Sterling/Euro exchange rate forecast July 2012

Friday 29th June 2012
Good morning. Sterling/Euro exchange rates have had a very strong week indeed, remaining supported around the €1.25 level. This is despite further poor data about the UK economy. The reason rates are good is because of the weakness in the Euro. Against other currencies Sterling has fallen this week. I think there is a very high chance that we will see more Quantitative Easing next week, and so I personally think these levels will not last for long. In today’s post I will look at what is weakening the Euro, and why Pound/Euro rates may fall back in July.

UK economic figures disappoint, but Sterling remains strong

We have had some further disappointing figures from the UK this week. Firstly the latest mortgage approval numbers were much worse than expected, pushing Sterling lower against currencies other than the Euro.

Yesterday the latest GDP figures were released, showing that the UK economy shrank by 0.4% in the final three months of 2011, compared with previous estimates of a fall of 0.3%. This confirms that the UK is still in recession, and a deeper one than previously thought.

The estimate for the first quarter of this year was unchanged, showing the economy shrank by 0.3% in that period. A recession is commonly defined as two consecutive quarters of economic contraction. The news pushed the Pound lower, however as stated above, it didn't affect the GBP/EUR rate as the Euro is so weak at the moment.

More Quantitative Easing possible next week

Regular readers will know all about Quantitative Easing, and to be honest are probably as bored reading about it as I am writing about it, however it's the next 'big thing' that will affect rates and so is very important.

For those that don’t know what QE is, this BBC article explains it nicely. In response to the latest figures, some economists said they expected the Bank of England to restart next week its programme of quantitative easing, designed to boost the economy by buying government debt which in turn injects money into the economy.

Quantitative easing is usually seen as negative for the currency as it increases the supply of pounds in the system. But some analysts said signs policymakers would take active steps to protect the UK economy from the euro zone crisis may be seen as sterling positive. The last time QE was announced the Pound/Euro rate dropped by 3 points. I feel we will see this announced on the 5th of July, and expect the Pound to drop as a result

Euro remains weak ahead of summit

Sterling rose again against the yesterday after a German official quashed any thoughts of rapid decisions at a European Union summit. These comments which weighed on overall risk appetite and weakened the Euro making it cheaper to buy.

European Union leaders are preparing to meet for a closely-watched Brussels summit on the fate of the euro. European authorities have unveiled proposals such as the creation of a European treasury, which would have powers over national budgets. The 10-year plan is designed to strengthen the Eurozone and prevent future crises, but critics say it will not address current debt problems.

The fear that nothing will be resolved is what has driven exchange rates this week, pushing the Pound/Euro rate close to the best in nearly 4 years.

So will rates stay at €1.25 or higher, or will they fall again?

It is these problems in the Eurozone that have kept the Euro weak and the reason why buying levels are so attractive at the moment. As discussed above the fact that more QE is on the way, coupled with the unknown factor of how the escalating debt crisis may affect the UK, then there is no reason to think levels will remain at this level. Indeed several times in the last few months we have got to €1.25 only for rates to dip back away fairly quickly.

For those that need to buy Euros, a Forward contract should be given serious consideration. This week we have conducted 3 times as many Forward Contracts than usual, as clients want to fix the rate while it’s close to the best in nearly 4 years.

Even if you don’t need your Euros for some time, we can lock in the current rate for you, and you only have to lodge 10% of the total you want to convert. In this way you can protect yourself against adverse exchange rate movements, while retaining the majority of your capital, safe in the knowledge you have fixed close to the best rates in many years. Please note Forward contracts are only available for conversions of £10k+. Click here to find out more about them.

Pound/US Dollar

Sterling has not actually fared very well against other currencies. Against the US Dollar for example, the Pound has dropped down to the $1.55’s. This is partly due to the poor economic data pulling the Pound down, and partly due to the US Safe haven status. When there is economic uncertainty, the USD generally strengthens and becomes more expensive to buy. This is what we have seen this week.

Blog Off

The blog will be a little quiet for the next week, while I take a short holiday. Blog posts will resume on Monday the 9th of July. My twitter feed will continue to run, posting several updates throughout the day of where GBP exchange rates are, and any interesting stories that affect the exchange rates.

You can still make a free enquiry about our services, and one of my colleagues will respond to you in my absence to explain how we work and how we can help you. when you speak to one of the traders, make sure you quote 'AJABLOG'

I look forward to continue to keep everybody updated with the markets, and continue helping clients achieve the best possible rates of exchange when I return!

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

When you make an enquiry, quote 'AJABLOG'

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

Monday 25th June 2012
Good morning. As always for Mondays today I'll have a look back at last weeks events, what moved the market and the Pound Sterling Forecast for future exchange rate movements. Also I will outline the most important data releases of the week that could affect rates. In this week’s Report:

• More UK Quantitative Easing on the cards
• Spain could be next to seek bailout
• Greece forms government, calming exit fears
• Round up of the week’s other data that may affect rates

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

Sterling vs. Euro;

It was a pretty quiet week on the rate front for GBP/EUR last week however the news and data released could have caused it to be much more volatile.













