Weekly GBP/EUR & GBP/USD and the weeks data

Monday 31st October 2011
Good morning. It's Halloween, and it will be interesting to see if the markets are still 'spooked' over the debt crisis, or if last weeks late night agreement will help stabilise the Euro and 'raise Greece from the dead'. Today we will have a detailed look at the movements in Sterling/Euro and Sterling/US Dollar over the last week, and the forecast and predictions for where rates may be headed.

In this week’s Report:

• EU summit agreement strengthens Euro, pushing GBP/EUR lower
• GBP/USD hits 7 week high on dollar weakness
• Uncertainty over further QE keeps Sterling at risk
• Round up of the week’s data that may affect rates

(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

All eyes were focused on the outcome of the EU Summit meeting last week. GBP/EUR started the week around the €1.15 level, and stayed relatively steady until Wednesday’s EU leaders meeting in Brussels; they agreed to expand the Euro zone’s main bailout fund to 1 Trillion Euros. Banks also accepted a 50% ‘hair cut’ of Greece’s debt. Following the announcement we saw a drop of nearly 1.5% with a low of the day being €1.1326 as the Euro gathered strength and became more expensive to purchase.













Earlier in the week, Sterling didn't react very much on Tuesday after comments from the Bank of England Governor Mervyn King; King said they had come very close to restarting QE in September but held off to see if volatility would subside, before taking the decision to resume in October. Recent economic data has shown a darkening outlook forcing people to cut back on spending.

The real volatility started mid week, with EU Leaders agreeing to expand the single currency's bailout fund to 1tn euros and to take measures to recapitalise banks. Under the terms of the Brussels deal, banks must raise more capital to protect themselves against losses resulting from any future defaults. Markets seemed to react positively to the news, with the Euro gaining strength and exchange rates reached the low 1.13’s as a result.

In addition to the Euro and riskier currencies rising, Banks also performed well, underlying the fact that global investors think the deal will finally help to end speculation on what will happen over Greek debt.

A Co-ordinated approach is going to be needed for all involved within the Eurozone. The debt crisis is a double-edged sword for sterling/euro rates – as a risky currency closely tied to the Eurozone, the Pound has gained a little strength on the news. However, the Euro has also gained and the net result is lower exchange rates.

As the Euro has fallen and there are further concerns over how this latest round of QE will affect the cross, it will be interesting to see how the GBP/EUR will react and which currency will be shown to be the strongest or even the most resilient to slow economic growth.

With uncertainty remaining over the direction of Sterling/Euro, if you need to buy or sell Euros, send us an enquiry now by clicking here, and find out how to get the best exchange rates.

Sterling vs. US Dollar;

Sterling steadied against the Dollar on Friday, staying just shy of a seven-week high, with markets taking a breather following a huge rally in riskier assets the previous day after a deal was struck on Europe's debt crisis. Sterling entered Friday steady at $1.61 versus the Dollar, not far from a peak of $1.6140 hit on Thursday when equities and riskier currencies rallied after the Eurozone deal and as solid U.S. growth data eased concerns about the global economy. Analysts have said that a weekly close around $1.6140 may signal the potential for further gains towards $1.63.













A survey by GfK NOP (National Opinion Polls) on Friday showed British consumer confidence fell to its lowest level since February 2009, adding to evidence that the economy risks returning to recession. Bank of England policymaker Paul Fisher said on Thursday there was a significant chance the UK could suffer another recession and more asset purchases could be necessary after the current round is completed.

"Dovish comments from BoE's Fisher yesterday morning held back Sterling’s gains versus the Dollar, and Sterling underperformed during the recovery in risk sentiment," commented analysts at Lloyds.

Earlier this month the BoE embarked on a second round of Quantitative Easing aimed at stimulating lacklustre economic growth. QE involves flooding the market with pounds which is seen as a negative for the currency as it dampens demand. This may be the case, however some analysts stated that despite a weak UK economic outlook, Sterling would remain supported against the Dollar due to the fact that further QE in the UK has already been announced, while speculation over more monetary easing from the U.S. Federal Reserve has picked up in recent weeks.

If anyone is left scratching their head as to why the Greenback has toppled, they should ask themselves one question: why would I buy the US currency? If we look for the basic appeal of the unit, we lack yield (the Fed base rate is on hold until mid-2013), growth is on par with the lacklustre global pace, the money supply has been flooded and the world’s largest economy is considered the lender of last resort for the rest of the world.

Do you need to buy or sell US Dollars? Send us a free enquiry now.

Weekly Economic Data that may affect exchange rates

Monday – A new week. UK data starts with Consumer Credit, Money Supply and Mortgage Approvals. In the EU we have Unemployment data and Inflation numbers. Australia has some Private Sector credit data. In Canada we will see Gross Domestic Product figures.

Tuesday – Australia releases House Price data and there is also an interest rate decision. In the UK we will see Gross Domestic Product figures – these are important as it shows at what rate if any the economy is growing. There is some minor construction data from the USA.

Wednesday – Today we see the minutes from the US decision to hold interest rates. Staying in the states we also see mortgage applications, employment data, and at 16:30 there is an interest rate decision. There is little UK data today other than PMI construction. There is a lot to watch out for from the Eurozone: German unemployment in addition to German and EU inflation data.

Thursday – Australian retail sales are released today. There is the G20 meeting also that may throw up a few surprises. In the USA there are jobless numbers. In the EU we have an interest rate decision followed by a press conference – this often causes swings in GBP/EUR rates.

Friday – The G20 meeting continues today. From the Eurozone we have further inflation numbers, this time the Producer Price Index. In Canada there are Unemployment and Building permit figures. In the USA we will see Non-farm payroll & unemployment data.

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Sterling/Euro lower after deal. Outlook/Forecast

Friday 28th October 2011
Good morning. Sterling hit a 7 week high yesterday after the EU rescue deal, but fell sharply against the Euro. The EU agreement bolstered market sentiment, strengthening the Euro significantly against the Pound, and it also buoying equities and perceived riskier currencies such as Sterling. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1349
• GBP/USD 1.6076
• GBP/AUD 1.5065
• GBP/NZD 1.9651
• GBP/CHF 1.3882
• GBP/CAD 1.5946
• GBP/ZAR 12.4197
• GBP/JPY 121.87
• GBP/DKK 8.4467
• GBP/NOK 8.7084
• EUR/USD 1.4161

EU rescue deal strengthens the Euro

In negotiations in Brussels on Wednesday, euro zone leaders struck a deal for private banks and insurers to accept a 50% loss on their Greek government bonds, and agreed to beef up the region's rescue fund by €1 trillion. Yesterday this had a significant effects on exchange rates, with big swings for major currency pairs.

The Euro gained strength as the markets seemed to like the deal. This pushed GBP/EUR rates quite a bit lower in the mid €1.13's. The news also strengthened riskier currencies such as Sterling. As a result the Pound was up slightly against the US Dollar.

Safe haven currencies like the Dollar weakened, as market sentiment increased and investors moved away from the safe haven US Dollar. This pushed GBP/USD rates to a 7 week high briefly breaking the $1.61 barrier.

