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Will the Pound to Euro rate recover after dropping from 10-month highs?

By
Joe Wright
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GBP AUD Dips Again Ahead of BoE Rate Decision

Earlier this morning the Pound to Euro exchange rate had fallen almost 1-cent from the 10-month high the pair reached yesterday morning.

The GBP/EUR pair broker above 1.1700 for the first time since August last year yesterday, whereas this morning the pair bottomed out at 1.1610 although some upbeat data released this morning have given the Pound a boost.

Pay growth within the UK has risen by 7.2% on an annual basis when the timeframe of February to April is measured. This figure excludes bonuses and provides the Bank of England with a headache as they try to counter rising inflation levels without forcing the economy into a recession.

Whilst this growth is a major jump on the previous quarters figures, it remains below the rate of inflation and the chances of an interest rate hike next Thursday are almost certain.

One of the drivers of the Pounds value this month is whether the Bank of England will decide to hike the interest rate by 0.25% or by 0.5% and although 0.25% is the most likely, the chances of a 0.5% hike has gradually increased. This has helped strengthen the Pound although the financial markets are mostly expecting to see the 0.25% hike which will be the 13th consecutive interest rate hike from the Bank of England.

Before next weeks focus on the Bank of England, there could be fluctuations within the currency markets this week due to the volume of Central Bank updates outside of the UK. Tomorrow the US Fed Reserve will confirm its most recent interest rate decision and although no changes are expected, the commentary afterwards could offer insight into future monetary policy plans.

The European Central Bank (ECB) will then update us on Thursday with their most recent interest rate decision. A hike of 0.25% is expected so both market updates are worth following as there could be volatility within the currency markets.

Do feel free to register your interest with us if you wish to plan around these data releases.

Pound to Euro exchange rate drops from its 6-month high, will the Pound continue to fall?

By
Joe Wright
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GBP EUR Dips After Spanish Inflation Jump 

Last week we witnessed the Pound hitting a 6-month high against the Euro, almost climbing as high as 1.1700 as the GBP/EUR pair broke above 1.1660 at its highest level.

The peak of last week was just over 3-cents from the annual high which came in August last year, but since then Sterling has tailed off slightly and dropped back into the 1.15’s at the mid-market level.

It’s not unusual to see a slight sell off after a bullish run within the currency markets, and I don’t think that the Pound has been helped by the lighter than usual economic calendar this week.

The monetary policy of the Bank of England and the expectations of future hikes continues to drive Sterling’s value. Last week’s highs could be attributed to the increasing chances of a 50-basis point hike from the BoE later this month (June 22nd) although the most likely outcome is a 25-basis point hike followed by another at the BoE’s next meeting in July.

The rate of inflation will continue to drive expectations of the BoE’s policy changes, as it continues to try and counter inflationary pressures.

As previously outlined the economic calendar within the UK is very light this week, and the only data due out this week relates to property prices. This will be releases early tomorrow morning by Halifax and historically speaking this kind of data release has little impact on the Pounds value.

Perhaps the key release for GBP/EUR this week will be the GDP data which comes out at 10am on Thursday morning.

If you’re following the Pounds market movements and would like to be notified in the event of a major market movement for the Pound against other currencies, please feel free to register your interest with us.

You can contact me (Joe) directly on [email protected] and I’ll be happy to offer you some insight and quotes regarding a transfer you plan on making.

Pound reaches 2023 fresh highs against the Euro

By
Jonathan Watson
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GBP EUR Recovers from Early Losses on EU Trade

Pound reaches fresh levels against the Euro but will this continue?

The pound reached the highest points of the year against the Euro this week. GBPEUR rates have traded at 1.1592 highs so far today. The pound is benefitting from expectations of higher UK interest rates.

It is worth pointing out sterling has been see-sawing all year (albeit trending higher) over such expectations. Markets can be very fragile and whilst this sentiment appears established, any data could easily change this.

Interest rate expectations are key, and crucial to the strength and weakness of a currency as I have written here.