Greek Election Result

Firstly the Greek election results seemed Euro friendly as the New Democracy party was voted in with a slight majority over the anti-austerity Syriza party (without gaining enough seats to become THE majority party), as it reduced the likelihood that the Greeks would leave the Euro in the short-term, while pointing towards more favourable negotiations with the “Troika” (EU, ECB, IMF). However the fact that the Syriza party still managed to gain 26.9% of the vote (with the New Democracy party achieving 29.7%) showed the disquiet amongst the Greek population surrounding the currently agreed package.

As we moved through the week the negotiations between pro-bailout parties to form a coalition government continued until the the head of the ND party Antonis Samaras was finally sworn in as Prime Minister as head of a three party coalition government on Wednesday. This however didn’t give the Euro the push that we thought it would get as Germany continued it’s opposition to giving Greece any leeway on the current tough bailout conditions.

EU Bailouts

At the same time the Bank of Spain revealed that bad debts had risen to 8.7% of total lending for April which is the highest level for 18 years and further increased concerns over the country’s financial sector. This caused the 10 year Spanish bond yield to peak at 7.3%; this level is seen as unsustainable and is the level where other struggling Eurozone economies have sought bailouts. So while things seem to be calming in Greece at least in the short term, the eyes of the world will soon be firmly fixed on Spain which could be a much bigger problem.

Even news that Eurozone policymakers were discussing plans to reduce borrowing costs for countries under stress didn’t give the Euro any strength and we saw the mid-market rate start to climb from the week’s low of 1.2350 towards and over 1.24.

More Quantitative Easing?

Let’s not forget however that the UK is still in recession and on Wednesday the Bank of England minutes showed a much closer decision than forecast. While interest rates were held at their current all time low, the vote on further Quantitative Easing [QE] measures (previously 8-1 in favour of maintaining the current levels of monetary stimulus) showed a 5-4 split in favour of a hold. One of the members who have changed their stance towards more QE is the Governor Mervyn King and markets are now expecting another round to be announced at the next meeting on 5th July.

The last time this happened the Pound lost nearly 3 cents against the Euro in one trading day, but this was last October and was before the problems in Greece were quite as well known as they are now. After the minutes the initial drop in the Pound of half a cent was reversed later as we saw UK unemployment fall 51k for the first three months of the year, and retail sales showed an increase to 1.4% in May after the sharp April decline, and UK factory orders also showed an improvement.

Please don’t be fooled by the relative calm in the rate that we are seeing as both UK and Eurozone economies are still finely balanced and any further bad news out of Spain or Greece, or any kind of revision in UK GDP for quarter one that is released on Thursday could cause huge movements in the rate.

Do you want the best exchange rates for Euros? Send me an enquiry now.

Sterling vs. US Dollar;

Last week was yet another of Dollar strength remaining, broadly based on the currency’s safe haven status. Cable remained relatively range bound moving little more than 2 Cents throughout the week and not reacting in line with the host of disappointing data releases in the US throughout the course of the week. Both industrial production and manufacturing figures came in lower than were expected and so too did an employment data survey as well as home sales report.













Although this is welcome news for Dollar sellers, it provides little comfort to Dollar purchasers as it illustrates that Sterling positive (and Dollar negative) data seems to have little effect on the cross at the moment. The position of the GBPUSD cross seems to be governed by a far more macroeconomic and global viewpoint of the markets and the fact that in these time of uncertainly there is a clear flight to safety in the Dollar’s safe haven status.

This was evident by the fact that Sterling’s only actual gain against the greenback last week came on Tuesday following a rise in equities and commodity prices and hence investors took a movement away from the safety of the Dollar.

Operation Twist

The Dollar’s Strength isn’t a forgone conclusion as due to a run of poor data releases in the US, the Government have been forced to take action keep the economy turning and try to stimulate growth. They therefore extended operation ‘Twist’ which, although isn’t quite as dramatic as Quantities Easing is design to have a similar effect on the market and kick start the economy by encouraging spending. Since the Federal Reserve’s short-term interest rates are already at rock bottom, the bank plans to stimulate borrowing by dragging down the yields of long-term interest rates and thus make it a less attractive proposition.

The fact that the US have had to initiate this program shows that the US is struggling in the same way that economies in Europe and the rest of the world are and we may indeed see the Greenback weaken against the other major currencies as a result. Those needing to sell Dollars should certainly take this into consideration as even if it doesn’t weaken the Dollar by much it will most likely act as a limit to the gains the Dollar may be able to make.

Do you want the best exchange rates for US Dollars? Send me a free enquiry now.

Weekly Economic Data that may affect exchange rates

Monday – The week kicks off with some German Import Price data and consumer confidence measures. Germany, Europe’s largest economy also releases its latest Retail Sales figures. Later in the day there is a Speech by the European Central Bank. Back in the UK Nationwide releases the latest house prices which are an overall barometer of the economy. In the states we see Home Sales.

Tuesday – Relatively quiet today, with only Public Sector borrowing from the UK. The rest of today’s data is from the United States: Consumer Confidence & Manufacturing figures.

Wednesday – Today’s main UK release is the latest Mortgage approval numbers. We have a raft of inflation figures from Germany at 1pm. Later in the afternoon the US has its latest durable goods orders, homes sales and consumption expenditure data.