"The fact that EU leaders, who have disappointed on so many occasions before, have agreed a framework and avoided a disorderly, involuntary Greek default has been taken by the market as a positive," said Gavin Friend, currency strategist at nabCapital

Risks to Sterling remain

Earlier this month the BoE embarked on a second round of quantitative easing to try and boost growth. QE involves flooding the market with pounds which is seen as a negative for the currency as it dampens demand. A Confederation of British Industry distributive trades survey on Thursday showed the decline in UK retail sales eased off in October, although the underlying trend remained weak.

It also followed a survey on Wednesday showing British factory orders fell at their fastest pace in a year in October, which stoked fears the economy may tip back into recession.

However, some analysts said despite a weak UK economic outlook sterling would remain supported against the dollar due to the fact further QE in the UK has already been announced, while speculation over more monetary easing from the U.S. Federal Reserve has picked up in recent weeks.

Today's Data

A quiet end to the week with no data of note from the UK or EU. Most data is US based including inflation data and consumer sentiment information.

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EU Deal agreed, GBP/EUR rates fall

Thursday 27th October 2011
Good morning. Leaders from all 27 European Union nations have finally thrashed out a deal to solve the crisis started by concern over how Greece would cope with its debts. We'll look at the details of the deal shortly, but in short the net effect is a stronger Euro, pushing GBP/EUR rates lower by a point already. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1424
• GBP/USD 1.5999
• GBP/AUD 1.5190
• GBP/NZD 1.9805
• GBP/CHF 1.3992
• GBP/CAD 1.5983
• GBP/ZAR 12.5133
• GBP/JPY 121.42
• GBP/DKK 8.5032
• GBP/NOK 8.7618
• EUR/USD 1.4002

Eurozone deal agreed

The eurozone have finally agreed a deal on expanding the bailout fund and banks taking losses on Greek debt in exchange for recapitalisation. The news last night was greeted positively by the markets, with shares gaining in Asia overnight, and the Euro gaining strength of around 1% against the US Dollar, and around 0.6% against Sterling, pushing GBP/EUR rates lower.

The reason Pound vs Euro rates didn't fall more is because Sterling has also strengthened slightly on the news, due it's close ties to the Eurozone and the fact it's a risky currency.

Greece, the Irish Republic and Portugal have all required bailouts and this last week of talks was prompted by fears the crisis would spread to the larger economies of Spain and Italy. I'm actually surprised there was a resolute announcement last night, as we were expecting more of a woolly agreement with no clear details being shown for a few weeks.

However, late on Wednesday night and early on Thursday morning, the EU leaders meeting in Brussels agreed to expand the eurozone's main bailout fund to 1 Trillion Euros. Banks also accepted a loss of 50% on Greek debt, and they must raise more capital to protect themselves against losses resulting from any future defaults.

EU leaders said measures to restore confidence in the bloc's banks "are urgently needed and are necessary in the context of strengthening prudential control of the EU banking sector".

It will be interesting to see if this is the final word on the crisis, or if it is just another temporary measure that will not last. For the moment markets like the news, and as a result Pound Euro rates are falling.

Today's Data

Inflation figures today are released by Germany. Staying in the EU we will see Money Supply data. Of course the on-going debt crisis will continue to be the main driver in the value of the Euro. In the UK there are consumer confidence figures. In the USA markets will be closely watching the numbers released at lunchtime: Gross Domestic Product, Home Sales and Unemployment data.

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How will EU debt summit affect exchange rate forecast

Wednesday 26th October 2011
Good morning. The Pound fell slightly yesterday, as riskier currencies such as Sterling came under pressure amid uncertainty as to whether policymakers will take major steps to tackle the euro zone debt crisis. It was announced yesterday that meeting of EU finance ministers which was to have preceded the leaders' summit was postponed, throwing doubt over a resolution. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1500
• GBP/USD 1.6021
• GBP/AUD 1.5427
• GBP/NZD 2.0088
• GBP/CHF 1.4036
• GBP/CAD 1.6226
• GBP/ZAR 12.6774
• GBP/JPY 121.55
• GBP/DKK 8.5599
• GBP/NOK 8.8482
• EUR/USD 1.3926

EU debt summit - how will this affect exchange rates?

European Union leaders are gathering again today for an emergency summit in Brussels hoping to finalise details of a plan to tackle the eurozone debt crisis. There are fears that the Greek debt crisis could spread to Italy and Spain, and this has caused market turmoil in recent weeks and months.

It was announced yesterday that the meeting of Finance ministers scheduled for today had been cancelled, rumoured to be because of disagreement between the main powers. The leaders summit will still take place, but it's uncertain what if anything will be agreed today.

There were already some points of agreement reportedly reached at the weekend by EU officials, and there is a detailed report on this on the BBC site here. With regards to the currency markets, if an agreement is reached that the markets like, then it will likely strengthen the Euro and also riskier currencies such as the Pound. If however there is continued disagreement and no plan agreed, it's likely the Euro and Pound will remain weak, and safe haven currencies such as the US Dollar will strengthen.

Sterling also at risk on BoE comments

Sterling didn't react very much yesterday after comments from Bank of England Governor Mervyn King, who testified in front of the House of Commons Treasury Select Committee, explaining the Bank's decision to resume asset purchases this month.

King said the Monetary Policy Committee had come very close to restarting QE in September but held off to see if volatility in financial markets would subside, before taking the decision to resume in October. Recent data has underlined a darkening economic outlook which could force consumers to deleverage and cut back on spending. This could weaken the Pound further, but markets are purely focused on the EU debt summit at the moment, which is why there was not as much reaction as would normally be the case.

Today's Data

The debt summit of EU leaders will take centre stage today. Other than that, the only UK data today is the CBI industrial trend survey. In the USA there are various releases regarding Home Sales. New Zealand has an interest rate decision and trade balance figures that may affect GBP/NZD rates.

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Pound steady ahead of EU debt summit meeting

Tuesday 25th October 2011
Good morning. There was cautious optimism in the currency markets yesterday, with European leaders expected to hammer out a solution to the debt crisis over the next few days. This helped push Sterling to a 6 week high against the US Dollar, but it fell against the AUD and Euro slightly. Today we'll take a look at how the EU debt summit may affect Sterling exchange rates. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1496
• GBP/USD 1.5985
• GBP/AUD 1.5277
• GBP/NZD 1.9891
• GBP/CHF 1.4095
• GBP/CAD 1.6013
• GBP/ZAR 12.627
• GBP/JPY 121.62
• GBP/DKK 8.5576
• GBP/NOK 8.8346
• EUR/USD 1.3901

Markets steady ahead of EU debt summit

At the summit at the weekend the EU neared an agreement and they came closer to a deal to leverage the euro area's rescue fund. This helped calm the markets slightly. However a final decision was put off until the second meeting tomorrow, and significant differences remain over the size of losses holders of Greek government debt will have to book. It's a volatile time and tomorrows decisions will have a big impact on exchange rates for Sterling against other currencies.

"Sterling does look vulnerable, especially against the dollar in the coming days and months. The UK is exposed to the euro area and markets are trading on hope rather than any concrete action from euro zone policymakers," said Raghav Subbarao, currency strategist at Barclays Capital.

"A lot of the good news has already been priced in, so there is a risk of disappointment in the euro and currencies tightly correlated to the euro. Whatever they announce on Wednesday, it is unlikely to translate immediately into policy."

Most analysts expect Sterling/Euro rates to fall if an agreement is reached, as it will strengthen the Euro and make it more expensive to purchase.

