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

Monday 27th February 2012
Good morning. A new week, and as usual I will take a detailed look at the last weeks movements in Sterling/Euro, Sterling/US Dollar and the forecasts for where rates are headed through 2012. I will also list the weeks economic data releases that I think will have the biggest impact on exchange rates.

In this week’s Report:

• Pound falls to 10 week low vs. Euro
• Dovish BoE Minutes pushes Sterling down
• Greek debt crisis – is it really over?
• Round up of the week’s data that may affect rates

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

Sterling vs. Euro;

Last week saw the single currency gaining on investor relief that Greece’s second bailout package was agreed by European authorities. The end of the week saw the GBP/EUR Interbank rate around the 1.18 level, and the sharp decline is clearly illustrated in the chart below:













The start of the week saw the Euro strengthen against the Pound as the markets showed renewed optimism towards the Greek bailout fund being agreed. Talks progressed Monday and continued through the night. In the early hours of Tuesday morning Euro groups President Jean Claude Juncker announced that the €130bn agreement had been reached.

The Euro group made clear that reaching these debt levels was conditional on strict implementation of future policies. Greece would have to show that they are actively decreasing their debts, and accept a permanent presence of EU monitors to oversee economic management. The Euro did show gains through the day but not by much as many think it will not be the answer to Greece’s debt crisis and it is only helping to delay the inevitable Greek default.

Sterling reached a 10 week low against the EUR on Wednesday after the Monetary Policy Committee (MPC) minutes revealed an unexpected vote split with two MPC members voting in favour of more Quantitative Easing (QE). Analysts have expressed that further QE in May is highly unlikely and BOE actions will be tied to economic prospects. As a result the GBP/EUR cross fell from a high of 1.1928 to a low of 1.1820 with the pair opening slightly lower on Thursday morning.

The end of the week saw Sterling pull away from the 10 week low, although expectations of more monetary stimulus by the Bank of England could prevent the GBP/EUR cross hitting the 1.20 levels we saw earlier this month. It now seems that the UK economy may avoid another recession after a rise in customer spending and an upsurge in exports to help the UK economy bounce back, but the ever present threat of further QE will likely hamper any decent gains.

GBP/EUR has now broken €1.20 quite a few times in the last few years, but each and every time the spike is short lived and rates tumble back away. For those hoping rates will recover, recent UK data suggest the Pound will remain weak for some time to come.

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Sterling vs. US Dollar;

Last week was relatively quiet in the US after Presidents Day on Monday, but it did not stop it from being another volatile week for the GBP/USD cross as rates swung on the back of news from the UK and Europe. We started the week in the mid $1.58’s but as the week progressed we saw a sudden 1.5% drop as rates fell back into the $1.56’s before slowly recovering. To put this kind of movement into prospective a £200,000 trade would have seen you receive $4000 less on Wednesday than at the start of the week.













As news of the Greek bailout package came to light the GBP/USD cross began to move towards the highs we saw in October. However, Wednesday morning saw the Pound lose ground against the US Dollar as the Bank of England (BoE) minutes were released. In his last speech Sir Mervyn King announced that the bank would inject a further £50bn into the economy through its Quantitative Easing (QE) programme. However data has shown that two of the nine Monetary Policy Committee (MPC) members actually voted for a £75bn boost.

As soon as the data was released we saw rates drop across the board, the GBP/USD reacted by dropping briefly into the $1.56 level before recovering back into the low $1.57’s. With two MPC members voting for further stimulus it shows that some still believe the UK to be on fragile ground and believe the BoE should increase its asset purchasing programme. So far the bank has pumped £325bn into the economy since the UK credit crisis began.

With the recent gains from the from the Greek bailout and the positive data that has come out of the UK (retail sales and public sector borrowing) it shows how quickly the markets can move against you.

As the week progressed, news from Germany that business confidence was at a 7 month high would have given investors added belief that the Euro-zone could be about to turn a corner. When you have positive news coming from Europe investors tend to leave the Safe Haven status of the Greenback and head back into the bloc currency, this will lead to the dollar losing strength and make it cheaper to purchase.

With many analysts still concerned that the Euro is under threat any talk of a Greek default or a Euro recession could see the pound/dollar start to move back towards $1.50 as investors look to protect themselves with a flight to safety.

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Weekly Economic Data that may affect exchange rates

Monday – Today in the UK we will see House Price data from both the Halifax and Nationwide, showing how this sector is performing. It’s also a barometer of the economy as a whole and so could affect Sterling. German Retail Sales will also be watched and could affect GBP/EUR rates.

Tuesday – In the Eurozone today we will see measures of Economic Confidence, Consumer Confidence and Industrial Confidence. In Germany, there are some inflation measures and a Consumer Sentiment Survey, so lots that could affect the Euro. The only UK data of note is a CBI Trades Survey. In the USA we will see Consumer Confidence measures and Durable Goods Orders.

Wednesday – We start the day with German unemployment data, followed by inflation data from the Eurozone. In the UK we have Mortgage Approvals. Stateside the GDP figures will be closely watched to see how the economy is performing.

Thursday – The EU economic summit today could affect the Euro. In terms of Fundamental Data the most important releases are Swiss GDP, EU Inflation and Unemployment data, and US Jobless numbers. Also in the states we see Construction and Manufacturing numbers. Unusually for a Thursday there is nothing of note from the UK.

Friday – The EU economic summit continues, and there are further inflation numbers for the EU. There are some minor construction numbers from the UK, and GDP figures released from Canada at 13:30.

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Sterling falls on Bank of England MPC minutes

Thursday 23rd February 2012
Good morning. The Pound fell across the board yesterday, so the recent peaks are over for now. It was due to the Bank of England minutes, which most analysts, myself included, thought would actually strengthen the Pound due to better data of late. It actually showed the uncertainty over how much QE to pump in to the economy, and this caused Sterling to fall as the charts below show.

