extent from the multi-month lows seen late last week, the Pound appears to be now trading within new trading ranges after last week’s interest rate increase from the BoE (Bank of England).

In regards to the GBP/EUR exchange rate, it has been trading between 1.1300 and 1.1400 in the lead up to BoE monetary policy updates for good few weeks but now that the announcements have taken place we’re seeing new ranges.

At the time of writing GBP/EUR is trading just above the 1.1200 handle within a very thin range of around 20 pips so far today.

This shows a slight recovery from the multi-month lows of 1.1137 that we saw late last week, but it’s also a sign that GBP has lost between 1 to 2 cents after the interest rate hike last week and forward guidance given last week.

The decision to hike rates for the 10th consecutive time , this time by 0.5% as expected is perhaps not the reason for the fall. It was most likely the dovish commentary afterwards. If inflationary pressures subside due to weak economic activity and the BoE no longer continue to hike interest rates in a bullish fashion, the Pound could become weaker.

On a more positive note for the Pound, and the UK economy this morning it’s been reported by Halifax that UK property prices remained flat within January. This stems a consistent fall after they had dropped for 4-months in a row until last month.

Annually there was a 1.9% increase which was the lowest increase in the past 3-years.

Property prices within the UK can be a good indicator of economic health as a buoyant market often boosts retail sales due to increasing wealth of the nation. A drop in property prices can see a knock on effect which tends to be more heightened within the UK than other nations studies have shown.

On Thursday this week the BoE’s Monetary Policy Report Hearings is due to be released at 9.45am which could have a knock on effect to the Pounds value depending on the outcome so that’s worth being aware of.

There is also a raft of economic updates such as GDP, Industrial Production and Manufacturing Production figures due for release early in the morning. If you wish to plan around these releases due feel free to get in touch.

You can contact me (Joe) directly on [email protected] and I will be happy to offer insights. We can also set up rate alerts, and most importantly offer competitive quotes for any prospective clients that wish to discuss an upcoming currency exchange they’re planning on making.

Pound Euro rate falls after Bank of England ECB Rate Hikes

By
Tom Holian
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Pound Euro Rates fall after UK Interest Rate Decision 

The Pound Euro exchange rate fell from its recent monthly highs of above 1.14 into the 1.11 levels shortly after the interest rate announcement made by the Bank of England.

The current rate of UK inflation is at 10.2% but the central bank are expecting interest rates to fall to as low as 5.2% towards the end of 2023.

Although petrol prices at the pumps have started to fall recently, wholesale gas prices still remain relatively high.

This is keeping the costs of goods and services high which in turn is causing inflation to remain much higher than the target set by the Bank of England which is just 2%.

European Central Bank Increases Interest Rates

Meanwhile, on the continent the European Central Bank continued with their current monetary policy of raising interest rates.

The ECB raised interest rates by 0.5% earlier on today and they have also confirmed that they will be raising interest rates once again by 0.5% in March.

The ECB have been very slow in raising interest rates compared to both the US & UK.

Whilst the US increased interest rates rapidly during 2022 this has caused inflation to finally get to more normal levels.

Meanwhile, UK inflation still remains high but the Governor of the Bank of England Andrew Bailey has suggested that inflation will start to fall as we move further into the year.

Later today we will see the release of the latest US unemployment data due out in the afternoon.

As the world’s leading economy the current expectation is for unemployment to be released at 3.6% so anything different could see a lot of movement for global exchange rates as we end the week.

If you would like a free quote when buying or selling currency and would like to save money on exchange rates compared to using your own bank then contact me directly and I look forward to hearing from you.

Tom Holian [email protected]

 

 

Sterling remains robust despite the IMF downgrading UK growth prospects

By
Joe Wright
-

The UK is in the financial headlines for the wrong reasons this morning, after the IMF (International Monetary Fund) released a report downgrading the UK’s economic growth prospects.

Of the G7 economies, the UK is the only member whose economy is expected to fall into recession this year. The prediction is for a drop of 0.6% through 2023, which is almost a 1% drop from the previous prediction which was released as recently as October.

The reason for the downgrade is being attributed to increasing interest rates, high energy costs and tighter government spending. Last week within my blog I highlighted that there is little hope that the Chancellor of the Exchequer, Jeremy Hunt will be able to offer many surprises packages or bonuses during the Spring budget.

After a strong year of growth in 2022 the UK is facing quite a sharp correction according to these predictions, and this could impact GBP exchange rates moving forward.

Fortunately for GBP sellers so far this morning the Pound has remained robust, and it remains in the 1.23’s against the US Dollar and the Pound to Euro exchange rate is still testing the 1.1400 level.

The GBP/EUR exchange rate has remained very rangebound over the past few weeks, spending most of the time sitting within the 1.13 to 1.14 range.

This morning’s disappointing forecast from the IMF has done little to impact Sterling exchange rates so far, but there are further updates this week which could influence the Pound’s value.

On Thursday the Bank of England is expected to raise interest rates for the 10th consecutive time. A 0.5% hike is expected which will take the base rate of interest up to 4%.

This will be the highest rate since the 2008 financial crisis which will limit the spending power of the UK public which is likely to have a negative impact on the UK economy.

If you wish to plan around this week’s interest rate change please feel free to get in touch. We’re happy to offer our insight’s and offer competitive exchange rates to try and help you save money when making currency exchanges.

