Will the US Dollar continue to improve against Sterling in October?

GBP USD Exchange Rate: The Week Ahead August 14th

US Dollar close to all time highs vs Sterling

The GBPUSD exchange rate has recently touched close to all time lows following the mini-budget two weeks ago.

The US Dollar is often viewed as the global safe haven currency.

This is in part why we have seen the Dollar strengthen so much recently.

The ongoing issues in Ukraine have caused a flight to safety of the US Dollar.

Indeed, the Dollar also hit its best rate to buy Euros in the last few weeks owing to the global uncertainty.

With oil prices hitting record highs earlier this year, this is another example of why the Dollar remains as high as it is against a number of different currencies.

Oil prices are priced in US Dollars so when the prices rises this often helps the Dollar.

Energy Issues in the UK 

Turning the focus back towards the UK, we have seen a huge amount of uncertainty in the UK economy in the last fortnight.

Things appear to have settled down a little this week.  However, energy prices have risen for many across the UK since the start of October owing to the price cap.

The turbulence of the mini-budget news also caused issues for pension funds and banks.

Many banks and mortgage providers removed some of their products with interest rates predicted to go as high as 6% at some point next year.

The Bank of England are targeted at keeping inflation at 2%.

With inflation in the UK around 10% the central bank are left with little alternative but to raise interest rates.

Typically an interest rate hike would often lead to Sterling strength.

However, in recent months the opposite has happened.

This is because the accompanying statements have been rather gloomy with a recession predicted to happen in the UK.

For anyone selling Dollars to buy Euros or indeed another currency that is pegged to the US Dollar we are seeing excellent opportunities to take advantage of current US Dollar strength.

IF you would like a free quote when selling US Dollars or any other currency then contact me directly Tom Holian [email protected] and I look forward to hearing from you.

Will Liz Truss speech sink the pound today?

GBP EUR Exchange Rate: The Week Ahead August 15th

The pound could be in for another rollercoaster ride today, as investors will learn of Liz Truss’ latest plans for the economy ahead. Delivering her speech on the closing day of the Conservative Party Conference, markets will once again get to deliver the verdict on how it feels the Government is doing.

Sterling has made a very impressive rebound from the recent lows, with GBPEUR back over 1.15 and GBPUSD 1.12 in the last 24 hours. If we forget last week, these rates are near the bottom ranges of where sterling had been trading in September.

However, last week’s absolute lows make 1.12 on GBPUSD and 1.15 on GBPEUR look like some very attractive buying rates for sterling holders.

GBPEUR levels hit 1.07, that means on a £200,000 purchase of Euros, you would at yesterday’s highs achieve an extra €16,000. For a £200,000 purchase of US dollars, you would be receiving an extra $18,000 in the same equations using rates of 1.03 to 1.12.

Such dramatic rises and falls are rare in the FX markets, but do happen and remind us of how the unexpected can occur, triggering excessive movements.

The unexpected nature of the FX markets is one of the key reasons to be prepared when considering and desiring to purchase at a better rate. Simply saying ‘I want to wait until the rates gets to x or y’ is not always the best plan.

This is because, if you are trading on a large amount of money, you will often have to take some extra steps to be ready to buy. You will then also have the problems of whether or not you are truly getting the best rates of exchange, from a competitive source, that allows you to maximise your exchange.

If you have a currency exchange to make, and wish to ensure you have all the correct information about the FX markets to make a decision, please feel free to contact mw to discuss strategy.

I have worked as a FX dealer for 13 years, and can provide market insight and information, to help you make an informed decision with regard to buying or selling the pound. So, if you are looking at business payments, buying or selling Euros or USD (or any other currency), or maybe you have a property investors looking to repatriate funds from overseas, please feel free to get in touch for a balanced assessment of the outlook, your options and to benchmark any currency rates offered.

Thank you,

Jonathan

[email protected]

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]

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.

 

 

 

 

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.

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 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.

Fed hikes interest rate by 75 basis points with key BoE meeting looming

Yesterday evening the US federal reserve raised interest rates by 75 basis points. Raising the policy rate from 2.5% to 3.25%.

This is the third 75 basis point hike in as many meetings by the Fed, highlighting again their intention to take a strong stance on inflation levels that have spiralled out of control. “The committee is strongly committed to returning inflation to its 2% objective,” the Fed said in a statement. Markets now expect US interest rates to finish the year above 4%. For context they began the year at 0.25%.