~Currency Movements on Wednesday 22nd February 2012~











Bank of England minutes causes Sterling to fall

Yesterday we saw the most recent Bank of England minutes to the decision two weeks ago to hold interest rates, and pump £50bn into the economy through Quantitative Easing. In the minutes it was revealed that 2 members of the Bank of England's Monetary Policy Committee (MPC) wanted even more money pumped into the economy than the £50bn that was agreed earlier this month.

Two of the MPC members voted for a £75bn stimulus to the economy in February, but the other seven disagreed. The majority considered that £50bn would be enough, with some saying no further action was needed.

So why did this cause the Pound to fall? Most analysts including myself thought the minutes would show a unanimous agreement for the £50bn agreed, and coupled with recent good data this had reduced the chance of further stimulus. That's why the Pound had gained well in recent weeks. Because the minutes showed a lack of consensus, it leaves the door open for even more QE in the future, which has weakened the Pound as it would flood the market with currency, thus devaluing it.

So like many in the market, I had expected the minutes to close the door on further QE, but that in fact they left open the possibility for more.

Traders said some in the market had positioned for the risk of one or two policymakers voting for no QE at all after this month's BoE inflation report predicted the economy would improve, dampening expectations of further stimulus. So as the opposite has happened, exchange rates have corrected accordingly.

Today's Data

Today in the UK we see the latest mortgage approval numbers showing the health of the housing market. There is also a UK Industrial Trend Survey. In the Eurozone there are some German Confidence measures. Stateside we have Housing Prices and Jobless claims.

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Greek Bailout and effect on exchange rates

Wednesday 22nd February 2012
Good morning. Yesterday exchange rates were driven by reaction to the Greek bailout, and in general the Pound fell against both the Euro and US Dollar. Today I will take a detailed look at how the Greek bailout could affect exchange rates, and the Pound Sterling forecast for other major currencies for the next few weeks and months. The below charts shows how rates moved throughout the day yesterday.

~Currency Movements on Tuesday 21st February 2012~










EU Greek Bailout and what it means for exchange rates

Yesterday markets were reacting to the fresh bailout which has finally been agreed for Greece. In the latest bailout deal, Greece is to receive loans worth more than 130bn euros, and in return it needs to to reduce its debts and accept an "enhanced and permanent" presence of EU monitors to oversee economic management.

It was widely expected that the deal would go through, and initially there was little to no reaction in terms of exchange rates. Indeed, Europe's financial markets have given a very muted reaction indeed to the announcement of a second bailout deal for Greece.

The Euro did gain a little strength through the day, but not by much. This is because few in the markets think the latest bailout is the final answer, and it’s really only just putting off the inevitable. When we look at the facts, you see that this is the second deal in two years. The baikout equates to €20,000 for every person in Greece, and even that amount will not solved Greece's problems. All it really does is stop Greece having a very messy and chaotic default in March, but even so there are a lot of steps to go through before then.


Will Pound/Euro go up or down?

For those needing to convert Euros back to Pound, be aware the Euro could start to weaken again if markets think the latest bailout is indeed a delay of the inevitable. For those needing to buy Euros, rates are still close to an 18 month high. Will it go higher? It could of course, however fears the UK is heading back into a recession are pulling rates back down.

A good strategy for Euro buyers would be a Stop Loss order – a worst case scenario – your currency is bought should the rate fall below a preagreed level. In this way you can still take advantage of any gains in the market, while not leaving your position exposed should markets move against you.

Bank of England minutes today

Sterling's recent moves against the Euro and other currencies have been dominated by developments in Greece, and signs of improved UK data such as better than forecast Retails Sales. This has recently kept GBP/EUR close to an 18 month high. Euro strength following the bailout has pulled rates down as explained above, and today the BoE release the minutes to the recent decision to hold interest rates, and increase Quantitative Easing by £50 billion.

The minutes are released today at 09:30am and will show discussions, differences of view and how the vote was split. Given recent data has been a little better than expected, the minutes could generate some short term strength for the Pound. Any gains however may well be short lived. A recent survey of UK directors show there is real threat of the UK heading back into recession, and this will likely keep the Pound on the Back foot.

Summary; how to get the best out of the market

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

Monday 20th February 2012
Good morning. As always on a Monday, today I will take a detailed look at movements in the last week against Pound/Euro, Pound/Dollar and the forecast for what might happen with exchange rates this week, in addition to the weeks economic data that might move the markets.

In this week’s Report:

• Key deadline on Greek bailout today
• BoE Inflation Report strengthens Pound
• Forecast for GBP/EUR and GBP/USD
• Round up of the week’s data that may affect rates

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

Sterling vs. Euro;

Sterling finished in a strong position last week against the Euro following better than expected retail sales and nervousness amongst investors over whether the long awaited Greek Bailout will be approved.













The Euro was also on the back foot on Friday following the resignation of the German President Christian Wulff. He was forced to resign after prosecutors asked for his immunity to be lifted as part of a corruption investigation. Whilst Chancellor Merkel played down the significance of his departure, it was significant enough for her to cancel a trip to meet the Italian Premier today ahead to the Greek bailout decision on Monday – which incidentally is deeply unpopular and controversial in Germany.

Movements in sterling have been dominated by developments in Greece recently, with the pound outperforming the Euro. Greece now expects Euro zone finance ministers to approve a deal on Monday that will pave the way to a debt swap with private bondholders, seen as crucial if the country is to avoid a disorderly default.

Earlier in the week the Pound drew support from the Bank of England's decision to keep interest rates on hold again and also the latest inflation report which dampened expectations of further monetary stimulus. But gains were limited as BoE Governor Mervyn King said there were still downside risks to a UK economic recovery given the tight fiscal conditions at home and weakness in Britain's major trading partners such as the Eurozone.