What about the Pound vs other currencies such as the Australian Dollar?

Many investors see a rough ride ahead in coming months after Bank of England policy committee minutes last week hinted that more quantitative easing may be needed to prop up the UK economy. QE involves flooding the market with pounds and increasing the central bank's balance sheet, a move which is usually bearish for the currency.

Due to this, we expect rates to dip against the AUD in the coming weeks, especially as the antipodean currencies gain strength due to a rise in commodities. We said GBP/AUD fall nearly a point during trading yesterday, despite a boost for riskier currencies such as Sterling.

Today's Data

UK Mortgage approvals are released today, in addition to current account data from the ONS. There are consumer confidence figures from Germany. Further afield we have an Interest rate decision in Canada, and Housing Prices and confidence data from the USA.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Weekly GBP/EUR & GBP/USD and the weeks data

Monday 24th October 2011
Good morning. As always on a Monday, today we take a detailed look at the last weeks movements in GBP/EUR, GBP/USD and the weeks economic data.

In this week’s Report:

• EU debt crisis continues to affect GBP/EUR rates
• European Leaders hold summit to discuss solution
• Further Quantitative Easing possible for the UK
• Round up of the week’s data that may affect rates

(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

Sterling began the week at a five-week low versus the Euro on speculation the European Union will decisively address the region's debt crisis this week. Sterling fell as low as 1.1360, its weakest since early September.













Surprise inflation data showed UK consumer prices rose 0.6% last month. That took the annual rate of consumer price inflation to 5.2%, a three-year high. The higher inflation was due to soaring utility bills and not really a sign of increased economic activity. Instead rising prices are likely to further depress consumer spending while fiscal austerity measures also impact growth prospects and further complicate the task ahead for UK politicians and policymakers keeping concerns about stagflation very much alive. Stagflation combines rising prices and slow economic growth, historically a mix of weak growth and high inflation is negative for a currency.

On Wednesday the BoE's October meeting minutes showed policymakers voting unanimously to resume quantitative easing (QE), and considered injecting even more than the 75 billion pounds agreed. In a speech, BoE Governor Mervyn King defended the decision to launch another round of quantitative easing, citing a slowing world economy, especially in the euro zone, as threatening the recovery of the UK economy. “The minutes reinforce the view that the BoE is really concerned about the international environment and they stand ready to do more QE rather than less," said Kiran Kowshik, currency strategist at BNP Paribas.

Sterling received a late boost on Friday as rumours of a divide between France and Germany emerged ahead of an EU Summit designed to deliver a solution to the debt crisis. Despite the climb, Sterling and other perceived riskier currencies could be vulnerable to shifts in risk sentiment in the run up to the EU summits which Policymakers hope will make progress in tackling the euro zone debt crisis however remain deeply divided.

So, what now for Sterling and Euro? Well, The Bank of England seems to be prioritising growth, which leaves the door open for more QE, which risks devaluing the currency further. The EU summit which took place yesterday and concludes on Wednesday could result in a deadlock and if there is no resolution to the Eurozone debt crisis we could see the Euro fall.

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Sterling vs. US Dollar;

The start of last week saw Sterling fall 0.25% against the US Dollar after Germany surprised the market by saying that there are no quick fixes to the Eurozone debt crisis.












Sterling was also weighed down by a report from Ernst & Young’s ITEM Club, which urged the Bank of England to cut interest rates to virtually zero from a current record low of 0.5%, saying that the recovery has completely stalled and that additional QE is pointless, since prior attempts failed to stimulate business investment. A separate report from the Centre for Economics and Business Research (CEBR) said that the central bank was right to expand asset purchases, warning that Britain would be at a virtual standstill until the start of 2013.

The Pound slipped further following the release of UK inflation data on Tuesday. The year-on-year UK consumer price index accelerated to 5.2%, caused mainly by the recent increases in the cost of gas and electricity. Core CPI, which strips out volatile food and energy prices, rose to 3.3%, up from 3.1% in August.

Towards the middle of the week we saw a complete reversal in Sterling’s fortunes, as investors moved towards riskier assets. After a dovish report from the Bank of England, Sterling rose on the view that a solution to the eurozone crisis would be presented at the weekend’s EU summit.

Sterling’s gains were only short-lived however, as troika leaders warned that time is running out for Greece, urging the next tranche of bailout funds be paid soon. The warning saw risk appetite fade and sent investors into the safer US dollar.

GBPUSD closed the week at a 6 week high after the Pound soared against the Dollar on Friday, rising by over 1%. Sterling was buoyed by reported demand from a UK clearer and pushed higher along with the euro and equity markets.

Last week saw all financial markets driven by continued speculation over the European debt crisis and this week promises to be extremely interesting, with a plan for the EFSF and bank recapitalisations due by Wednesday at the latest.

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Weekly Economic Data that may affect exchange rates

Monday – Today markets will be reacting to the EU debt summit held at the weekend. Also from the Eurozone today we will see a host of inflation figures that could affect interest rates in the short term. Industrial New Orders are also released from the EU, so expect volatility in GBP/EUR prices today.

Tuesday – UK Mortgage approvals are released today, in addition to current account data from the ONS. There are consumer confidence figures from Germany. Further afield we have an Interest rate decision in Canada, and Housing Prices and confidence data from the USA.

Wednesday – The only UK data today is the CBI industrial trend survey. In the USA there are various releases regarding Home Sales. New Zealand has an interest rate decision and trade balance figures that may affect GBP/NZD rates.

Thursday – Inflation figures today are released by Germany. Staying in the EU we will see Money Supply data. Of course the on-going debt crisis will continue to be the main driver in the value of the Euro. In the UK there are consumer confidence figures. In the USA markets will be closely watching the numbers released at lunchtime: Gross Domestic Product, Home Sales and Unemployment data.

Friday – A quiet end to the week with no data of note from the UK or EU. Most data is US based including inflation data and consumer sentiment information.

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Sterling up against Euro on EU summit concerns

Friday 21st October 2011
Good morning. The pound fell slightly against the US Dollar yesterday, but continued it's volatility vs the Euro, and rose a point to nearly €1.15. This was because of doubts the EU summit this weekend would go ahead, and whether or not they would reach a deal on leveraging the euro zone rescue fund. This weakened the Euro and pushed GBP/EUR rates up. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1479
• GBP/USD 1.5779
• GBP/AUD 1.5416
• GBP/NZD 1.9901
• GBP/CHF 1.4044
• GBP/CAD 1.6023
• GBP/ZAR 12.919
• GBP/JPY 120.98
• GBP/DKK 8.5440
• GBP/NOK 8.8584
• EUR/USD 1.3740

Pound gains vs Euro on EU bailout doubts

Yesterday the volatility in GBP/EUR rates continued, as investors questioned how much progress would be made on resolving the EU debt crisis at the EU summit this weekend. There was a German media report that said they had not ruled out postponing the meeting.

This weekend will be very important for the future of the Eurozone, and analysts said that the Pound's value against the Euro would continue to be dictated by what happens with the Euro, and that the pound could suffer more against the US dollar if EU leaders are seen to be unable to agree on the euro zone bailout fund.

This weakened the single currency and helped push GBP/EUR rates higher. There were also some better UK retail sales data released yesterday, however it didn't do much to affect the value of the Pound, with events in the Eurozone continuing to take centre stage.