Today is the last day of May where as it is month end, we can sometimes see increased volatility. This is because traders will open and close off positions, and some larger corporate transactions will be booked.

Market volatility can increase so if you have any transactions to buy or sell currency, this is worth being aware of. You can contact me Jonathan directly by emailing [email protected]

What can we expect in June for the pound?

Next month is a whole series of new economic data releases, with Inflation bound to attract extra attention on the 21st June.

The 22nd of June is the latest Bank of England interest rate decision. This is looking like a crucial release too. You can read more about comments and decision making from the UK central bank here.

Our latest FX research shows that at current levels we are operating near the top, which could be a reason for Euro buyers with sterling to not hold on too much longer.

What do the forecasters say?

The pound has been trading very close to the higher levels we have seen in the forecasts. Looking at the averages across circa 50 different banks we have surveyed, we see an average of around 1.12. This is over the coming three-, six- and twelve-month periods.

Going back to the June outlook, the upcoming economic data will be key to assess the extent to which we can rely those forecasts.

We offer a proactive service to help clients keep up to date with the latest news and trends, to help them make informed decisions about their currency transactions

For more information, please fill in the contact form below and one of our currency experts will be in touch to discuss your requirements.

[email protected]

https://uk.linkedin.com/in/jonathan-watson-46591057

Will UK inflation cause the pound to rise?

By
Richard Nugent
-

UK inflation has dropped below 9% for the first time in over a year. Data released yesterday confirmed CPI year-on-year is at 8.7%. The BoE have been raising interest rates for 18 months in order to bring inflation under control so the drop will be welcomed by many.

However, analysts were expecting a reduction to 8.2% which suggests the BoE have more work to do. Expectations for an interest rate hike at the next BoE meeting is now 100%. 90% probability of a 25-basis point rise, and 10% for a 50-basis point rise.

The new interest rate expectations caused the pound to surge against the euro yesterday morning. GBPEUR hit a new yearly-high at 1.1560.

In the eurozone this morning, German GDP data was much lighter than expectations. The German economy shrank last quarter and is also down year-on-year. Expectations for a recession in Germany are now rising and this could spell trouble for the single currency moving forward.

The inflation data is not all good news for sterling. Stronger inflation will continue to squeeze the pockets of businesses and consumers which in turn would reduce spending in the economy.

Could sterling strength be euro weakness?

EURUSD is the most traded currency pair globally. The pairing has dropped to a 2-month low in the last couple of days trading. Cable (GBPUSD) has dropped to a 6-week low following a resurgence in the strength of the dollar.

UK retail sales data is released tomorrow morning. A lower-than-expected reading would confirm economic activity is reducing while inflation remains embedded.

Durable goods orders and Michigan consumer sentiment will come from the US ending a busy week of economic data.

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 Stronger as UK Inflation Remains High

By
Jonathan Watson
-
Pound to Dollar Rate Drops to One-month Low

Pound reaches fresh highs against the Euro

UK Inflation data this morning showed a drop to 8.7% but this is still higher than previous Bank of England forecasts.

This leaves the door open to future interest hikes, which in principal could lead to a stronger pound.

The pound was also in the headlines again yesterday as the Bank of England faced criticism.

In terms of where interest rates are headed, the governor Andrew Bailey spoke. “I think we are nearer the peak than we were”, was his commentary in relation to how much further hikes might go.

In acknowledgement of the Banks failure to control inflation, Bailey conceded “very big lessons” were there to be learned.

The news was not all bad in yesterday’s trading. The pound rose also rose higher yesterday as the IMF confirmed the UK is no longer headed for recession.

Why has the pound been strengthening this year?

Sterling has been empowered in recent weeks as the UK shrugs off the worst forecasts.

At the turn of the year, all eyes were on a long and drawn-out recession. This has continued to look less and less likely as the year goes on.

Our latest forecasts had thrown doubt on the potential for the pound to rise higher ahead. These forecasts are now coming under pressure as further good news emerges.