The BOE raised its two-year inflation forecast to around 1.8 %, higher than the expectation of most economists. The lower inflation expectations had been keeping alive prospects of it further quantitative easing. More QE usually has an adverse impact on the strength of the currency and so therefore this news bolstered the Pound.

All eyes will be on Greece heading into the new week and whether the bailout will be approved. An approval, despite its austere implications to the people of Greece will offer the markets some certainty and may see the Euro strengthen against the Pound. Send me a free enquiry now and discuss your options to protect yourself against any unwelcome market movement. A ‘Stop-Loss’ order can limit any losses to you in a falling market yet keep your position open for you to capitalise should the market do the opposite and move in your favour.

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Sterling vs. US Dollar;

It was a choppy week for the GBP/USD cross with rates moving between the $1.56 level and reaching highs of just below $1.59 on the mid-market.













The main factor behind the early week lows was the threat of a downgrade of the UK’s AAA credit rating by the credit rating agency Moody’s. This was due to a combination of weak growth and also due to the UK’s exposure to the Euro zone debt crisis. There was also key data released which showed that unemployment rose by 48,000 to 2.67 million in the three months to December, official figures have shown, the smallest rise in almost a year.

However, the number of claimants was nearly double the forecast. The rise in unemployment had been forecast because there is simply no growth. With this in mind, Sterling still took a hit pushing down into the $1.56 region against the Dollar.

The pound gained momentum after comments from BOE Chief Mervyn King regarding the interest rates being kept on hold and prediction of no further stimulus in the UK. This positive news for the pound was also coupled with a rise in retail sales which rose 0.9% in January compared with December, according to the latest figures from the Office for National Statistics (ONS). The figure was much stronger than forecast as many economists had expected sales volumes to fall.

Everything surrounding the future of where rates are heading depends on the outcome in Europe. With an announcement on new bailout due to be released today, it will be interesting to see what the outcome holds for Sterling and the Dollar.

If approved it could well see a flight from safety and see the dollar strengthen against the pound. A flight to safety is when global investors worry about economic uncertainty and flock to the ‘safe haven’ status of the US Dollar. This in turn strengthens it and makes it more expensive to buy, pushing the exchange rate lower. This could be reversed should a bailout be agreed today, and this in turn may push GBP/USD lower.

With so much movement between the GBP/USD timing is essential when buying or selling currency. By clicking here and making a free enquiry you can have a free consultation to help you make an informed decision as to when you make your move.

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Weekly Economic Data that may affect exchange rates

Monday – Markets will be very quiet for fundamental data today as the US is closed for President’s Day. This by no means mean the currency markets will be stagnant however, as today we expect the Greek bailout vote to be agreed by the EU, which is likely to have a big impact on exchange rates. The only fundamental data of note is UK House Price info and the RBA minutes from Australia.


Tuesday – Markets will continue to react to yesterday’s Greek bailout decision. We also see UK Public sector borrowing, Consumer Confidence measures from the EU, and Retail Sales from Canada.

Wednesday – A key day, as we will see the BoE minutes from the recent decision to increase QE. The discussion notes and votes often impact GBP. In the EU there are various inflation numbers from Germany and the whole EU. In the USA, Home Sales and mortgage applications are the main releases.

Thursday – Today in the UK we see the latest mortgage approval numbers showing the health of the housing market. There is also a UK Industrial Trend Survey. In the Eurozone there are some German Confidence measures. Stateside we have Housing Prices and Jobless claims.

Friday – Another key day for the currency markets. There is the G20 meeting which could affect exchange rates. Germany and the UK both release Gross Domestic Product figures; these often have a big impact on the value of a countries currency. In the USA we see home sales and consumer sentiment.

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Pound Euro rates go up Feb 2012 Forecast Outlook

Friday 17th February 2012
Good morning. Sterling gained well against the Euro yesterday as the single currency suffered from delays to a second Greek bailout. The pound was also supported by fresh questions as to whether there would be further UK monetary stimulus. Sterling was also up slightly on the day versus the dollar, as risk sentiment declined over Greece. The below charts show how rates moved throughout the day yesterday.

~Currency Movements on Thursday 16th February 2012~











Doubts over Greek Bailout weakens Euro; Pound/Euro up

Why have Pound/Euro rates gone up? Eurozone finance ministers have demanded much greater oversight of Greece's economy in return for the €130 billion bailout package. In a three-hour conference call this week, the ministers scrutinised Greece's planned budget cuts.

The single currency bloc praised Greece's "substantial progress", but demanded more detail, including a full timeline for implementing the measures. A decision on the bailout is expected to be finalised on Monday

The effect on the currency markets was a weakening Euro and a decline in risk sentiment. Investors worried about the continued wrangling have moved to the safe haven of the US Dollar – the net effect was a much weaker Euro that was cheaper to buy, and rates are now close to re-visiting the recent 18 month highs.

Pound/Dollar rates could fall due to EU uncertainty

Why may the Pound/US Dollar rates fall? As the bailout for Greece has been thrown into doubt, it has renewed the flight to safety. This is when global investors are worried about economic uncertainty and flock to the ‘safe haven’ status of the US Dollar. This in turn strengthens it and makes it more expensive to buy, pushing the exchange rate lower.


Getting the best exchange rates to buy Euros

As I’ve stated before in the blog, it should be noted that this is the 6th time rates have broken €1.20 in the last few years, and each and every time the spike is short lived, to be followed by a correction lower. If it were me needing Euros in the next 6 months, I would fix the rate as soon as possible, considering back in October it was €1.13. There is no way to predict exactly where rates will move, but looking at the historical movements, in my opinion there is more chance that rates will fall than continue rising.