Today's Data

Australia releases import and export data which could affect GBP/AUD rates that have been dropping from the $1.60 level in the last few weeks. Germany has various confidence measures, and as the largest economy in the EU this could impact EUR prices. Finally, the weekends summit in the Eurozone could also have an effect.

On Monday I will be posting a detailed outlook of GBP/EUR rates, GBP/USD rates and all the weeks economic data that you should watch out for if you are buying or selling currency.

Getting the best Exchange rates

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Sterling up against Euro on risk sentiment

Thursday 20th October 2011
Good morning. Sterling rose yesterday and hit a 1 month high against the US Dollar, and was also up against the Euro. It was nothing to do with any particularly good data, rather it has been supported by better risk sentiment. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1477
• GBP/USD 1.5711
• GBP/AUD 1.5453
• GBP/NZD 1.9838
• GBP/CHF 1.4233
• GBP/CAD 1.6064
• GBP/ZAR 12.683
• GBP/JPY 120.44
• GBP/DKK 8.5436
• GBP/NOK 8.8596
• EUR/USD 1.3684

Sterling up on risk sentiment

Gains in European stock markets, and optimism that progress would be taken by euro zone policymakers towards solving the debt crisis pushed up sentiment towards the pound yesterday. Investors are returning to riskier currencies on the better EU outlook, and this helped the Pound gain against other currencies.

However, analysts are still saying that while there are signs that progress on tackling the euro zone debt crisis will be made this weekend, a comprehensive and a durable solution was unlikely and the UK would remain vulnerable to financial tensions in Europe.

The other factor that could pull the Pound back down is the risk of further stimulus by the Bank of England, especially after yesterdays BoE minutes hinted more asset purchases may be needed to help Britain's ailing economy. In the minutes yesterday it showed that policymakers voted unanimously to resume quantitative easing (QE) this month, and considered injecting even more than the 75 billion pounds agreed. They did discuss up to £100bn in easing, and this signals that further QE may be on the cards. This will likely keep any gains for Sterling limited.

Today's Data

UK Retail Sales figures are released today in addition to Nationwide Consumer Confidence, showing how confident consumers are about the economy. There are also inflation figures from Europe. Stateside we have various measures of unemployment.

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Pound lower on inflation data and BoE minutes

Wednesday 19th October 2011
Good morning. Sterling fell yesterday after inflation was higher than expected. We have the Bank of England (BoE) minutes today which analysts also expect to be dovish, so the Pound is bracing itself for a possible further drop. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1411
• GBP/USD 1.5764
• GBP/AUD 1.5290
• GBP/NZD 1.9716
• GBP/CHF 1.4153
• GBP/CAD 1.5932
• GBP/ZAR 12.525
• GBP/JPY 120.92
• GBP/DKK 8.4917
• GBP/NOK 8.8114
• EUR/USD 1.3814

UK Inflation data weakens the Pound

The rate of Consumer Prices Index (CPI) inflation yesterday hit its record high in September, rising to 5.2% from 4.5%. This was higher than expected, and the latest RPI measure is the highest annual rate since June 1991.

The Bank of England had already predicted that inflation would top 5% this year as a result of higher utility bills, but it expects price rises to slow in 2012 and 2013. Despite the high numbers, many economists agree with the Bank of England that inflation may soon start to fall.

Usually when inflation is high, it signals interest rates may rise to combat it. Higher interest rates create demand for a currency and it would usually strengthen. In the current climate however with interest rates at record lows, the high inflation numbers actually weakened the Pound. This is because stagflation (high inflation with low growth) means rates have to stay low, and as a result Sterling weakened and fell against other currencies.

BoE minutes today

At 09:30am today the Bank of England release the minutes to it's latest decision to hold interest rates and pump £75 billion into the economy with Quantitative Easing. Because analysts expect the minutes to be quite dovish, this has also had an impact the Pound, weakening it and pushing exchange rates lower. The minutes show what was discussed and how the voting went.

Sterling vs Australian Dollar

The Australian dollar gained against the Pound yesterday, on reports that France and Germany were ready to sharply boost the eurozone's rescue fund amid a solid performance on regional equity markets. This combined with the weaker pound has pushed GBP/AUD rates down from it's highs in the last month, and this is expected to continue while the Pound remains under pressure.

Moody's downgrade Spain

Moody's has downgraded the rating of Spain's government bonds. The ratings agency cut Spain two notches, two days after Standard & Poor's took the same decision. Moody's said it had cut the rating because there had been no credible resolution to the eurozone debt crisis.

There has been little effect on the currency markets, because there has been so many downgrades of the main economic zones, the currency markets now seem to be paying little attention any more.

Today's Data

Today is quite important for Sterling, as we see the BoE minutes to their recent decision to pump £75bn into the economy. We will see what was discussed and how the vote went, and may well impact on the value of the Pound. There are further inflation numbers from the USA today, but no data of note from the Eurozone.

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Pound up against Euro, but gains may be short lived

Tuesday 18t October 2011
Good morning. Sterling fell against the US Dollar yesterday, tracking losses in the Euro. The weaker Euro however helped push GBP/EUR rates up by nearly 1%, after comments from German officials tempered optimism that a European Union summit this week will produce a comprehensive plan to tackle the euro zone debt crisis. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1495
• GBP/USD 1.5750
• GBP/AUD 1.5546
• GBP/NZD 1.9978
• GBP/CHF 1.4178
• GBP/CAD 1.6135
• GBP/ZAR 12.673
• GBP/JPY 120.91
• GBP/DKK 8.5568
• GBP/NOK 8.8865
• EUR/USD 1.3700

Euro weakens pushing GBP/EUR rates higher

The German Finance Minister yesterday dampened demand for the euro when he said Sunday's summit of EU leaders will not present a definitive solution for the region's significant debt problems. This weakened the Euro, making the single currency cheaper to purchase.

His comments helped boost GBP/EUR rates up from a 5 week low. However the Pound dropped against other currencies such as the US Dollar. The comments spooked investors and we saw a flight back to the safe haven US Dollar, which usually strengthens when there is global economic uncertainty.

Sterling at risk of falls due to poor data

Despite the gains seen yesterday, it's worth noting this is nothing to do with any strength in the Pound, rather it's Euro weakness pushing up rates. Many analysts said there was little reason to buy sterling given weaknesses in the UK economy and loose monetary policy.

The ITEM Club yesterday downgraded its growth forecasts for the UK, which didn't do Sterling any favours. We now await data on UK inflation and retail sales which are expected to show the economy's recovery remains frail, so this could mean the current spike in GBP/EUR rates are short lived.

Some analysts said this week's data may have limited impact on sterling given that the UK central bank has already moved to bolster the economy with more quantitative easing, which involves flooding the market with pounds and thereby decreasing demand for the currency.

Today's Data

Retail Price Index, Consumer Price Index, and CBI trend survey are all released for the UK today. All of this can impact future interest rate movements and so can affect GBP. In the EU we see Economic sentiment figures. US data comprises inflation data.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Weekly GBP/EUR & GBP/USD and the weeks data

Monday 17th October 2011
Good morning. As regular readers will know, on a Monday I take stock of movements in GBP/EUR & GBP/USD over the last week, with forecasts on what may happen in the coming week. I will also list the most important economic data to watch for that may affect rates.