The cable rate (GBPUSD) fell by a cent immediately, following the Fed’s announcement to a new 37-year low of 1.1235. The pound did stage an initial fightback; however, we open the day trading in the lower 1.12s, having hit a new low of 1.1211. £100,000 now buys $6000 less vs a month ago. Will we see cable test the 1.10 handle in the coming weeks?

The dollar strengthened against every other major currency during yesterday’s session but what does this mean for the pound? Although cable fell, GBPEUR gained close to half a percent, presenting a window of opportunity for euro buyers. Although the pound gained value against the euro. This was not driven by positive news coming from the UK and perhaps was driven by the euro’s weakness against the dollar.

USDEUR is the most traded currency pair globally and the euro lost more than 1.25% against the dollar during the day. The pairing climbed close to 1.02 following the fed, 20-year highs for the dollar.

Other than the increase against the euro, the pound lost value against a number of major currencies. GBPAUD is trading close to 5-year lows, with GBPCHF trading at 48-year lows and GBPCAD at 12-year lows. GBP sellers will be hoping the Bank of England lends support to the pounds value which is now one of the worst performing major currencies in 2022.

As mentioned in my article last week, the Bank of England will announce at midday today whether interest rates are going up by 50 basis points or 75 basis points. With a recession looming, the bank will not want their decision to cause the UK economy to cool off too quickly.

The market shows a 70% probability of a 75 basis point hike and a 30% probability of a 50 basis point hike. It is expected that the 9 members of the MPC (monetary policy committee) may have differing views and be split on whether to raise rates by 25, 50 or 75 basis points.

GBP sellers will be hoping for a bullish 75 basis point hike which could lend support to the pounds value. However, with the energy crisis expecting to continue into the winter months, some commentators believe the Bank can only limit the damage caused to the pound.

GBPEUR opens the day slightly softer, GBPCHF dropped by than half a percent this morning in anticipation of the SNB’s (Swiss National Bank) interest rate announcement. As expected, they have raised interest rates by 75 basis points, bringing their policy rate up from -0.25% to 0.5%. The SNB next meet in December, some commentators were expecting a supersized 100 basis point hike today and so the pound has clawed back all of the ground lost against the Swissie in the last 24 hours.

If you lave a large currency exchange coming up and you would like to discuss the markets in more detail, feel free to contact me on [email protected] and I will be more than happy to have a chat with you.

GBP/EUR continues to trade at annual low with BoE meeting in focus in week

In the early hours of this morning, the Pound to Euro exchange rate hit a fresh annual low of 1.1385, which is the lowest level the pair has traded at in close to 20 months.

The weak start to this week’s trading follows on from a 1.25% drop last week, after Friday’s sell-off pushed the Pound lower off the back of some concerning economic data for the UK.

UK Retail Sales were expected to have dropped by 0.5% in August, but data released on Friday showed a drop of 1.6% month on month. With the cost-of-living crisis a mainstay in the news a drop-off wasn’t a surprise but it was the size of the drop that shocked the currency markets and pushed the Pound lower across the board of major currency pairs.

The Office for National Statistics confirmed that all retail sectors were affected and economic reports such as Friday’s confirm that the economy is likely to slide into a recession.

There are hopes that the newly appointed Prime Ministers’ announcement of a two-year cap on energy prices will help ease the cost-of-living crisis and boost spending but the announcement came this month so moving forward retail sales figures are likely to be followed closely and could impact the Pound’s value as we saw on Friday.

This week both the FED Reserve in the US and the Bank of England here in the UK are expected to hike interest rates. There could be further market movements for the Pound as there is uncertainty regarding how much the Monetary Policy Committee will decide to hike interest rates by.

At the last meeting, the BoE hiked by 0.5% and although it’s likely that they will do the same again, the voting patterns haven’t been unanimous with some favouring a 25-basis point hike and others 75 basis points so this Thursday’s release is certainly worth looking out for.

Should you need assistance with a large currency conversion for the purchase or sale of a property overseas and you would like to discuss these market movements in more detail, please feel free to email me, Joseph Wright on [email protected], and I will be happy to have a chat with you.

You can also request a quote anytime you wish if you would like to compare to your bank or current broker.

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