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Pound breaks €1.20 vs Euro on BoE inflation report

Thursday 16th February 2012
Good morning. Sterling rose against the Euro yesterday on the back of the Bank of England inflation report, pushing a cent higher and breaking through the €1.20 level. Against the Dollar, we ended slightly lower. Today after the snapshot of yesterdays movements I'll cover how Sterling exchange rates may be affected by: The inflation report, UK unemployment, the prospects for UK recovery, and faltering UK growth.

~Currency Movements on Wednesday 15th February 2012~











UK Unemployment

As you can see from the chart above, as trade opened GBP/EUR rates fell due to UK unemployment figures. UK unemployment rose by 48,000 to 2.67 million in the three months to December, official figures have shown, the smallest rise in almost a year. However, the number of claimants was nearly double the forecast, and so Sterling took a hit pushing lower to €1.19 on the Euro and in the $1.56's against the Dollar. The Pounds fortunes were soon to change however, following the Bank of England's inflation report....

Bank of England inflation report

The UK economy will "zigzag" this year, dipping in and out of growth, but should avoid going back into recession, Bank of England chief Sir Mervyn King has said. The Bank's quarterly inflation report predicts the economy will grow by 1.2% and forecasts inflation will continue to fall in the coming months.

However, it now predicts inflation will decline to 1.8% by 2014, not as low as the previous estimate of 1.3%. So why did this cause the Pound to rise against the Euro? The revised inflation figures make it less likely the BoE will pursue further Quantitative Easing, at least in the short term, and it is this that pushed the Pound back through the €1.20 level against the Euro, getting closer to the 18 month highs we saw in recent weeks.

"The fiscal consolidation and tight credit conditions at home and the weakness of our major overseas trading partners are acting as a drag on growth," said Sir Mervyn.

"The underlying need for repair of balance sheets means that the path of recovery is likely to be slow and uncertain. For much of this year, there is likely to be a zigzag pattern of alternating positive and negative quarterly growth rates."

However exposure to the Eurozone debt crisis could keep any further gains in check. Analysts said given UK's high exposure and strong trade links to the euro zone, sterling's gains would be muted against the US Dollar and Euro, and as such many remain bearish about its prospects in the months ahead.

They also expect austerity measures to hurt the UK economy which would derail deficit reduction, raising prospects of a downgrade of its AAA rating.

Today's Data

Let’s start in Australia where we will see Inflation data in addition to unemployment figures. In Europe a report is released by the European Central Bank. Further afield in the states we have various Jobless measures and various numbers showing inflation. After all the data is released one of the FEDs members gives a speech.

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Pound Sterling Forecast affected by Inflation and Credit Rating

Wednesday 15th February 2012
Good morning.Credit ratings agency Moody's yesterday unnerved investors by warning it could cut the UK's AAA credit rating due to weak growth, and also due to it's exposure to the euro zone debt crisis. As the daily charts show below, this caused GBP/USD to drop significantly, and the GBP/EUR rate also fell, although not by as much.

~Currency Movements on Tuesday 14th February 2012~











Sterling falls on downgrade risks

Why has Pound Euro rate fallen Feb 2012? As mentioned above, the main reason for rate drop other than the UK QE programme and possible Greek bailout, is the credit warning given by Moody's, that has weakened the Pound off slightly this week.

Losses have been limited somewhat however as this isn't a huge surprise and had been a possibility for some time. Because of the strict government austerity measures that have contributed to a poor UK growth outlook, many in the market had been expecting this for some time. It is the first time the UK's very good rating has been reviewed in a few years.

The reaction in the currency markets was less severe than in 2009 as several large developed economies including the United States and France have already been downgraded by ratings agency S&P in the last year. In fact so many countries have now been downgraded, it's almost become meaningless and as such there was limited reaction, although rates have still dropped away.

"We are underweight sterling mainly versus the dollar. Some of what Moody's are saying are things that have been bothering us for some time. It's no surprise to us that the ratings agencies are catching up," said Clive Dennis, head of currencies at Schroders. As well as issuing a warning on the UK, the agency said it may cut the credit ratings of France and Austria and downgraded six other European nations.

UK Inflation data eyes / BoE report

Of other note yesterday was the latest inflation figures for the UK. They came out exactly as forecast, but still showed a sharp fall in inflation. It showed 3.6% - last month it was 4.2%.

Despite being as forecast, the lower figures makes it easier for the BoE to make the case for further monetary easing, and in turn could weaken the Pound.

Today we will have the BoE inflation report, following policymakers' decision last week to pump another 50 billion pounds into the economy to try to stimulate growth under its quantitative easing (QE) programme.

Other data today

We kick of the German GDP data at 7am, followed by a raft of UK data at 09:30am including Average Earnings, Unemployment, a BoE inflation report and a speech by BoE governor Mervyn King.

We will also see EU wide GDP and Trade Balance figures. In the USA there are some Industrial production figures followed by the Federal Open Market Committee (FOMC) minutes.

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

Monday 13th February 2012
Good morning. So, the start of a new week in the currency markets, so a review of the last weeks movements is in order, in addition to forecasts for Pound/Euro and Pound/Dollar, and the weeks economic data releases that I think will affect exchange rates.

In this week’s Report:

• Bank of England announce £50bn Quantitative Easing
• Greek Bailout – will they or won’t they?
• Forecasts for GBP/EUR and GBP/USD
• Round up of the week’s data that may affect rates

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

Sterling vs. Euro;

Events in the euro zone continued to drive currency movements with Sterling beginning the trading week with a rise against the euro as Greek politicians struggled to find a consensus on bailout terms, heightening anxiety over the debt crisis in Europe. Failure to secure a second bailout would result in an unruly default by Greece on its sovereign debt.













Last week’s run of positive UK economic data gave some added support to sterling, though it seemed unlikely to dissuade the Bank of England from announcing an increase in the asset purchase programme (Quantitative Easing) that has been weighing on Sterling. Quantitative easing involves flooding the market with more pounds and is usually negative for the currency.