In this week’s Report:

• Poor economic figures hurt Sterling
• G20 discuss EU debt crisis
• Downgrading of Banks continues
• Round up of the week’s data that may affect rates

(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

Sterling lost over 2% against the Euro last week as it fell from above 1.16 on Monday, to end the week struggling to remain above 1.14. The main data releases couldn’t have been more confusing when trying to gauge the current state of the UK economy with jobs figures on Wednesday showing that the UK unemployment rate is at its highest since 1994, rising above 8%, followed by data on Thursday that showed the trade deficit figures for August were narrower than expected.













The improvement in trade figures was a result of £0.2billion increase in exports, reaching their highest levels since records began in 1998, and a £0.2billion fall in imports, and is something the Bank of England have been hoping for since the credit crunch took hold in 2008 as increased exports should stimulate growth in the economy (and potentially create more jobs...)

Unfortunately news from the Eurozone was pretty downbeat. At the beginning of the week there were concerns that Slovakia would be the only 1 of the 17 member nations not to ratify the increased European Financial Stability Facility which is where every Eurozone member (including the smallest nations like Slovakia) are putting together a bailout fund of €440billion. It was thrown out in the first vote but went through in the second round on Wednesday and the Euros performance was visibly better afterwards, gaining another cent against the Pound, and moving nearly 2% against the US Dollar to reach a 1 month high of 1.3890.

Even the downgrading of Spain’s sovereign debt rating by ratings agency Standard & Poors, just a week after another of the big agencies Fitch had done the same couldn’t stop the Euros rally.

Looking ahead the Pound will most likely be driven by goings on within the UK as opposed to further afield. We know now that the bailout fund for the Eurozone has been approved it doesn’t look like the EU or IMF are willing to let the Euro fail, especially after there were more rumours today that Greece would be receiving another bailout before the end of October.

It therefore looks like the Bank of England could be solely responsible for which way the Pound moves as we get closer to Christmas since they announced a further £75 billion quantitative easing on 6th October. If this turns out to be the only time then the Pound may start to find its feet as we move through the 4th quarter. However, MPC member Charles Beans said in a national newspaper last week that the Bank of England would expand its asset purchase programme if necessary meaning any further concerns about the UK economy could swiftly be followed by more QE, and potential further falls in the value of Sterling.

With this in mind make sure you are in touch with the Foremost Currency Group about your Sterling/Euro currency requirements to help you avoid any adverse market movements.

Are you looking for the Best Exchange Rates for Euros? Contact us now.

Sterling vs. US Dollar;

Last week saw the markets start to settle following the frivolities of the previous week. After cable reached a 10 month low of 1.527 (Interbank) the previous week’s trading after the Bank of England initiated a £75 Billion program of quantitative easing (QE) the Pound seemed relatively buoyant at the start of last week finishing the day almost 3% higher against the Dollar.

Under normal circumstances the market would normally expect the currency of an economy that enter a QE program to remain consistently weak for some time after the event happens. However because most of the other major banks are themselves considering QE it has not weighed as heavily on the Pound this time around.













After Sterling's impressive rebound on Monday the currency was again stopped in its tracks following poor growth data with traders stating that Sterling was still vulnerable to further selling off. Fundamentally Sterling is still a weak currency and a weak cable cross is beneficial to the UK export market which is often commented on by the BoE governor ‘Mervin King’. Sterling’s recovery against the Dollar was always going to be limited as the US Dollar remains a safe haven currency for investors whilst there is uncertainty within the world markets.

The Dollar slipped on Wednesday against all the major currencies including the Pound after investors scaled back on long term positions in the Dollar as it was broadly seem that the exposure to the market was too great and the risk was too high. This knocked the Dollars performance and Sterling gained over 1 % against the greenback despite damning UK employment figures being released the same day. The figures showed that unemployment claimants are on the rise and worryingly almost a quarter of 16-24 year olds are now out of work.

The end of the week saw the Pound continue to gain against the Dollar after a sharp rise in the performance of the Euro which saw the Dollar slip. Traders encouraged caution over cable as there are still risks to the downside, not least that there is still the threat of further QE. However for now sterling seems to be content with riding on the back of other currencies performances, albeit good or bad and until Sterling’s fundamental show consistent signs of improvement the status quo is unlikely to change.

Unfortunately for currency purchasers this uncertainly makes life a bit trickier. Whether you are buying or selling it is important to keep up to date with market movements to ensure you maximise your position in this difficult market.

Are you looking for the Best Exchange Rates for US Dollars? Contact us now.

Weekly Economic Data that may affect exchange rates

Monday – We have a fairly quiet start to the week, with no data of note from the UK or EU. Any further developments regarding the EU debt crisis however could still affect rates. From the USA we have some industrial production figures.

Tuesday – Now we get going with UK fundamentals: Retail Price Index, Consumer Price Index, and CBI trend survey are all released today. All of this can impact future interest rate movements and so can affect GBP. In the EU we see Economic sentiment figures. US data comprises inflation data.

Wednesday – Today is quite important for Sterling, as we see the BoE minutes to their recent decision to pump £75bn into the economy. We will see what was discussed and how the vote went, and may well impact on the value of the Pound. There are further inflation numbers from the USA today, but no data of note from the Eurozone.

Thursday – UK Retail Sales figures are released today in addition to Nationwide Consumer Confidence, showing how confident consumers are about the economy. There are also inflation figures from Europe. Stateside we have various measures of unemployment.

Friday – On to Friday, and Australia releases import and export data. Germany has various confidence measures, and as the largest economy in the EU this could impact EUR prices.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exchange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

G20 meet to discuss EU debt crisis

Friday 14th October 2011
Good morning. Despite Trade Balance figures for the UK being better than expected, Sterling fell against the US Dollar as both the Pound and the Euro weakened after the European Central Bank said that the sovereign debt crisis could damage the euro's reputation. I would have thought that obvious, but there was still market reaction to the statement. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1443
• GBP/USD 1.5759
• GBP/AUD 1.5452
• GBP/NZD 1.9828
• GBP/CHF 1.4152
• GBP/CAD 1.6073
• GBP/ZAR 12.368
• GBP/JPY 121.21
• GBP/DKK 8.5169
• GBP/NOK 8.8737
• EUR/USD 1.3771

UK Trade Balance better than expected

The UK's trade deficit narrowed in August official figures have shown. Analysts said the stronger exports may boost the economic growth figures, however there were limited gains for Sterling on the news.

Howard Archer, chief UK economist at IHS Global Insight, said the August figures were "appreciably better than expected". The latest trade figures come a week after the Bank of England announced that it would inject a further £75bn of new money into the UK economy through another round of quantitative easing.

G20 Finance ministers to meet over Eurozone

Finance ministers from the G20 group of nations are meeting France later today to continue efforts to find a solution to the EU debt crisis. Greece remains the focal point but there are also fears that the crisis could spread to other countries such as Spain and Italy. This comes a day after the ECB warned that the Euro's reputation is at risk due to the debt crisis.

This weakened the single currency a little pushing GBP/EUR rates up, but as the UK is also exposed to the debt problems, gains were limited and today rates remain in the mid €1.14's.

Other news yesterday from the Eurozone was that Spain has had it's credit rating cut. Standard & Poor's reduced Spain's long term rating by one point saying there was weak growth and high levels debt. This is only one week after rating agency Fitch also cut Spain's rating.