Thursday – As is often the case, today is the busiest day of the week for fundamental data. There European council meets, with the debt crisis likely to dominate the agenda. Staying in the EU we see German unemployment, EU consumer confidence, Industrial Confidence and Economic Sentiment. The UK has its latest GDP figures to show if we are still in recession, in addition to consumer confidence numbers released this evening. The US also has its latest GDP figures in addition to Jobless numbers.

Friday – The EU council continues its meeting today, during which the EU releases its money supply data and Inflation numbers. The USA has its latest inflation numbers and consumer sentiment measures, followed by a speech from the FED.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

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Sterling Euro Forecast 2012; could rates be about to fall?

Thursday 21st June 2012
Good morning. Exchange rates have continued to be quite volatile, with news from the EU and Bank of England key to the future movements of the Pound Sterling to Euro exchange rate forecast. In today’s post, I will look at the following:

• More UK Quantitative Easing (QE) on the cards
• Greece makes deal to form government
• Spain and Italy to seek bailouts
• What all this means for exchange rates

More QE on the way from the Bank of England

Yesterday the Bank of England (BoE) released the minutes to their latest decision to hold off further Quantitative Easing (QE).

They showed that the BoE's Monetary Policy Committee voted 5-4 against restarting the gilt purchases they suspended in June, with Mervyn King , Adam Posen and David Miles all voting for a £50 bn injection. What exatly is QE? There is an excellent article explaining it here on the BBC.

So it seems it was a very narrow call indeed earlier this month not to pursue more QE. The closeness of the vote suggest to me that there will be another round of stimulus at the beginning of July, for between £25 and £50 billion of extra money.

As soon as the minutes were released, the Pound fell sharply against the Euro as the graph shows. If more QE is indeed announced in a few weeks, then expect the Pound to drop further against the Euro and other currencies.

BoE Governor Mervyn King said in a speech last week that the economic outlook had darkened under a "black cloud" of worries about the euro zone debt crisis, and that the case for further QE had increased.

QE would weaken the Pound as it floods the market with Sterling, and when there is an excess of anything it usually loses value. I certaintly think this will happen.

Greece makes a deal to form government

It emerged yesterday that a deal has been struck to form a new Greek coalition government. Antonis Samaras of New Democracy, the party which narrowly won Sunday's elections, has met President Karolos Papoulias to confirm the deal. This puts to rest some uncertainty over the future of Greece within the single currency, however it is yet to be seen whether they will try to renegotiate their terms of the bailout.

Greece has endured nearly seven weeks of political uncertainty which threatened to spark turmoil throughout the eurozone and beyond. The country is in its fifth year of recession, and there is growing antipathy to the tough terms of Greece's huge bailout from the EU and the International Monetary Fund (IMF).

For the time being, it gives some calm back to the markets and for the moment secures Greece’s place within the Eurozone. I do expect the parties involved to try to get a better deal, however the only thing I think that Germany will negotiate on is the timescales, not the overall terms.

This should give some strength back to the Euro, after weeks of uncertainty had weakened the single currency and pushed GBP/EUR exchange rates up.

Spain and Italy to seek bailouts

In other Eurozone news, there are plans to announce a £600 billion deal to bail out Spain and Italy. It is hoped that the move will send a strong signal to financial markets that Europe’s biggest economy is finally prepared to back its weaker neighbours. What the markets will make of it we will have to wait and see, but if the move is seen as positive, it could give the Euro strength and pull GBP/EUR rates back down. If it is interpreted as just kicking the can down the road a little further, we might see the Euro get weaker.

At a press conference to mark the end of the G20 summit, David Cameron welcomed the assurances given by eurozone leaders. He said: "What I've sensed at this summit is that there is a fresh impetus - using all the mechanisms, institutions, firepower they have." He added that European leaders would put the future of the euro "beyond doubt". White House sources indicated that a "new framework" to shore up the single currency would be unveiled at next week's summit in Brussels.

So what does all this mean for exchange rates?

It removes some of the uncertainty that we have seen in recent weeks. With a clearer framework in place it could be that Pound/Euro rates now start to drop back away. Many ill informed articles in the press are still suggesting rates may hit €1.30, which was indeed forecast several weeks ago. However this was purely based on the Euro continuing to weaken, which may now not be the case.

Even if the latest ‘solution’ to Europe's woes does not come to fruition, a weakening Euro would not necessarily push GBP/EUR rates higher anyway. Escalating problems in the single currency would affect our exports and weaken Sterling along with it.

Couple this with the very high chance o further monetary stimulus in the UK as explained at the top of this article, and we could well see Pound/Euro rates fall. Indeed we have not tested the highs of €1.25+ seen several weeks ago, and in fact we have seen rates slip into the €1.22’s.

If you need to buy Euros

With more chance of rates now falling, you may wish to secure your rate now to protect against falling in the wake of possible QE. Even if you don’t need your currency for some time, you can fix today’s rates for up to 2 years with a Forward contract, and only lodge a small percentage of the total to be converted.

If you need to sell Euros

The EU crisis is having unprecedented effects on the rate, with the Euro getting weaker. You could take the safe approach and fix rates now to protect against the uncertainty. If you hope rates will move in your favour, then don’t leave yourself totally exposed; speak to us about Stop Loss and Limit orders.