As expected and predicted here on the Blog last week, the BOE left its key interest rate at a record low of 0.5 per cent on Thursday and said it would buy another 50 billion pounds of assets mostly government bonds with freshly printed money. This resulted in Sterling falling into the high 1.18 level before recovering on an accompanying statement in which the BoE sounded more upbeat, saying recent surveys painted a more positive picture of the UK economic recovery however Europe’s debt crisis still posed the biggest risk going forward.

Developments in Greece remained firmly in focus to see out the week. Greek political leaders said they had clinched a deal on economic reforms needed to secure a second EU bailout, but euro zone finance ministers demanded more steps and a parliamentary seal of approval before providing the second bailout. A Crucial parliament vote was due over the weekend or today.
So despite the QE uncertainty now being settled, rates could go either way depending on developments in the Eurozone in particular Greece.

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Sterling vs. US Dollar;

Last week saw the Pound make steady gains against the Dollar despite fears that Thursday’s announcement of more quantitative easing by the Bank of England would weaken Sterling across the board and drive GBP/USD rates down.

Conversely, Sterling Dollar rates actually climbed half a cent at the time of the announcement as investors saw the Bank of England’s decision as a positive step towards stimulating economic growth.













Subsequently, investors moved away from the perceived safe-haven of the US Dollar and into riskier currencies, benefiting the Pound and driving GBP/USD rates upwards.

As has so often been the case recently, it is difficult to comment on the movement of Cable, without mentioning the effect the current Eurozone crisis is having on the currency pairing. In what seems to be a never-ending saga, all eyes were on Greece last week as it was hoped that they would reach an agreement on austerity measures and avoid a disorderly default. The belief that a deal would be struck broadly buoyed riskier currencies, strengthening the Pound and weighing heavily on the safe-haven Greenback, driving Cable up to 1.5929, its highest level since mid - November.

The Bank of England sounded a bit more positive about the UK’s economic prospects last week after better than expected PMI data was released on Thursday. Recent surveys had painted a more positive picture and inflation is expected to undershoot 2 % in the medium term without the need for further adjustments in monetary policy.

The Pound was further boosted after UK industrial data beat forecasts and the trade deficit narrowed more than expected. However, Sterling’s rally proved to be fleeting as GBP/USD rates dropped off sharply on Friday, dropping around a cent over the course of the day, after a reversal in risk sentiment as investors once again moved towards the safe-haven.

"We have a slightly more risk averse environment today but sterling has performed relatively well in the aftermath of QE," said Simon Derrick, head of currency research at Bank of New York Mellon. Analysts said further jitters about Greece would probably push the pound higher against the euro, but put it under pressure against the safe haven dollar. GBP/USD ended the European session last week in the mid $1.57s.

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Weekly Economic Data that may affect exchange rates

Monday – We ease into the week with a quiet day for fundamental data releases. Of note we have German wholesale prices and a press conference with US president Barack Obama, where he is giving a speech on a range of issues including the economy, which may have an indirect impact on the financial markets.

Tuesday – Today is much busier, particularly for the UK. The key releases are House Prices, Consumer Price Index and Retail Price Index. All of these are a barometer of inflation and economic activity. In the Eurozone there are measures of Industrial Production and Economic Confidence. In the USA we have Import Prices, & Retail Sales. There are also Retails Sales released in New Zealand, and Consumer confidence measures from Australia.

Wednesday – We kick of the German GDP data at 7am, followed by a raft of UK data at 09:30am including Average Earnings, Unemployment, a BoE inflation report and a speech by BoE governor Mervyn King. We will also see EU wide GDP and Trade Balance figures. In the USA there are some Industrial production figures followed by the Federal Open Market Committee (FOMC) minutes.

Thursday – Let’s start in Australia where we will see Inflation data in addition to unemployment figures. In Europe a report is released by the European Central Bank. Further afield in the states we have various Jobless measures and various numbers showing inflation. After all the data is released one of the FEDs members gives a speech.

Friday – A busy end to the week as the world’s finance ministers meet for the latest G20 meeting. We also see UK Housing Prices & Retail Sales. We end the week with measures of inflation for Germany and the EU and the USA.

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 vs Euro exchange rate forecast 2012

Friday 10th February 2012
Good morning. As I predicted in yesterdays post, the Bank of England announced a further £50 billion in Quantitative Easing, and left interest rates on hold, as did the European Central Bank. Despite a temporary gain for the Pound in the immediate aftermath of the announcement, rates fell back away and ended the day largely unchanged, as yesterdays graphs demonstrate:

~Currency Movements on Thursday 9th February 2012~











Central Bank announcements as expected

Yesterday as expected the BoE announced a further £50 billion of Quantitative Easing. The Bank justified its decision against a backdrop of a weak economy, uncertain outlook, and falling inflation.

In a statement they said "In the United Kingdom, the underlying pace of recovery slowed during 2011, with activity falling slightly during the final quarter. Some recent business surveys have painted a more positive picture and asset prices have risen. But the pace of expansion in the United Kingdom’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries."

As the charts above show, in the immediate aftermath of the announcement to pump an additional £50 billion into the economy, the Pound made gains against the Euro and US Dollar. This was due to the chance of up to £75 bn being announced, so when the lower figure was released the pound made some temporary gains. These were quite short lived however, and we ended the day where we started, with exchange rates largely unchanged.

European Central bank also leave rates on hold, but for how long?

The European Central Bank also kept base rates unchanged at 1%, but there are chances it could flag more cuts in the near term. Investors are also hoping that Greece will strike a deal to avert a default soon.

What next for Sterling/Euro exchange rates?

The key driver for this currency pair will now be what happens in the EU, with focus now returning to the debt crisis, and Greece in particular. There are some that say Greece will soon agree a deal to avoid a default, and this would calm the markets strengthening the Euro, and could push GBP/EUR rates lower.
However, if there is no deal agreed and the ECB do cut interest rates in the coming months, the Euro could continue to weaken pushing GBP/EUR rates back up again.