There were other downgrades yesterday of the creditworthiness of UK banks Lloyds and RBS, and also UBS. This shows that there are real concerns both over the health of UK and EU banks. The markets have reacted very little however, probably as there have been so many downgrades all over the world, it's the same for everyone and so there has been no real effect on exchange rates.

Sterling vs Australian Dollar

The Pound had been making some gains against AUD in recent weeks. Antipodean currencies tend to weaken when there is global economic uncertainty, as they are perceived as risky. When there is volatility investors tend to unwind Carry trades and return to the safe haven currency, weakening AUD.

As some risk has returned to the markets following better US Data, we have seen GBP/AUD slip back slightly of late however. Generally Australia largely avoided the recession, and it's higher interest rates have been keeping it strong and exchange rates low relative to where they have been in recent years. If we see an interest rate cut in Australia in the coming months then we could see the rate increase more, but while there is so much turmoil in the markets investors will remain wary of the AUD.

Today's Data

Lots of EU data today. Trade Balance figures from the EU are released at 10am, followed by various measures of inflation. In the US, retail sales will show how confident consumers are in the economy.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling vs Euro at risk of further falls

Thursday 13th October 2011
Good morning. Sterling has risen to a 4 week high against the US Dollar, as investors move away from the safe haven currency, weakening USD and making it cheaper to purchase. Against the Euro however, the Pound has fallen to the €1.14 level, as changes to the EU bailout fund look set to go through, strengthening the Euro and pushing rates lower. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1400
• GBP/USD 1.5733
• GBP/AUD 1.5395
• GBP/NZD 1.9764
• GBP/CHF 1.4069
• GBP/CAD 1.5998
• GBP/ZAR 12.2767
• GBP/JPY 121.19
• GBP/DKK 8.4769
• GBP/NOK 8.8355
• EUR/USD 1.3818

Sterling rises to 4 week high vs US Dollar

Sterling has risen to it's highest in a month against the US Dollar. Exchange rates for USD are now well above the 14 month low of $1.52 we saw recently. There has not been any particularly poor data from the USA, it's simply the fact that with the uncertainty surround Greece and financial markets, investors had been moving to the safe haven USD, strengthening the Dollar.

With markets becoming calmer ahead of an EU vote on the bailout plan, investors returned to risk and moved out of the USD, weakening the currency and pushing exchange rates up.

Euro gaining strength ahead of bailout plan

Political rivals in Slovakia have agreed to support a crucial bill ratifying changes to the EU bailout fund in exchange for early elections. It is proposed to expand the effective lending capacity of the European Financial Stability Facility to €440bn euros.

The fund would also be empowered to buy eurozone government debt and offer credit lines to member states and to banks. Top EU officials urged the country on Wednesday to ratify the bill swiftly. The news has given renewed confidence to the markets, and the result is a stronger Euro and lower GBP/EUR exchange rates.

Given we expect further poor data from the UK, it's likely rates could fall further in the coming weeks

UK Economic figures likely to weaken the Pound

Figures yesterday showed that UK unemployment rose by 114,000 between June and August to 2.57 million, a 17-year high, according to official figures. This is bad news for Sterling exchange rates, as poor data weakens Sterling giving it less buying power in the markets.

Analysts think that the UK economy is likely to get steadily weaker through the rest of this year, and the Bank of England's future decisions on asset purchases will be largely driven by overseas developments, BoE chief economist Spencer Dale said yesterday.

Fellow BoE policymaker Adam Posen said he was also pleased that the BoE had decided to further ease monetary policy last week.

With further weakness expected, it's likely rates could drop further, therefore if you need to buy Euros in the next 3 months, contact us today to discuss how to get the best possible exchange rates for Euros.

Today's Data

Today is quite a busy data for fundamental data releases. Starting in the EU, we have German inflation figures and a report from the European Central Bank. In the UK we have Trade balance figures which often have an impact on exchange rates. In the USA there are Jobless figures and a monthly budget statement.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling vs Euro exchange rate forecast

Wednesday 12th October 2011
Good morning. Further poor UK data has pushed Sterling down against other currencies. The Euro also strengthened pushing GBP/EUR rates down quite a bit, after Greece's international lenders said the country would receive vital bailout funds next month. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1423
• GBP/USD 1.5594
• GBP/AUD 1.5641
• GBP/NZD 1.9905
• GBP/CHF 1.4170
• GBP/CAD 1.6017
• GBP/ZAR 12.297
• GBP/JPY 119.52
• GBP/DKK 8.5012
• GBP/NOK 8.8790
• EUR/USD 1.3650

Sterling remains weak due to poor UK data

The UK's recovery is likely to be the weakest of any since the end of World War I, the National Institute for Economic and Social Research said yesterday. Other figures from the Office for National Statistics data showed the manufacturing sector shrank in August, putting further pressure on the Pound.

The ONS data showed the UK's manufacturing output was 0.3% lower August than in July. Compared with a year ago, it was 1.5% higher, which is the weakest annual growth since February 2010. Analysts said the sluggish economic data and comments by BoE policymaker David Miles defending QE added to the impression UK monetary policy could remain extremely loose for some time.

"The recent data has been a mixed bag and can't see anything to get too bullish about sterling," said a London based trader. The general view in the markets is that Sterling is likely to remain under pressure against other currencies such as the Euro and US Dollar.

Euro gains strength, pushing GBP/EUR rates down

Slovakia's parliament has voted against measures to boost the powers of the eurozone bailout fund yesterday, which is seen by analysts as vital in combating the EU debt crisis. The governing coalition had linked the vote to a confidence motion and as a result has effectively been toppled.

Slovakia is the last of the eurozone's 17 members to vote on expanding the European Financial Stability Facility. However a second vote could be held soon and is likely to succeed.

The fact the second vote is likely to go through caused the Euro to strengthen during late trading yesterday, pushing Sterling lower against the single currency.

Today's Data

Unemployment figures from the UK are the main numbers to watch for today. An increase in those claiming unemployment benefits would weaken Sterling. There are some industrial production figures from the EU later in the morning.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling falls vs Euro but up vs US Dollar

Tuesday 11th October 2011
Good morning. Sterling has dropped vs the Euro, on a French & German plan to do what was necessary to shore up banks, settle the Greek debt crisis and help growth in Europe. This strengthened the Euro and pushed rates down. The Pound was up against the US Dollar. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1462
• GBP/USD 1.5658
• GBP/AUD 1.5709
• GBP/NZD 1.9998
• GBP/CHF 1.4136
• GBP/CAD 1.6121
• GBP/ZAR 12.295
• GBP/JPY 120.02
• GBP/DKK 8.5298
• GBP/NOK 8.9204
• EUR/USD 1.3653

French / German plan strengthens the Euro

The Euro gained strength yesterday as investors took comfort from the pledge by French and German leaders to do what it takes to protect European banks from the debt crisis. This pushed the GBP/EUR rate down as markets were calmer about developments with the EU debt crisis.

Markets were also boosted by the bailout of troubled Franco-Belgian bank Dexia, dispelling fears it could go bankrupt. Following talks with French President Nicolas Sarkozy in Berlin on Sunday, German Chancellor Angela Merkel said the two nations were "determined to do the necessary to ensure... the recapitalisation of Europe's banks".

The leaders said they were close to a detailed package to ease the crisis and would give further details within weeks. All eyes are now on the G20 meeting in Cannes at the beginning of November, analysts say.