You can contact me directly on [email protected] with an outline of your transfer plans.

Sterling weaker following poor economic data – will the pound drop further?

By
Richard Nugent
-

Sterling weaker following poor economic data – will the pound drop further?

Sterling opened yesterdays session at a weekly low against the single currency. The pairing increased throughout the day but is trading more than a cent lower than the monthly high reached last week, following strong UK inflation data.

PMI data released on Tuesday morning is the catalyst for the latest move. PMI data (Purchasing Managers’ Index) measures the performance of the manufacturing and services industries. The index provides insight into the current and future business conditions. A reading above 50 signals an expansion where a reading below 50 signals contraction.

The combined PMI reading for the eurozone was 50.2, higher than last month’s reading of 49.3 and signaling an expansion for the EU industries and giving a boost to the value of the euro. The UK’s combined reading was 47.8, lower than last month’s reading, signaling a contraction. This will come as a concern for the Bank of England who have forecast the UK to fall into recession in 2023.

Inflation remains a problem in the EU and UK. The PMI numbers suggest the economic recovery has begun in the Eurozone which gives the ECB bargaining power to continue raising interest rates. Another hawkish 50-basis point hike from the ECB would provide support for the euro against the pound and the dollar. EURUSD is trading at 9-month highs and EURGBP is trading close to 4-month highs.

Weak PMI data poses a problem for the BoE as they continue to combat inflation which sits at a 40-year high. Further interest rate hikes could cause the economy to cool down at a faster pace than expected and plunge the UK into a deeper recession. Some commentators are tipping the Bank to reduce the next rate hike to 25-basis points. A reduced or dovish-hike from the BoE could put further downward pressure on the pound.

There is little to no data of consequence coming from the UK or Eurozone today so all eyes will be on the US. Durable goods orders, jobs data, and GDP data is released today. Any data that deviates from expectations could provide significant volatility for the dollar against its major counterparts.

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].

GBP exchange rates remain flat despite concerning economic data released this morning

By
Joe Wright
-

Government debt within the UK has reached its highest December figure on record according to figures released this morning. The currency markets have barely been impacted though, as these figures were expected, but it is a concern for the UK economy moving forward and could weigh on the Pounds value.

The government’s decision to support households and businesses with rising energy bills, along with increasing interest rates increasing the debt burden on national debt has pushed UK government borrowing to a record December high of £27.4bn.

Moving forward, this limits the potential for UK Chancellor of the Exchequer, Jermey Hunt to offer many giveaways and make budget cuts when he delivers his next budget on the 15th of March.

This could limit any upside for the Pound moving forward, unless economic updates offer a more bullish outlook for the UK economy moving forward.

UK property prices are another area of focus as previously touched on within our daily blogs. If there is a steep decline in property prices the usual knock-on effect would be a drop in spending owing to the decreasing wealth of the nation. There have been forecasts of a drop in property prices so this could be another important topic through 2023.

With regards to monetary policy, the Bank of England is currently in a period of silence ahead of next week’s interest rate decision. The expectation is for is for the BoE to hike rates for the 10th time in a row by another 0.5% which would bring rates up to 4% from the current 3.5%. The decision takes place on the 2nd of February and moving forward the expectation is for a peak of 4.5%.

If you would like a second opinion regarding a currency exchange you’re planning on making, please feel free to get in touch with me (Joe) on [email protected]

We can also set up rate alerts and offer a number of currency exchange contracts which may help you make the most of your currency transfer.

Could UK Inflation Data Influence GBP Exchange Rates This Week?

By
Joe Wright
-

The Pound begun the week in an uneventful fashion after trading within thin ranges throughout Monday’s trading session.

The Pound to Euro exchange rate remains quite rangebound at the moment, mostly trading between 1.1250 to 1.1300 with no signs of a breakout from this range at the moment. This morning is a good example of this trading pattern, with the pair hitting exactly 1.1250 before rising slightly.

Jobs data released this morning has done little to influence GBP exchange rates although perhaps tomorrows inflation data could have a greater market impact. In the early hours this morning UK labour market data showed that the unemployment rate remains unchanged at 3.7%. Job vacancies declined slightly, although it remains at a historically high 1.16m. Despite there being a high number of job vacancies, the drop in vacancies shows the jobs market is easing. Pay growth on the other hand showed signs of climbing and this may put pressure on the Bank of England to continue to hike interest rates.

Looking forward, tomorrow mornings Inflation data for the month of December will be followed closely for clues regarding the Bank of England’s monetary policy moving forward. The BoE has hiked interest rates at their last nine opportunities, and further hikes are expected. The inflation data tomorrow is expected to show a slight drop on the previous figure, although it is expected to remains in the double digits which is well above the BoE’s target. Inflation figures are likely to continue to drive the BoE’s monetary policy and this can impact the Pounds value so this release is worth monitoring tomorrow morning. Do register your interest with us if you wish to be notified regarding any major changes in the Pound’s value.

Aside from the Bank of England’s monetary policy, UK property prices could also influence the Pound’s value this year. A drop in prices is expected, and the UK economy can be heavily influenced by property prices due to the wealth of Brits generally shrinking.

If you’re planning on making a currency exchange involving the Pound and would like to discuss exchange rates along with market insights, please feel free to register your interest with me (Joe) on [email protected]

We can also set up rate alerts and offer a number of currency exchange contracts which may help you make the most of your currency transfer.

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