So despite the QE uncertainty now being settled, rates could go either way depending on developments in the Eurozone.

Strategies to employ if you are buying or selling Euros

In the current climate with no particular consensus on whether rates will rise or fall, Stop and Limit orders come into their own. For example, lets say you need to buy €150,000 in the next 6 months. You don't want to hold out for higher rates only for the market to drop away, increasing the cost of your currency. Likewise, you don't want to fix your rate now only to see it go higher in the coming weeks and months.

Let's say you're currently able to trade at a level of €1.19. What you can do in this example is place a 'Stop Loss' order at €1.16 - if rates drop away below this level, your currency is secured giving you a worst case scenario; a safety net should rates drop.

At the same time, you can place a 'Limit Order' at a level of €1.21 - if rates hit this level, 24 hours a day 7 days a week, your currency is automatically purchased. Even if you're not following the market, your order is placed allowing you to take advantage of any short term spikes.

Taking control of the market in this way allows you to take advantage of any gains without leaving yourself open to significant drop in rates. You can place these type of orders regardless of which currency you need to buy or sell.

The alternative is simply hoping the market will move in your direction within your time frame. Hope is not a reliable economic tool, and leaving things to chance mean you're letting the market control you. Don't!

How to get the best exchange rates

Take the first step to taking control of your currency, click below to open a free, no obligation trading facility with the Foremost Currency Group, and find out how good our exchange rates are. When you complete the form, when asked how you heard about Foremost, quote 'BLOG'.

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.

Quantitative Easing effect on Exchange Rates

Thursday 9th February 2012
Good morning. Sterling was down against most currencies including the Euro and US Dollar, as markets brace for more Quantitative Easing today from the Bank of England. This is what we will focus on today, and look at what effect Quantitative Easing may have on Sterling exchange rates. First, let's look at how rates moved throughout trading yesterday:

~Currency Movements on Wednesday 8th February 2012~











Quantitative Easing and the effect on Sterling exchange rates

Today at 12:00pm, the Bank of England will announce if they are changing interest rates, and also if they will pump more money into the economy through their QE programme. It's expected that they will announce a further £50 billion of stimulus, in an effort to bolster the UK's struggling economy. QE involves flooding the market with more pounds and usually weakens the currency. Indeed last time the BoE pumped money in, the Pound fell across the board.

So what effect could it have? As the forecast is for £50 billion and this is already expected, for the most part this will already have been priced into exchange rates. This is why we have seen the Pound fall in recent days. If they decide to opt for more than £50bn, then it's very likely the Pound will fall further.

On the other hand, if the BOE does not opt for more QE, or opts for less than the £50k that has been forecast, it could give a boost to the Pound.

Recent UK data has been a mix of good and bad, and this has hindered accurate forecasts on what will happen today. Some say that the recent good data means that they may not need to pursue more QE at this stage.

Opinion is mixed though. with some arguing that the economy is on the brink of a recession and will need monetary easing especially given that fiscal policy is being tightened. It's therefore likely that UK monetary policy may weigh on sterling.

Euro could also gather strength as a solution to the Greek debt talks seems on the cars.

This has strengthened the Euro and made it more expensive to purchase, compounding the fall in GBP/EUR rates.

Summary - take the first step to taking control of your currency needs

There is lots going on at the moment that will affect exchange rates in the next few weeks and months. Each persons requirement is unique, and depends on timescales in addition to the currency you need to buy or sell.

The best option is to send me a free enquiry by clicking here. I can then provide you with a free consultation over the phone as to what options you have to ensure you get the best possible exchange rates, and you can then decide when to time your purchase, armed with all the knowledge you need to make an informed decision.

In addition to the consultation service we provide, our exchange rates are up to 5% better than available elsewhere, so take the first step to making the most of your currency - send an enquiry to us now.

Pound drops against Euro; how to protect against falling rates

Wednesday 8th February 2012
Good morning. Sterling fell against the Euro yesterday, and in the absence of any UK data it was developments in the Eurozone affecting rates, with the single currency holding firm even as Greek talks on the terms of a new bailout deal dragged on. The Euro is being supported by comments from Eurogroup President Jean-Claude Juncker who said he had no doubt about Greece's future in the euro zone provided the country fulfilled its duties towards other euro members. This is what caused rates to dip yesterday, as the chart below shows:

~Currency Movements on Tuesday 7th February 2012~










Sterling falls vs Euro, markets braces for further drops

The GBP/EUR rate has been fairly steady in the last few weeks, but yesterday rates fell slightly as there was more optimism over Greek debt. As stated above, positive comments from the Eurogroup president gave the single currency some strength, and this is what driven rates yesterday.

His comments strengthened the Euro, making it more expensive to purchase and pushing rates back into the €1.19's. The chart above clearly shows the drop through the afternoon. This also had an inverse effect on the GBP/USD rates - with investors more confident in the Euro, funds were moved from the safe haven US Dollar to the Euro, causing the Dollar to weaken, and pushing rates to a fresh near 3 month high.

Today's Data is pretty thin on the ground UK wise, and there are some Trade Balance figures for Germany. Markets will be bracing for Thursday's key Bank of England decision, with many forecasting doom and gloom for the Pound.

Bank of England - more Quantitative Easing on the way?

Better UK PMI data last week eased concerns the UK economy could slip into recession, although market players are still expecting the Bank of England to announce another round of quantitative easing later this week, with the decision happening at 12pm on Thursday.

most forecasts suggest around £50 billion more being pumped into the economy - effectively flooding the market with more pounds which would be likely to weaken demand. The last time QE happened, GBP/EUR rates fell around 3 points in 24 hours.

Do you need to buy Euros?