The net result is GBP/EUR rates slipping back towards the lows we saw last week after the BoE announced further QE.

Sterling recovering slightly despite fall in GBP/EUR

Despite the stronger Euro pushing rates down, the Pound was actually up slightly against the US Dollar and other currencies. Analysts said a lack of UK data meant moves in the pound were largely driven by swings in risk appetite, with the negative reaction to the announcement of more quantitative easing (QE) from the BoE wearing off.

"The market is coming back to the view that a country taking affirmative steps to resolve its problems is supportive for a currency," said Lee McDarby, head of dealing at Investec.

BoE policymaker Martin Weale said on Sunday there was still room for more QE, as Britain's economy struggles in the face of fiscal austerity and a potential deepening of the euro zone's dent crisis.

"Normally more QE would be negative for a currency, but given most of the major central banks are contemplating more easing themselves, it's not weighing on the pound as much this time around," said Michael Derks, chief strategist at FX Pro.

Today's Data

Industrial and Manufacturing production figures are releases from the UK today. These will be watched quite closely as it’s one of the few sectors showing growth, so poor results could reflect a slowdown in the economic recovery. There is also a GDP estimate for the UK showing total growth. With markets open after the break in the USA, the minutes to the recent FED decision to hold rates will be released.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Weekly GBP/EUR & GBP/USD and the weeks data

Monday 10th October 2011
Good morning. It's a Monday morning, so let's take stock of where rates have moved over the course of the last week, which was an extremely volatile one for the currency markets!

In this week’s Report:

• Bank of England announce £75bn Quantitative Easing
• GBP/USD falls to 14 month low
• GBP/EUR hits 7 month high before dropping sharply
• Round up of the week’s data that may affect rates

(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs Euro

Last week saw GPB/EUR hit the highest level in 7 months, briefly breaking the €1.17 level. The gains were short lived though, and by the end of the week rates were around the €1.1550 level, however still very close to the 7 month high considering it had been in the €1.13’s just several weeks ago. The volatility within the Eurozone has continued with decisions made on Quantitative Easing (QE) and Moody’s downgrade of banks within Greece, Portugal and the UK.











The start of the week saw trading around the €1.16 level with everyone still waiting for news of whether the UK will be implementing more QE on Thursday. The GBP/EUR hit €1.17 as it was announced that Greece will miss its deficit reduction target. Wednesday also saw Moody’s downgrade of even more of Greece’s and Italy’s banks further increasing the chance of default. Poor construction data in the UK kept the GBP/EUR steady as everyone waited for the Bank of England’s decision on QE.

The revised GDP figures showed the economy is pretty much at a standstill, and has been now for 6 months. As the BoE announced £75 billion worth of QE at 12.00pm traders saw the Euro drop over 1% within a matter of minutes. The BoE hopes that through added QE the economy will get the much needed bump started as more people and investors are able to borrow and spend more to help stimulate economic growth and increase the strength of the GBP.

Speaking at his last news conference before stepping down, ECB President Jean-Claude Trichet’s urged "banks to do all that is necessary to reinforce balance sheets" where needed. The European Central Bank is offering unlimited new one-year emergency loans to banks to help steady the Eurozone. The ECB would also help the banks by spending 40bn Euros (£35bn) buying assets from them known as covered bonds.

The end of the week saw Moody's downgrade the credit rating of twelve UK financial firms including Lloyds, RBS, Nationwide, and Santander. Nine banks in Portugal were also downgraded further showing how closely linked we are to the single currency. The news sent bank shares lower, with RBS 3.8% off and Lloyds losing 3.36%.

Even though we are now down from the highs seen earlier in the week, the GBP/EUR rate is still doing well compared to the end of August where we were around the 1.13 level. Even though there does seem to be added volatility and uncertainty, the fact is that exchange rates are currently still much better than they have been in the past and we are still hovering around a 6 month high.

Do you need to buy or sell Euros? Send us an enquiry now

Sterling vs. US Dollar;

There were a number of hotly anticipated market events toward the later stages of last week for this cross. Thursdays Bank of England meeting was always going to draw the attention of traders’ eyes with speculation rife that a further tranche of Asset Purchasing or Quantitative Easing as it’s commonly known would be announced by Mervyn King and his cronies on the Monetary Policy Committee. The big news from the US was always likely to come from Friday’s Non Farm Payroll with a lot of talk about jobs creation being a big factor in whether or not the US would enter a double dip recession or not.

True to expectations the Bank of England did announce a new programme of QE however releasing up to £75bn to the markets. The extent of the programme surprised the markets, as in the past they have done it in £25bn increments. The scale of the stimulus certainly was not expected and as soon as it was announced, Sterling fell sharply by over 1% against the major currencies and quickly slipped fell to a 14 month low against the Dollar.











Fridays downgrading of 12 UK financial companies by the rating agency Moody’s, including Lloyds, RBS, Nationwide, and Santander further added to Sterling’s woes. Moody's said it now believed the UK government was less likely to support some firms if they got into trouble leading the market not only to sell shares in many of the 12 companies but also the pound.

As a back drop to this, America is still widely benefiting from its renowned safe haven status in light of the European Sovereign debt crisis and should have been further boosted by a stronger than expected number in Fridays Non Farm Payroll. However in the kind of twist almost entirely unique to currencies, the Dollar actually weakened against the pound after the number was released, potentially due to a renewed sense of risk appetite from traders when may have taken the number as a signal that the US will avoid double dip.

All in all last week was extremely volatile on this cross with excellent opportunities for both buyers and sellers. Next week looks set to be similar with a raft of data releases from both sides of the pond including the Federal Reserve meeting minutes and retails sale prices for both nations. You can see more detail on the data releases later in the report.

Do you need to buy or sell US Dollars? Send us an enquiry now.

Weekly Economic Data that may affect exchange rates

Monday – US Markets are closed today for Columbus day, so there is no data from the states. We will see some Housing data from the US. In the EU there are trade balance figures from Germany, and some confidence measures for the EU as a whole.

Tuesday – Industrial and Manufacturing production figures are releases from the UK today. These will be watched quite closely as it’s one of the few sectors showing growth, so poor results could reflect a slowdown in the economic recovery. There is also a GDP estimate for the UK showing total growth. With markets open after the break in the USA, the minutes to the recent FED decision to hold rates will be released.

Wednesday – Unemployment figures from the UK are the main numbers to watch for today. An increase in those claiming unemployment benefits would weaken Sterling. There are some industrial production figures from the EU later in the morning.

Thursday – Today is quite a busy data for fundamental data releases. Starting in the EU, we have German inflation figures and a report from the European Central Bank. In the UK we have Trade balance figures which often have an impact on exchange rates. In the USA there are Jobless figures and a monthly budget statement.