Don’t just hope for the best rates; make it happen

With much volatility and conflicting opinions on where markets are headed, it’s more important than ever to know your options, and take advantage of the expert knowledge I can offer you for no cost. I have worked in the FX markets for nearly 10 years and so have a very good knowledge of not only what moves exchange rates, but strategies and tools you can use to help you achieve the best possible exchange rate.

If you need to buy or sell any international currency, send me a free enquiry now to find out what your options are.

Everybody’s requirement & attitude to risk is different, but in having a free consultation and gaining full knowledge of all the options available to you, you can make an informed choice on what is best for you.

Click here to send me a free enquiry

How does Greek election affect exchange rates

Monday 18th June 2012
Good morning. Today's post is a little later than usual, as I wanted to wait until the markets had opened this morning to gauage the reaction to the Greek elections, and the effect it is having on exchange rates. So what do we have in this week’s Report?

• Greek election result reduces chances of Euro Exit
• Bank of England warn on more stimulus
• Elsewhere in EU Spain/Italy could seek bailout
• Round up of the week’s other data that may affect rates

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

Sterling vs. Euro;

Yesterday saw the results of the Greek election as we saw a close victory for Antonis Samaras and the New Democracy party with 29.6% of the vote. The party has now been given three days to come up with and build a coalition government ready to tackle the on-going debt crisis, something that couldn’t be done just six weeks ago in the first election.













After inconclusive elections in May, world leaders have welcomed the narrow election victory of Greece's pro-bailout New Democracy party. Now, they will try to form a coalition and create a stable government with a stronger popular mandate. So, problems solved?

Not necessarily. The recent vote was eagerly anticipated amid fears that Greece could exit from the euro should the anti-austerity party win. While an exit now looks much less likely, problems could now spread to other Eurozone members and deepen the turmoil in the global economy

The next three days could be very volatile depending on what happens and it will be a case of watch this space to see how investors react to upcoming news over the next few days.

Election aside, last week was a very volatile one with GBP/EUR rates moving between 1.2265 and 1.2470 at mid-market. The movement we saw last week alone would have meant a difference of €2000 between the high and the low on a typical trade of £100,000 to Euros.


Spain Downgraded

Through the week we saw Moody’s downgrade Spain’s rating by three notches to BAA3, one level above junk. The increased debt burden, weakening economy and limited access to capital markets were cited as being the reasons for the downgrade. Moody’s followed on the sentiment of financial markets after the 100 billion-euro bailout of Spanish banks.

Cyprus’s bond rating was lowered by two levels, Moody’s attributed the downgrade to the likelihood of a Greek exit from the euro and the amount of support the government may have to extend to the Cypriot banks. The downgrades show weakness within the Euro zone which in turn drives the rates up and makes it cheaper to buy Euro’s.

Bank of England stimulate economy

As the week progressed, Bank of England Governor Mervyn King unveiled measures to fight Europe’s debt crisis as global policy makers prepared for the impact of the Greek election. The announcement that the case for more UK stimulus is growing, caused the GBP/EUR rate to instantly drop 0.3% when markets opened at 8.00am Friday morning. The GBP/EUR rate soon recovered through morning’s trading.

The Mexico Summit this week will give EU Leaders the opportunity to discuss concerns with the heads of other major economies and should give fuel to increased volatility as the leaders will either agree or disagree on how to combat the escalating Sovereign debt crisis.

So despite the election being out of the way, the future is far from certain. We could well see the Euro weaken more as larger countries such as Spain seek bailouts. Of course the effect the escalating problems in Europe will have on Sterling is impossible to forsee, so all in all nothing has really changed since last week.

To discuss the options available to you, and how the latest news from the EU could affect exchange rates, send me a free enquiry now.


Weekly Economic Data that may affect exchange rates

Monday – Markets will be reacting to the Greek election result, which will likely overshadow fundamental data today. Data is light anyway today, with only some Housing Market Data from the USA. There is of course the G20 meeting this week which may affect rates.

Tuesday – Quite a bit from the UK today including Consumer Confidence Measures, inflation data, House Price info and Retail Sales. Lots that will show how the UK economy is faring so expect Sterling volatility. In the Eurozone we have some Economic Sentiment measures and Construction data. Over in the states we see Housing Starts and Building permits.

Wednesday – Again a very busy day for the UK: Average Earnings, The Bank of England minutes & a raft of unemployment figures. In addition we have the BoE quarterly bulletin. In the EU Germany releases Inflation data. Elsewhere we have some GDP figures from New Zealand, and Interest Rate decision for the USA, and a press conference from the FED.

Thursday – The EcoFin meeting starts today, which looks at the EU economy. We also have Inflation data from the Eurozone and Germany. The only UK release of note is the latest retail sales. In the USA we will see the latest Jobless Claims and unemployment figures, in addition to Homes Sales and a Manufacturing Survey.


Friday – The EcoFin meeting continues, and there is also a summit of EU leaders, which will no doubt be dominated by Greece and the debt crisis. There are no UK releases today, but we do have an assessment of the German economy. To end the week Canada releases Inflation data which could affect the countries future interest rate movements.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

Pound falls sharply on news of more BoE Stimulus

Friday 15th June 2012
Good morning everybody. Why has the Pound fallen against the Euro this morning? Things can change very quickly in the currency markets, and in my last post GBP/EUR rates were getting close to €1.25. The facts have now changed, and so has the exchange rate; the Pound has fallen sharply this morning, after The Bank of England announced yesterday evening that it will launch two new stimulus packages in response to the worsening economic outlook:


Sterling falls sharply on news BoE to pursue more stimulus

When the markets opened at 8am this morning the reaction was severe, and Sterling has dropped sharply across the board, as the chart above shows.