If you need to buy Euros within the next 3 or 6 months, consider fixing a rate before Thursday to protect you against a possible drop in rates. Even if you don't need your currency for some time, you can fix the rate with a Forward Contract - you only lodge 10% of the total you want to convert, and you can guarantee the rate on the total. The remaining 90% is only due when you want your Euros to be transferred.

In this way, you can guarantee your rate, protect yourself for a potential drop in rates, and all the while retain the majority of your funds to earn interest on.

Find out more about Forward contracts by clicking here.

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.

Pound Sterling Forecast and Euro Rate Forecast

Monday 6th February 2012
Good morning. Today we'll take a detailed look at recent exchange rate movements. With the GBP/EUR rate coming down from an 18 month high, and GBP/USD down from a 2.5 month high, we will look at the Pound Sterling Forecast and Euro rate forecast, and if exchange rates will go up or down through February 2012.

In this week’s Report:

• Bank of England to resume Quantitative Easing this week?
• Pound/US Dollar drop from 2.5 month high
• Pound/Euro predicted to fall from near 18 month high
• Round up of the week’s data that may affect rates

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

Sterling vs. Euro;

Sterling’s week against the Euro remained relatively range bound with data releases having little effect on the pairing. Most investors spent much of the week holding out before making any serious moves as they waited for a conclusion to the Greek debt problems and a potential bail out through private creditors. “There's not very much news coming from the UK market at the moment, I think really it's all about what we're seeing in Europe," said Sara Yates, FX strategist at Barclays.













Analysts said the market was likely to take direction from the Greek debt talks, though concerns about debt problems in Portugal, where yields on government debt have hit record highs, may weigh on the single currency.

Despite the lack of movement in the market there were a couple of key data releases that may have a longer term impact on the market. On Wednesday the UK saw a surprising upwards movement in the Manufacturing sector with PMI data. Purchasing Managers' Index (PMI); is a leading indicator of economic health - businesses react quickly to market conditions and their purchasing managers hold perhaps the most current and relevant insight into the company's view of the economy.

The survey is taken from about 600 purchasing managers in order to gain a consensus and a reading of above 50.0 indicates growth and a reading of below 50.0 indicates a contraction in the market. This month reading of 52.1 was a welcome surprise from the expected reading of 51.1.
Although January's manufacturing PMI partially eased some of the UK’s economic worries, it made little to change the market's forecast of more quantitative easing by the BoE this week, which is likely to undermine the pound in the near term.

Peter Allwright, head FX trader at fund manager RWC Partners summed up the mood of the market perfectly when he said “One still cannot paint a rosy picture for the UK. But having said that, there is nothing to get excited about the euro either”.

One potentially influential event happened on Thursday and yet virtually no press given to it. Chinese Premier Wen Jiabao said China was "investigating and evaluating concrete ways in which it can, via the IMF, get more deeply involved in solving the European debt problem".
Whilst one could argue that the reason it was not widely publicised was due to the fact it is unlikely that anything will come from it and it is all just rhetoric, there is the train of thought suggesting that if this effort were to come up with something that is applicable and sustainable in the long term, then it could potentially change the whole nature of the Euro debt crisis.

Euro purchasers would do well to bear this in mind with a view to their currency movements and remember that there are a great many factors pressing on the GBP/EUR cross. Despite the recent Euro weakness the Pound is still far from a reliable currency with which to bank on its performance.

If you need to buy Euros and want the best exchange rates, click here to send an enquiry now.


Sterling vs. US Dollar;

Despite some poor UK data and the chance of a Euro break up sending the UK economy into a second recession, sterling hit a 2 ½ month high against the Dollar in the latter part of last week. This was mainly due to Mr Ben Bernanke (chairman of the Fed) announcing that the US interest rates are likely to remain near zero until late 2014. That coupled with the likelihood of QE3 in the US hurt the dollar across the board. A weaker Dollar is cheaper to purchase, hence the climb in rates.













The GBP/USD rates were also being supported by a more optimistic outlook for riskier currencies and data from the UK which pointed towards growth in the UK construction and manufacturing sectors. However, continued worries over the UK economy and the growing likelihood that the Bank of England will also announce an increase in its asset purchasing program on Thursday of this week to support the UK’s flagging growth, is likely to keep the pound in check. That said, the survey of UK manufacturing released last Wednesday did ease some worries about the UK economy after the contraction in the 4th quarter of last year.

To end last week, on Friday the eagerly awaited US non-farm payroll came out up 243000 which was well above the expectations of 140,000 and saw cable drop off from recent 2.5 month highs to the mid $1.57s (interbank rate).

Looking ahead, due to the fact that sterling is increasingly linked with global growth prospects because of its reliance on exports, any movement in the GBP/USD cross in the medium term will partly be due to evolving news on the global debt crisis. Although the main mover of cable in the short term will be the UK interest rate decision (which is highly expected to be kept on hold) and the possibility of more QE3 on Thursday.

Last week saw GBP/USD rates move between the $1.56 and $1.5850 range (interbank). To put this into real terms, a purchase of $200,000 would have a difference in cost of £1500.00 between the highs and the lows of last week, outlining the importance of staying in close contact with your FCG account manager.

With rates now falling from the recent 2.5 month highs, and further falls possible due to the risk of further Quantitative Easing by the Bank of England, most forecasts now seem to suggest rates heading back towards $1.50. For this reason, if you need to buy US Dollars in the next 3 to 6 months, contact us today to discuss how we can protect against adverse exchange rate movements.

Click here to find out more about our commercial exchange rates.

Weekly Economic Data that may affect exchange rates

Monday – The only UK release of note today is House Price data from the Halifax. There are some investor confidence measures for the Eurozone in addition to German Factory orders. Further afield, Australia releases Retail Sales, Construction performance and Jobs data.