Friday – Lots of EU data today. Trade Balance figures from the EU are released at 10am, followed by various measures of inflation. In the US, retail sales will show how confident consumers are in the economy.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exchange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling falls as £75bn Quantitative Easing announced

Friday 7th October 2011
Good morning. Sterling tumbled yesterday as the Bank of England embarked on another round of Quantitative Easing, as I said they may in yesterdays post. The scale of the stimulus (£75bn) surprised the markets, and the Pound fall sharply as a result. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1535
• GBP/USD 1.5521
• GBP/AUD 1.5822
• GBP/NZD 2.0029
• GBP/CHF 1.4252
• GBP/CAD 1.6103
• GBP/ZAR 12.298
• GBP/JPY 118.87
• GBP/DKK 8.5846
• GBP/NOK 9.0136
• EUR/USD 1.3452

Bank of England in £75 billion Quantitative Easing

Yesterday the Bank of England announced £75 billion of QE. This has surprised the markets, as in the past they have done this in £25bn increments. The scale of the stimulus was not expected and as soon as it was announced, Sterling fell sharply by over 1% against other currencies.

Analysts said the BoE's decision to buy 75 billion pounds in UK assets over four months was negative for sterling as the UK leads other developed countries in the latest round of flooding the market with currency while keeping rates historically low.

Sterling fell to a 14 month low against the US Dollar, and also fell against the Euro before recovering slightly after the European Central Bank meeting.

Find out more about Quantitative Easing here on the bbc site.

UK Banks Downgraded

Moody's has downgraded the credit rating of 12 companies including Lloyds, RBS, Nationwide, and Santander. Moody's said it now believed the UK government was less likely to support some firms if they got into trouble. This also weakened Sterling slightly.

ECB also in loans to banks

The European Central Bank is offering unlimited new 1 year emergency loans to banks to help steady the eurozone. The ECB said it would also help the banks by spending 40bn euros (£35bn) buying assets from them known as covered bonds. They left interest rates on hold, and the Euro strengthened by around 1% as some in the markets had expected a rate cut.

Today's Data

Another round of inflation numbers for the UK today, this time the Producer Price Index. We will also see the latest non-farm payrolls data from the USA. These numbers are usually quite different than forecast and so can cause volatility for GBP/USD.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Effect of Quantitative Easing on Exchange Rates

Thursday 6th October 2011
Good morning. Sterling exchange rates rose a little yesterday morning after a UK services sector survey data was better than expected. Gains were short lived however, as the Pound remains under pressure on growing expectations the Bank of England will soon announce further quantitative easing to boost the economy, this could happen today. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1578
• GBP/USD 1.5429
• GBP/AUD 1.5937
• GBP/NZD 2.0102
• GBP/CHF 1.4298
• GBP/CAD 1.6065
• GBP/ZAR 12.243
• GBP/JPY 118.30
• GBP/DKK 8.6177
• GBP/NOK 9.0613
• EUR/USD 1.3319

Could the Bank of England announce Quantitative Easing today?

Data yesterday showed UK economic growth is almost non existent. The revised GDP figures showed the economy is pretty much at a standstill, and has been now for 6 months. This increases the case for further Quantitative Easing, which many analysts believe will happen if not today, then in November.

Pumping money into the economy would help keep interest rates low and boost the economy, however it would also flood the market with Sterling and this could push exchange rates lower. Most analysts believe they will have to pursue more QE, and this could be announced today. There are some that believe that the BoE may wait until November, by which time there will have been another round of economic data to help them in their decision.

The fact remains however that it really is a question of when, not if, they announce further QE. It is this that has been keeping Sterling on the back foot, and the reason many in the markets believe Sterling is at risk of a correction to the downside.

EU debt crisis; what next?

The debt crisis is now turning into a banking crisis, with so many UK and EU banks exposed to Greek debt, this has been causing problems in the global economy. Italy has had it's credit rating downgraded, the IMF say they may step in to assist, leaders have delayed a decision to give more money to Greece - all in all there is a considerable lack of direction in the Eurozone.

These problems have weakened the Euro, and this is the reason GBP/EUR rates are not down in the €1.10 or below territory. Today the ECB will announce their decision on interest rates, but it's likely there will be no change.

What is important, is the press conference after the decision. This is where the president of the ECB gives his thoughts on the economy. Last month his comments caused significant changes in GBP/EUR so we will be watching closely today to see what impact his comments may have.

What you should do if you need to buy or sell currency

With markets extremely volatile for all the reasons above, exchange rates are very susceptible to any changes in economic figures. With so much happening at the moment, exchange rates could move either way by a significant amount. Rather than just hope rates move your way, there are various strategies you can employ to ensure you don't lose out.

Stop Loss and Limit orders allow you to place upper and lower limits in the market, so should exchange rates move up or down, your currency is bought at a pre-agreed level. In this way you can still take advantage of any gains in the rate, but not lose out should rates fall away.

You could also look at Forward contracts, where you can fix the current rate for up to 2 years, and only lodge 10% of the total now, allowing you to budget effectively for any purchase.

To discuss these types of contract, fill in the enquiry form now and send us a free enquiry. We can then discuss your particular requirements and put a strategy in place so you can take control over your currency requirement. Take control of your currency exchange, and don't let the markets control you!

Remember, our exchange rates are up to 5% better than you can get at the bank, so for any international transfers you need to do, make the most of your currency by contacting us now.

Pound at risk of more falls; QE and GDP figures

Wednesday 5th October 2011
Good morning. Sterling fell to a 13 month low against the US Dollar yesterday, and was under pressure against the Euro after weak UK construction data added weight to speculation the Bank of England may resort to more easing. Despite Italy having it's credit rating downgraded, GBP/EUR rates remain lower due to the threat of QE. At 08:30 this morning rates are as follows:

• GBP/EUR 1.1585
• GBP/USD 1.5428
• GBP/AUD 1.6154
• GBP/NZD 2.0272
• GBP/CHF 1.4218
• GBP/CAD 1.6274
• GBP/ZAR 12.541
• GBP/JPY 118.32
• GBP/DKK 8.6202
• GBP/NOK 9.0654
• EUR/USD 1.3314

Pound under pressure due to Quantitative Easing risk

Yesterday poor construction data increased the chance of monetary easing from the BoE this week. So what do the analysts say about possible QE?

"Any individual piece of data that reinforces the message the economy is not in fantastic shape and points to the Bank potentially implementing further (quantitative easing) will get a negative response from the currency," said Michael Derks, chief strategist at FX Pro.

"The extraordinary risk aversion we continue to see in the equity and commodity markets also contributes to the case for more monetary easing."

The Pound has been weakening of late due to the fact more QE may be needed to revive the flagging economy. Another round would flood the market with the UK currency, reducing demand and pushing exchange rates lower.

Problems with EU debt had been keeping the GBP/EUR rate quite high, but the QE risk is pulling the Pound back down. We're at the lowest in more than a year against the US Dollar.

George Osborne said earlier in the week he would support any such move, and that the Bank of England could announce more easing as early as this week on Thursday. This is keeping the Pound weak.

Italy credit rating downgraded

The Italian government's credit rating has been slashed by Moody's from Aa2 to A2 with a negative outlook. The ratings agency blamed a "material increase in long-term funding risks for the euro area", due to lost confidence in eurozone government debts.

Moody's said that Italy could be further downgraded to "substantially lower rating levels" if a further deterioration in investor sentiment made it even harder for the country to raise cash from the markets. The news came after markets had closed yesterday, but this morning there has not been a significant gain in GBP/EUR as the QE risk as mentioned above is keeping rates in check.

Today's Data

The most important data today is Gross Domestic Product data for the UK and EU. This will show how the relative economies are performing and could have a big impact on GBP/EUR rates. If the UK figures are worse than expected rates could fall. Either way we expect some significant movement on sterling vs euro rates today.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.