In the new developments, it was announced that together with the government, it will provide billions of pounds of cheap credit to banks to lend to companies. Banks will also have access to short-term money to deal with "exceptional market stresses". The chancellor said the measures would "inject confidence".

In the announcement, the governor Mervyn King said that "We are not powerless in the face of the eurozone debt storm. Together we can deploy new firepower to defend our economy from the crisis on our doorstep,"

Indeed on this blog I have been warning for some time that the EU debt crisis could well start to affect the UK, and this is what we are now seeing.

The Bank has already pumped £325bn into the economy through its quantitative easing (QE) programmes, hoping that the institutions that sell bonds to the Bank then use the money to buy up other assets, but that hasn’t always been the case. Some have said that they have held on to the money undermining the effectiveness of QE. Regardless the additional currency in the system has weakened the Pound in recent months.

You can read more about the £140bn scheme to kick-start stagnant economy here on the telegraph website.

Euro crisis deepens and affects Spain

As expected, Spain is the latest country to be dragged into the debt crisis, having earlier in the week taking a €100 billion bailout of its banks. Yesterday it was seen that Spain's borrowing costs hit 7% which is a level widely seen as unsustainable. Italy's borrowing costs also rose sharply meaning we could now see bailouts for these two countries.

Greek elections this weekend

With Greek elections taking place this weekend in what is being seen as a referendum on the euro, analysts have warned of potential further shocks to the financial sector. If the anti austerity Syriza party succed, then they may well effectively be voting themselves out of the single currency.

What is certain is that whatever happens this weekend, the market reaction on Monday morning is likely to be quite severe, as for many weeks investors have been waiting for this event before deciding what to do with their currency.

On Monday I will post a full analysis of the results, and what the Greek elections could mean for the Pound/Euro exchange rate forecast.

Pound/Euro exchange rate forecast

Many clients have been convinced that the Euro debt crisis would continue to weaken the Euro making the GBP/EUR exchange rate higher. Indeed on this very blog I have been warning for some time that this may not be the case, and in fact the UK is not immune to the EU’s problems. Sterling is at risk of falling if more stimulus is needed. This is now what has happened, and the 3.5 year highs seen recently now seem a distant memory.

Where rates will go moving forwards is impossible to predict, but with so much uncertainty surrounding the UK and EU economies, rates could go either way. Currently there is not much support for Sterling in the wake of yesterdays announcements, and so in the short term I don’t expect rates to rise back to €1.25 any time soon. I would expect rates to stay in the €1.22 to €1.2350 range for the moment, but on Sunday when the election results are seen, I'm sure the market will correct accordingly. Of course I will post a full analysis of what the election results mean on Monday morning.

What to do if you need the best exchange rates

With much volatility and conflicting opinions on where markets are headed, it’s more important than ever to know your options, and take advantage of the expert knowledge I can offer you for no cost. I have worked in the FX markets for nearly 10 years and so have a very good knowledge of not only what moves exchange rates, but strategies and tools you can use to help you achieve the best possible exchange rate.

If you need to buy or sell any international currency, send me a free enquiry now to find out what your options are. Everybody’s requirement & attitude to risk is different, but in having a free consultation and gaining full knowledge of all the options available to you, you can make an informed choice on what is best for you.

Click here to send me a free enquiry

EU Debt crisis & Pound/Euro forecast

Wednesday 13th June 2012
Good morning everybody. We started the week down in the €1.22’s against the Euro, which was supported by news of Spain’s Bank bailout over the weekend. It was hailed as great news for the Euro, and initially the single currency seemed supported. The spin did not last long however, and soon after markets opened the Euro started to weaken again. By yesterday fears that the crisis that has spread from Greece to Spain is now on the way to Italy and Ireland – this caused the Euro to weaken yet again, pushing rates higher.

In today’s post I’ll have a detailed look at the EU problems, the UK’s exposure to them, and what it all means for the Pound/Euro exchange rate forecast.

EU worries push Pound/Euro close to €1.25

Over the weekend it was announced that Spain became the fourth country in the crisis-torn Eurozone to ask for international aid when it was forced to ask for a bailout to prop up a banking system saddled with £150billion of toxic property loans.

The financial markets initially welcomed the deal but investors soon sounded the alarm over the impact the bailout will have on the country’s mountainous debts. On Monday morning everyone was hailing it as great news for the Euro. Hmmmm.

The initial optimism proved short-lived when the markets started trading in earnest on Monday and Tuesday. The Euro suffered considerably as fears over how the money would be funneled to banks hit sentiment, as questions surrounded the terms of the deal, which will add to Spain’s debt burden.

Indeed Spain's borrowing costs have risen to the highest rate since the launch of the euro in 1999, and also Italy's 10-year bond yield rose to 6.28%, a rate not seen since January, as concerns about its finances rose. The interest rates are seen as unsustainable in the long run for two countries weighed down by huge debts. So there could be more bailouts for other countries.

Crisis Spreading to other countries?