Tuesday – Another quiet day for the UK with only Retail Sales data from the BRC being released. Australia has an interest rate decision; GBP/AUD is already at record lows. In the Eurozone the only data is German Industrial Production. In the afternoon the USA releases its latest measures of Consumer Credit and Economic Optimism.

Wednesday – Another fairly quiet day as markets brace for tomorrows central bank decisions. Today we have some Trade Balance figures from Germany, Employment data for New Zealand and US Mortgage Applications.

Thursday – By far the most important and anticipated day of the week, and lots to cover so bear with me! We’ll start in the UK with some minor House Price data, followed by Industrial and Manufacturing Production and Trade Balance figures late morning. At 12:00pm we will see the Bank of England’s latest decision on Quantitative Easing and Interest rates.

It’s predicted that rates will be left on hold, but there is a very high change the BoE will increase its QE programme by up to £75bn which could weaken Sterling significantly. Also, at 15:00pm there is the NIESR GDP estimate for the UK, which could indicate the UK is heading back into recession. There is much today that may affect Sterling exchange rates.

In the Eurozone there is also an interest rate decision where rates will probably be left on hold. The US has various jobless measures in the afternoon.

Friday – Market will continue to react to the raft of data released on Thursday, and also today we will see German inflation data. In the UK we also have lots of inflation data that could affect interest rates in the future. We end the week with US Trade Balance numbers and a budget statement from the Federal Reserve.

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 Euro exchange rate forecast will the rates last this high?

Friday 3rd February 2012
Good morning. Sterling was pretty steady against the US Dollar yesterday, remaining around the 2.5 month high. Against the Euro it was up and down, but remained in the €1.20's all day. The Pound is being supported by a cautiously optimistic outlook for riskier currencies and data from the UK which pointed at growth in the construction and manufacturing sectors. Below shows how rates moved throughout the day yesterday:

~Currency Movements on Wednesday 1st February 2012~











Markets Flat

There is little to report in fact with regards to yesterdays currency movements. Most data came out roughly as expected, and there wasn't much volatility. Pound/EUro remained between €1.20 and €1.2080, and the Pound/Dollar rates hovered around the 2.5 month high for most of the day.

The GBP/EUR rate briefly spiked as there was some uncertainty over a Greek debt swap deal and an increasingly ominous outlook for Portuguese sovereign debt kept investors wary of the common currency. The European Central Bank is expected to keep offering cheap money to euro zone banks to try and free up liquidity and get them lending to companies and consumers, however, and that kept the spike limited and pulled rates back down to where we started the day, and the chart above illustrates.

Markets await next weeks key UK data

Despite the relative calm we saw yesterday, we still think rates are very unlikely to remain at the current levels for long. Persistent worries over the UK economy and the likelihood that the Bank of England will announce an increase in its asset purchase programme next week were likely to keep the pound in check, with data from the dominant service sector awaited on Friday.
If you need to buy Euros in the next 3 months, then there are ways to protect against the market going down, even if all your funds are not available and you don't need the Euros for some time.

To discuss the different ways we can help you do this, in addition to achieving commercial exchange rates that are significantly better than elsewhere, send a free enquiry now by clicking here.

Today's Data

We end the week with more UK House price info, this time from the Halifax. There are also further inflation numbers to add to those released earlier in the week. The Eurozone also has further inflation numbers and Retail Sales. Across the pond, we have Non-Farm Payrolls and Unemployment data – both of which often affect GBP/USD rates.

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.

Pound Euro rate forecast Feb 2012

Thursday 2nd February 2012
Good morning. Sterling levelled off around the €1.20 level against the Euro yesterday, as markets repositioned the Euros value for the start of the month. Overall, the Pound gained, especially against the US Dollar after better than expected UK manufacturing PMI data meant markets are wondering about the level of QE expected next week from the Bank of England (BoE). Below shows how the rates moved throughout the day.

~Currency Movements on Wednesday 1st February 2012~











Pound surges against the US Dollar

Yesterday the pound gained well against the Greenback. We started the day in the low $1.57's however by later afternoon the rate had risen to the mid $1.58's. This represents the best buying levels for US Dollars in nearly 3 months.

The main reason for the gain was the fact Sterling was supported by a surprise return to growth in the UK's manufacturing sector. This in turn means the QE from the BoE next week may not be as high as the £75bn estimated, and as a result the Pound gathered some strength and GBP/USD rates went up.

Pound lags against the Euro

Despite the gains against the Dollar, Pound/EUro rates actually fell slightly yesterday. BUt with good UK data pushing the Pound up, why didn't it go up against the Euro?

It's simply because the euro outperformed the Pound. The single currency was bolstered by higher than forecast German PMI data. The data suggests higher interest rates may be on the cards in the Eurozone, and this gave the Euro strength and pulled GBP/EUR rates down, despite the good UK figures. The Euro however is likely to run into selling at higher levels given mounting worries that the sovereign debt crisis could spread to bigger economies.

Going forwards this could weaken the Euro again, but with the Pound expected to fall in the coming weeks, a weak Euros doesn't necessarily mean higher GBP/EUR rates - indeed I predict by the end of next week we will be significantly below the €1.20 level.

Sterling could weaken

Most recent UK data, including gross domestic product numbers, has so far shown the economy is on the brink of a recession and the Bank of England is likely to step up its asset purchase programme next month to support the flagging economy.

Yesterdays data did ease some of those worries and gave the Pound a little boost, but did little to change market expectations of more quantitative easing by the Bank of England next month.

That is likely to undermine the British pound in the near term, especially against the dollar.

Today's Data

We’ll start down under today – Australia has Building permits, Commodity prices and Trade Balance figures – if good this could push GBP/AUD even lower than it already is. The UK releases its PPI data this morning also. In the Eurozone there are also inflation figures. In the USA there are some important releases – Jobless Claims, Labour costs and Nonfarm productivity.