Whilst government borrowing has increased in the latest figures, the rise in projected economic growth and avoidance of recession is naturally seen as a plus.

When we consider that Germany could well be headed for recession, and the US economy is also not clearly out of the woods, the pound could be looking in good shape from an investors point of view.

When is the best time to buy Euros with pounds?

Looking to the data, our latest research had indicated of 54 banks; 45 predicted the pound will be lower. Precisely, they predicted the GBPEUR level would be below 1.14 in the coming months.

Considering GBPEUR levels have reached fresh six-month highs in May, now could be a good time to lock in your rate.

Clients buying £100,000 worth of Euros are today getting an extra €4,000 compared to the lows of February.

As mentioned, our research in assessing the predictions of all the major banks indicted a much tougher time than the pound is currently experiencing.

Market sentiment is providing a boost for Euro buyers with pounds but this might not last.

There is an argument to say therefore, that given the recent movements, and the fact that market expectations predict a lower pound, now is a good time to buy.

Will the US dollar weaken on the US debt ceiling talks?

Markets have been here many time before and only a handful of times have they failed to agree a deal before the deadline.

If the government runs out of money, and they fail to make payments then we could in principal see the US dollar weaker. With so many US dollar denominated assets globally investors might become fearful.

We might also flip this around and argue that the US dollar would actually strengthen since as a safe haven currency, the US dollar will rise in times of uncertainty

Investors will be keenly monitoring the outcome here, with the familiar talk of the reliability of the US dollar as a leading global currency and how justified that label is also likely to gain column inches.

For more information on the latest GBPEUR and GBPUSD forecasts, please contact me to learn more.

Jonathan

[email protected]

Could the focus on the Bank of England this week influence GBP exchange rates?

By
Joe Wright
-
GBP AUD Dips Again Ahead of BoE Rate Decision

In recent weeks, the Pound has remained relatively rangebound against the majority of major currency pairs.

The main focus of our daily blogs is the GBP/EUR pairing and since the Pound broke above 1.1400 at the beginning of the month, there has been less than a 1.5 cent range of movement with GBP/EUR consolidating above 1.1400 and struggling to make much progress into the 1.15’s.

Cable (GBP/USD) has seen a bit more volatility than GBP/EUR, with the Pound dropping off slightly after hitting an 11-month high on the 10th of May.

This week the Bank of England are likely to be in focus as the currency markets try to second guess the Central Bank’s next policy moves along with the direction of the Pound.

The International Monetary Fund and the Bank of England are currently at odds regarding the UK’s economic output with the IMF predicting a decline in output for the UK this year. This would be weakest showing from all of the major economies, but interestingly the BoE is predicting growth this year for the UK economy after previously predicting a recession.

The IMF are in the UK today and will give a press conference this morning at 11.15am to report on their most recent outlook for the UK economy.

At the same time the Bank of England Governor Andrew Bailey along with other members of the Monetary Policy Committee will discuss their reasoning behind the most recent interest rate decision.

Earlier this month the base rate of interest was increased for the 12th consecutive time, and some market analysts believe there is an 80% chance of another hike this summer.

The comments and language used could impact GBP exchange rates, especially if hints at the BoE’s next moves are made obvious in today’s speech.

There will be further speech’s throughout the week from BoE personnel, so it’s worth being aware of the potential impacts they could have on the Pound’s value.

If you wish to be updated in the event of a big market movement for the Pound, do feel free to register your interest with me (Joe).

We are also happy to offer quotations on currency exchanges, and to discuss to various contract types we offer.

You can email me directly on [email protected] with an outline of your plans, and I will be happy to explain how we can help.

Sterling exchange rates remain high – will the pound weaken?

By
Richard Nugent
-

Sterling exchange rates continue to sit at elevated levels following a strong performance from the pound in 2023.

During yesterdays session GBPEUR once again rose within touching distance of the yearly-high, which was breached a week today.

A number of analysts and commentators are suggesting potential downside risk for GBPEUR in the coming weeks.

On Tuesday UK employment data confirmed the unemployment rate had risen to 3.9% which was above last months reading and expectations of 3.8%.

The unemployment rise will be monitored closely by the Bank of England. Although the deviation from the expectation is small, the data suggests that the UK economy is beginning to cool down.

A flurry of weaker UK economic data would increase risk sentiment and pile pressure on the pound against its counterparts.

The BoE began raising interest rates last year to try and bring rampant inflation under control. Interest rate rises discourage spending by increasing the cost of borrowing. This in turn decreases the amount of money being spent in the economy which reduces prices.

UK inflation must be brought under control, however, the BoE will not want to cause a recession by raising rates too high. The current base rate sits at 4.5% which is the highest it has been since the 2008 financial crisis.

Interest rate hikes have supported the value of the pound against over the last year. Dankse Bank are suggesting the BoE will raise rates one more time in June before pausing.

Sterling could weaken if the BoE suggest a pause or end to the current rate hike cycle.

The dollar weakened across the board following the last Fed meeting where the central bank suggested US rates had reached their terminal level.

If you have an upcoming currency requirement, please feel free to reach out directly on [email protected].

Will the Pound fall if the Bank of England stops hiking interest rates?

By
Joe Wright
-
GBP EUR Dips After Spanish Inflation Jump 

Last week, the Pound hit a six-month high against the Euro, and an 11-month high against the US Dollar after further interest rate hikes and bullish commentary from the Bank of England boosted the Pound.

The hike was the 12th consecutive interest rate hike from the Bank of England, which has come after a long period of very low interest rates just a few years ago.

The UK’s inflation issues have been well reported, and whilst inflation is also a global issue the UK appears to be especially struggling with bringing the above 10% inflation levels down.

The increasing interest rate has no-doubt made the Pound a more attractive currency to hold funds in, and this has helped strengthen the Pounds value.

With the rate hikes expected to end later this year, market commentators are expecting just one further hike up to 4.75% before potential cuts next year. The Pound could potentially drop so it’s worth following the BoE’s updates for insights into the Pound’s next moves.

UK avoids recession with growth now expected this year

Our regular readers will be aware of the Pounds recent gains against most major currency pairs. The gains are not just down to rate hikes from the Bank of England, but also a complete turnaround in expectations for UK growth this year as well as in 2024.

The Bank of England had expected to see a recession this year. As recently as February there were expectations of a 0.5% contraction in growth through 2023, but since then the bank has pivoted and now expects to see growth of 0.25% in 2023, and 0.75% in 2024 and 2025.

These predictions are slightly above the International Monetary Fund’s consensus for the UK economy. If the UK exceeds expectations, it wouldn’t be unusual to see the Pound make further gains.

Whilst economic data out of the UK is light this week, there will be some speeches from key market figures to look out for. The governor of the BoE, Andrew Bailey will be speaking tomorrow morning at 10.50am and then on Thursday the BoE Monetary Policy Report Hearings will be released.

If you wish to be updated in the event of a big market movement for the Pound, do feel free to register your interest with us. As a market leader in the international payments sector, we can also offer you quotes if you plan on making a currency transfer in future.

You can contact me (Joe) directly on [email protected] with an outline of your plans and I’ll be happy to offer insight and exchange rates.

Sterling strengthens ahead of Bank of England interest rate decision

By
Richard Nugent
-
GBP EUR Rallies After Bank of England Rise in Interest Rates

Sterling stronger ahead of Bank of England decision

2023 is turning into a positive year for the pound after a disappointing end to 2022. Sterling is the strongest performing major currency of the year and exchange rates remain elevated against many of its major counterparts.

Cable (GBPUSD) is trading close to one-year highs while GBPEUR hit a 2023 yearly high during yesterday’s session. The pound is also trading close to yearly highs against the Loonie (CAD), Kiwi, and Aussie.

What is driving sterling higher?

The pound has been boosted by a stream of less than negative economic data. The UK is no longer facing a lengthy recession as previously suggested by the IMF, BoE and OBR. Revised forecasts for the year suggest the UK’s economy will shrink 0.2% by year-end but importantly avoid a technical recession. PMI data from the services sector last month was positive signaling an expansion in activity.

Another key driver for exchange rates is the Bank of England’s interest rate policy. Particularly when compared against the policy of other central banks. The BoE have been raising interest rates for over a year in attempt to bring UK inflation under control.

Inflation remains elevated in the UK and significantly higher than in the Eurozone and US. The bank is expected to raise interest rates today by 25 basis points, raising the base rate to 4.5%. This could lend support to the value of the pound, however, markets will be looking for signals of future interest rate rises as today’s decision may already by ‘priced in’ to exchange rates.

Last week, the Fed raised rates but their commentary led to dollar sell-off. Suggestions that US rates have reached their terminal level is negative for the dollars outlook. A similar suggestion from the BoE today could weaken the pounds footing.

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

Will pound sterling keep rising? Focus on Bank of England Thursday

By
Jonathan Watson
-
GBP EUR Still Struggling Below 1.1600 Level 

Will the pound keep rising? To assess how the Bank of England meeting Thursday will affect the pound, we can look at the forecasts.

We researched data across 54 banks and just 9 think GBPEUR will be above current levels (1.1462) in the coming months.

The other 80% plus forecasters, indicated rates will be below 1.14. The research shows there might not be much headroom on GBPEUR levels.

The pound ended the first week of May well. Sterling hit the highest points of the year against the Euro, and a one-year high against the US dollar.

On a £500,000 purchase of Euros, you now get an extra €17,000 from February’s lows, and the same transfer into US dollars achieves an extra $42,600 from the March low.

Crucial week ahead for the pound

If you have an exchange to convert pounds now or in the future, the pound is enjoying fresh highs against many currencies.

However, we are about to have an important event with the latest Bank of England interest rate decision. I have been pointing out for some weeks the importance of this week’s decision, you can read here.

Getting ‘the best rate’ involves timing and preparedness. To help our clients take advantage of the market, we offer a range of options to help them maximise their position.

Please contact me for more information on strategy and what to expect [email protected]

The rise of sterling has largely been down to events elsewhere, with both the Eurozone and United States scaling back interest rate hikes.

The US dollar accounts for 60% of globally traded FX, and the Euro 20%.

With the pound coming in around 5%, it has been ‘lifted’ by the weakness of these two currencies.

Interest rates are a key factor in determining the relative strength or weakness of a currency. When interest rates are raised, we can typically see a currency strengthen.

And when interest rates are lowered, we can often see a currency lose value.

This is because just like a higher interest rate on a bank account will attract investment, a higher (or lower) interest rate by a central bank will feed through into the attractiveness of that currency.

Will the UK upset the recent trend of central bank decisions?

On Thursday next week, we have the latest Bank of England interest rate decision, where it will be the UK’s turn to enter the interest rate party.

The Bank of England is expected to raise rates next week, just like the US Federal Reserve and the ECB. What is less clear is the effect on sterling.

The commentary of the Fed and the ECB indicated a slightly softer outlook for further interest rate hikes ahead. This led to a weakening of both currencies.

There is positive news the UK economy has so far avoided recession. But, there are a number of worries over high inflation in the UK. This has ended up hampering consumer spending and putting pressure on wages.

The pound could easily suffer a similar fate to both the Euro and US dollar. And fall on a less than positive interest rate outlook ahead.

Thursday is looking like the key day for the pound this week

Thursday’s news is the key focus for the pound. So, a sensible FX strategy should be factoring in the potential outcomes here.

The King’s coronation bank holiday in the UK makes for a more condensed trading week.

The crucial Bank of England meeting and bigger movements on sterling rates last week could mean increased volatility this week.

For more information on what to expect next week please contact me at [email protected]

I am one of the senior traders at one of the UK’s largest FX brokerages. My team and I will be happy to share our research and market insight.

Thank you for reading,

Jonathan

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