While the Eurozone debt crisis has been a cause of concern for some time, it has so far affected relatively smaller economies such as Greece and Portugal. However, as the crisis spreads to bigger nations such as Spain and Italy, there are fears that growth in the region may slow even further.

Cyprus, which is heavily exposed to Greece, hinted it may become the fifth country in the single currency to need a bailout following the rescues of Greece, Ireland, Portugal and now Spain.

It is this spread that has spooked the markets and caused the Euro to fall in value yesterday, getting close to €1.25. So maybe the bailout wasn’t the ‘great news for the Euro’ that the spin doctors had hoped for on Monday morning. Indeed they are, in my opinion, still simply 'kicking the can down the road' and hoping the problem will go away.

Pound remains vulnerable

Following a string of recent weak UK data, a growing number of analysts think the BoE could opt for another bout of asset purchases under its quantitative easing programme, possibly as early as next month. It remains uncertain whether or not the BoE will opt for further QE.

Although the economy is weak, some policymakers have expressed concern that inflation remains too high. But BoE policymaker Adam Posen struck a dovish tone on Monday, saying the central bank should buy assets other than government bonds in order to boost the UK's ailing economy. I for one think we will see further QE, and in fact the IMF and BoE have hinted as much in recent weeks. More QE would weaken the Pound, and of course if the EU debt crisis continues to spread then it will also affect the Pound due to our exports.

What does all this mean for exchange rates?

They key question everyone wants to know is will the GBP/EUR rate keep going up past €1.25 testing new highs, or will it drop back away again as it has now done several times since hitting the 3.5 year high several weeks ago.

One thing I am certain of is that the Euro will continue to lose value. What is impossible to quantify is how the Pound will fare in the shadow of the EU problems. 50% of our exports go to Europe, and of course our banking industry is heavily tied to the EU, so a further escalation of the crisis could start to affect the Pound.

Couple this unknown quantity with the threat of further QE and there is a strong case to be made for the Pound/Euro rate to struggle to make further gains and indeed drop back away.

Don’t just hope for the best rates; make it happen

With much volatility and conflicting opinions on where markets are headed, it’s more important than ever to know your options, and take advantage of the expert knowledge I can offer you for no cost. I have worked in the FX markets for nearly 10 years and so have a very good knowledge of not only what moves exchange rates, but strategies and tools you can use to help you achieve the best possible exchange rate.

If you need to buy or sell any international currency, send me a free enquiry now to find out what your options are. Everybody’s requirement & attitude to risk is different, but in having a free consultation and gaining full knowledge of all the options available to you, you can make an informed choice on what is best for you.

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Weekly GBP/EUR forecast, and the weeks data

Monday 11th June 2012
Good morning. So another Monday morning and a fresh week to look forward to. Today I will take a look back at the reasons why the GBP/EUR exchange rates are being pulled in both directions due to the continuing crisis in Europe, and the possibility of more QE in the UK. In addition we will look at what measures you can take to protect against adverse exchange rate movements.


In this week’s Report:

• BoE hold off more QE, for now at least
• EU markets get the jitters over Spain
• Global Economic turmoil continues to drive rates
• Round up of the week’s other data that may affect rates

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

Sterling vs. Euro;

The BOE left interest rates on hold at the record low of 0.5% again this month and despite speculation, resisted pumping more money into the quantitative easing program which helped support the pound on Thursday. However the minutes from this meeting out later in the month will state how the members voted and will be eagerly awaited for signs of any on the horizon. As there was an outside chance of QE, the fact there was not gave Sterling a slight boost. However, it’s now very likely we will see more stimulus in the coming months, so the Pound could well fall in value.













What's happening in Europe? Will the Euro get weaker?

Moving to the EU, with all eyes on the problems in Greece recently the focus seemed to be shifting towards other euro countries. The Spanish credit rating was downgraded to a triple B status by the Fitch rating agency, a strong sign it thinks Spain's ability to honour its debts is weakening. This fuels rumours that Spain could be the next country to seek a bailout and speculation over the growing size of the bailout could begin to mount.

Elsewhere, France has had to cut its growth forecasts for Q2 (April to June) of this year to -0.1% having previously predicted there would be zero growth. This cut is another sign of the lack of growth within the Eurozone after the latest set of official figures confirmed the EU economy achieved zero growth in the first three months of 2012.

The GBP/EUR rates this week have seen highs of 1.2416 and lows of 1.2283. Putting this into real terms, a transfer of £100,000 would have a difference of just over 1300 Euros in just 3 trading days.

With the continuing problems in the EU, pressure from the IMF for the UK to cut interest rates further and the likelihood that there will be further funds pumped in to the UK’s QE program, the GBP/EUR rates really could go either way in the following weeks.

Options to help you get the best exchange rates

At the Foremost Currency Group we can help protect you from an uncertain market. Waiting until the last minute and leaving your transfer to chance can often prove to be a very costly mistake. So what are your options?

Do Nothing – This high risk strategy means relying solely upon a spot contract and one won’t know the rate of exchange achievable until the actual point of buying the currency. The volatility and unpredictability of the currency markets makes this strategy high risk and speculative. The markets do move both ways, so it could result in a win (or lose) situation, however it does make budgeting for the future virtually impossible.

Secure a Forward Contract – This will enable you to lock into a rate of exchange the moment you know you have a currency requirement in the future. It will protect you against any market movement, both positive and negative and you will know exactly how much the transaction will cost you.

Use Currency Options –The two key tools are a Stop Loss order, which will protect you against adverse exchange rate movements and secure your currency if it falls below a pre-agreed level. The other is a Limit order, which is placed at the top end of the market to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you.

Whatever your requirements, send us a free enquiry now.

Weekly Economic Data that may affect exchange rates

Monday – We ease into the new week light on data. Of note are German wholesale prices released at 7am, followed later in the day by some House Prices from the Royal Institute of Chartered Surveyors.

Tuesday – Starting in the UK we have the latest Industrial and Manufacturing production figures. Later in the day we will see a GDP estimate from the NIESR. Other data of note today is a budget statement and speech by the US Federal Reserve.

Wednesday –In the EU today we see German inflation data and EU wide Industrial Production. Over in the States we have Inflation data, Retail Sales and Business Inventories. There is also an interest rate decision for New Zealand.

Thursday – A monthly report from the ECB is released today, followed by inflation data. In the USA there are further inflation measures and jobless claims, unusually for a Thursday there are no UK releases of note.

Friday – We end the week with UK Trade balance data, followed by EU trade balance data. In the USA consumer sentiment figures are released.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

Bank of England decide not to pursue QE, for now..

Friday 7th June 2012
Good morning. The markets remain very volatile with the Pound/Euro rate continuing to be pulled in two directions. Only yesterday we saw lows in the €1.22's and highs touching €1.24's, illustrating just how unpredictable things are at the moment. So today I'll take a look at what is pulling the rate; Fears of Spain having debt trouble, and when the Bank of England are likely to pursue Quantitative Easing.

The Bank of England and Quantitative Easing

Yesterday the Bank of England left it's interest rates at 0.5%, and left quantitative easing unchanged at £325bn despite mounting speculation that it would take steps to stimulate growth this month. Before the decision, it looked like around 25% of analysts thought they would pursue more stimulus, and so this was partly priced into the value of the Pound.

When they announced no change for the moment, the Pound then corrected to the upside. If you look at the chart, you can see the instant reaction at 12:00pm yesterday when the announcement was made.

I actually thought there was an outside chance of them announcing further stimulus. Indeed the decision contrasts with the recommendation from the International Monetary Fund (IMF), which last month urged the Bank to restart QE to help restore Britain’s faltering recovery.

I now expect a much higher chance of further Quantitative Easing in July. It's likely that they have simply held off, as should the situation in Europe deteriorate further, they will have this in their back pocket to try and stimulate growth. So, expect a rocky road for Sterling in the coming months.

Spain issues spook the market

There have been reports in the past few days that Spain was seeking an immediate bailout from eurozone funds. I recent weeks I have been warning that behind the headlines about Greece, Spain and other EU countries are facing serious problems. There is every likelihood that the EU will see a domino effect with debt issues spreading.

Spain's economy minister has since dampened speculation that the country is about to seek a bailout of its bank sector, saying that no decision would be made until audits of the banks were completed, possibly by the end of June.

Giving some support for the Euro was strong demand for Spanish bonds at an auction on yesterday, which was seen as a key test of the country's ability to raise funds, but it had to pay a higher interest rate. The rate on the 10-year bonds was 6.044%, up from the 5.743% paid when bonds were last sold in April.

What next for Pound/Euro exchange rates?

I wish I could foresee what will happen, but unfortunately nobody can! On the one hand, the Euro is being pulled down by the well publicised problems with Greece and Spain. I think the Euro will continue to get weaker.

Will the Pound/Euro rate go up though? I don't think it has much further it can go. It peaked several weeks ago in the €1.25's, but speculation on QE in the UK will likely limit any further gains. Being in recession with more QE widely predicted, I can't see where any Sterling strength is going to come from .

If you need to buy or indeed sell Euros, then contact me today for a free consultation on your options. There are various ways we can help you take control of the market to help you get the best exchange rates.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

Sterling/Euro & Pound/Dollar forecast outlook

Saturday 2nd June 2012
Good morning. For a change today's post comes to you on a Saturday morning - I thought given the long 4 day break in the UK, I would post the latest currency news for the next 4 days. UK markets will re-open on Wednesday morning, and blog posts will resume then. Today I will do my usual analysis of where rates have moved in the last week, and the forecast for future exchange rate movements.

In today's Report:

• Pound/Euro falls back on poor UK data
• Pound/Dollar tumbles 10 points in a month
• EU debt crisis continues to spook markets
• Round up of the week’s other data that may affect rates

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

Sterling vs. Euro;

Last week we have again seen a similar fluctuation in the GBP/EUR cross to previous weeks, with the rates moving close to the recent 3 and a half year high near the mid 1.25’s, before dropping down to the high 1.23’s later on in the week. This has been as a result of some important activity within the Eurozone which includes increasing troubles within Spain and poor manufacturing data within the UK which will be explained in more detail below the graph.













Eurozone Problems Continue to weaken the Euro

Over recent weeks the main problems within the Eurozone were from within Greece due to the political unrest that we have seen recently. However this week we have seen fresh concerns from Spain surrounding their banking sector. The Spanish bank ‘Bankia’ on Friday revised their 2011 figures from a €300m profit to a €2.98bn loss, followed then by a request to the state for a €19bn bail-out. Shortly after this announcement, the rating agency Standard and Poor's (S&P) downgraded Bankia and four other lenders within Spain to ‘junk’ status.

Another big problem in Spain at the moment is the status of their bond yield. They are currently trading at a level of 6.5%. In the long term yields higher than 7% are deemed to be unsustainable. Greece, Portugal and the Rep. of Ireland were all at this level when they received international bail-outs, which is beginning to look like a very big possibility for Spain.

There is also still a massive amount of uncertainty surrounding Greece’s future within the Eurozone. Recent opinion polls within Greece have been contradictory of each other with varying results on whether the left wing Syriza party, or the right wing New Democracy party are leading the election, which is to be held on the 17th of June. With these problems in the Eurozone we saw the pound rise to mid €1.25’s throughout the week against the Euro, and we saw these levels stay quite flat until the end of the week.


UK Data disappoints, pulling Sterling lower

Pulling rates back down was the UK Purchasing Managers’ Index (PMI), which came in very low on Friday against what was expected. We currently have a level of 45.9 compared to the predicted 49.8. Companies cut back on production and employment as inflows of new business declined amid rising uncertainty among domestic and overseas clients. The headline index fell by 4.3 points over the month, the second-steepest fall in its 20 year history. At 45.9 we currently have the lowest PMI figures for over 3 years which has significantly weakened Stirling against a basket of currencies and pushing the GBP/EUR rate towards the high 1.23’s.

The only other key data releases of note within the Eurozone came from Germany. Unemployment change data was released with an unchanged figure following a predicted 5k decline. Consumer Price index data was also released at 1.9%, coming in 0.1% lower than predicted.

We have a very important week coming up with regards to data releases. There is lots of data being released by The European Monetary Union (EMU) including Producer Price Index, Retail Sales, GDP figures and interest rate decisions from the European Central Bank. Spain also have the release of their PMI data.

Back in the UK we have the very important releases of interest rate decisions and Quantitative easing, of which an increase of monetary stimulus has been predicted by many experts over the last month.

With some very important data being released it is shaping up to be a very volatile week for the GBP/EUR cross with the potential for the rates to fluctuate massively. It will definitely be worth your while if you are looking to exchange your currency over the next few weeks, to get in touch with us to discuss your options:

Click here to send me a free enquiry now

Sterling vs. US Dollar;

Last week was a dramatic one in the markets with the GBP/USD rate shedding around six cents in a week. Throughout last week the dollar strengthened against the pound ending the session around a four and a half month low. More talk of a Greek exit from the Euro-zone and a lacklustre response to the fiscal crisis in Europe is weighing on the pound, which had a miserable May, losing ground against the surging US dollar.













In the US, consumer confidence fell to its lowest levels in eight months as fears over the global economy caused unrest. The Consumer Confidence Index fell from 68.7 in April to 64.9 its lowest levels since October 2011. Consumer spending currently makes up around 70% of the U.S economy activity so the figures are watched closely, but even with the announcement the dollar continued to gain strength over the course of the day.

A run of positive UK data midweek could not save sterling from falling to its lowest levels for a long time. Worries over Spain’s rising borrowing costs and banking sector once again caused the value of the greenback to increase as investors headed back to the safe haven dollar.

Last Friday data showed that British manufacturing activity shrank at its fastest pace in three years in May as a broad-based global economic slowdown hit demand for British goods. This weakened the pound heavily and saw fresh lows for the currency pairing.

Also on Friday the hotly awaited non-farm payroll figures were released, American employers in May added the fewest workers in a year and the unemployment rate unexpectedly increased as job-seekers re-entered the workforce, further evidence that the labour-market recovery is stalling. There was not much of a reaction to the figures but as soon as the US markets opened, Greenback weakened against Sterling and rates pushed up higher.

It is a brave person who simply waits for the rates to move in their favour. With so much uncertainty in the markets it is important to know your options to help you make an informed decision as to when you make your move.

Click here to send me a free enquiry now

Weekly Market data that might affect exchange rates

Monday – UK Markets are closed for Spring Bank Holiday, however we will see some Halifax House Price data. There will also be various EU releases however including inflation data and Investor Confidence measures.

Tuesday – UK markets remain closed for the Jubilee. There are some EU retail Sales, Inflation data and German factory orders. There is also an interest rate decision for Australia and Canada.

Wednesday – UK Markets reopen today and there’s a lot to digest. EU GDP figures are released at 10am, and later in the morning we have an interest rate decision for the EU, followed by a press conference. There could be GBP/EUR volatility on the back of what happens today. Over in the states there are some productivity measures and the Fed’s Beige Book (this reports on the current economic situation in the USA).

Thursday – Today we see the latest decision on UK interest rates and Quantitative Easing. It’s this that will likely drive Sterling’s value in the coming weeks, so keep a close eye on what happens today. Over in the USA we see Jobless Claims and measures of consumer credit.

Friday – We end the week with a raft of data from Germany, Europe’s biggest economy: Wholesale Prices, Imports and Exports & Trade Balance figures. These releases are followed by inflation measures for the UK. Later in the afternoon we see US Trade Balance figures and Unemployment data from Canada.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry