Pound/Euro falls: August 2012 forecast

Wednesday 1st August 2012
Good morning. Today I'll give a quick mid-week update on what's been happening in the currency markets in the run up to tomorrows policy decisions by the Bank of England (BoE) and European Central Bank (ECB), after we saw Sterling/Euro rates take a tumble throughout trading yesterday.

Pound/Euro rate falls on positivity from EU leaders

This week we have seen some robust comments from EU leaders that the EU debt crisis will be tackled, and this has strengthened the Euro and pulled exchange rates down. So what was said?

French President Mr Hollande said they agreed that the euro should be "defended, preserved and consolidated" and added there had been "significant progress" in recent weeks. Italy's Prime Minister Mario Monti has said he sees "light at the end of the tunnel" on the eurozone debt crisis.

As well as his meeting with Mr Hollande, Mr Monti is also travelling to Finland and Spain, and he said he hoped his meetings would help "secure the euro and give a decisive boost to European growth".

Over the weekend, a joint statement from Chancellor Angela Merkel and French President Francois Hollande was thought to indicate that Germany had softened its opposition to using the ECB and European bailout funds to buy government debt.

The comments have caused the Euro to strengthen and pull GBP/EUR rates down over a point yesterday as the graph below shows.
















So what does it all mean?

These comments come amid speculation in recent days that European authorities are set to take action to lower borrowing costs for Spain and Italy. Tomorrow we have the BoE and ECB decisions on monetary policy. The ECB meeting is now expected to overshadow policy decisions by the Bank of England and the Federal Reserve after last week's pledge by ECB President Mario Draghi to do "whatever it takes" to protect the euro.

If the ECB delivers credible measures, it could boost investor appetite for taking on risk, helping sterling against the dollar, but if it disappoints markets it could lead to sharp falls in the euro and other trades perceived as higher-risk.

So we all await what will happen on Thursday. Expect volatility in GBP/EUR rates - if the markets think action taken is good news, expect Pound/Euro to fall further. If however it's just a case of them kicking the can further down the road, then I think rates will climb back up.

Getting the best exchange rates

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Weekly Pound/Euro & Pound/Dollar forecast

Monday 30th July 2012

Good morning. It's a new week, and as regular readers will know, it's when I take a detailed look back over the Sterling/Euro and Sterling/Dollar exchange rate, and take a look at whether rates will go up or down in the coming weeks. So, what's been happening?

• GDP figures show recession worse than thought
• ECB will do ‘whatever it takes’ to save Euro
• Pound/Dollar hits 5 week high, Pound/Euro in decline
• 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 saw minor retracements of the Euro’s relative weakness against the pound. The GBP/EUR cross fell from Tuesday’s high of 1.2856 finding support around the 1.27 level. In this week’s report we consider the announcements that generated these movements.

Last week saw Moody’s deliver a blow to the stronger Euro-economies by placing Germany, Luxemburg and the Netherlands’ AAA credit-ratings on negative watch. The announcement, tarring the nations as guilty by association, highlighted two increasing fears for the single currency; a Greek exit from the Euro and the high likelihood that the strongest Euro members might be called upon to provide more financial support for countries that have not yet received bailouts, namely Italy and Spain.

However, Euro woes were offered a momentary reprieve on Thursday via an announcement from the ECB President Mario Draghi. The president’s “bumble-bee” speech vowed to do whatever it took to save the Euro, claiming that “the Euro is irreversible”. Realistically, the only measures available to the ECB will be to again cut their main interest rate by another 25 basis points and to create a negative deposit rate.

This approach, if introduced, would undoubtedly weaken the Euro further. Not only this, but if Citibank’s claim that there is a 90% chance that Greece will leave the Euro proves to be true, contagion fears could become reality affecting Spain, Italy, Portugal, and as Moody’s have highlighted, those who would be forced to bail them out.

Last week’s fall in the GBP/EUR cross must also be attributed to the UK’s second quarter GDP results. On Wednesday official figures stated that the UK economy shrank by a greater than expected 0.7%. Despite 0.5% of the fall being attributed to the additional bank holiday, the most significant factor from the report is that the British economy is still shrinking. Calls for the “work experience” chancellor to be removed are unlikely and Vince Cable will have to continue to play his part from behind the scenes. However, the Coalition is placing significant emphasis on the Olympic Games as a source of recovery, expecting the event to bring about a third quarter rally.

Looking ahead to this week, the most significant announcement will arrive Thursday as the Bank of England prepare to deliver their intentions with regard to interest rates and the potential for more quantitative easing. All those following currency rates will be watching with intent, as without doubt, whatever the Bank of England’s proposal for economic stimulus: the currency markets will react in kind.

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Sterling vs. US Dollar;

The Sterling/Dollar rate was in decline for most of last week, however on Thursday and Friday the fortunes of cable were reversed and we saw the Pound hit a 5 week high against the dollar, tracking gains in the euro and other riskier currencies as speculation of European Central Bank action lifted investors' appetite for buying riskier assets and currencies.

The reason for the GBP/USD fall mid-week emanated from the UK and Eurozone, as has been the case for some time now. The poor UK GDP figures mentioned in the Euro section were the main reason for the decline, as the economy slumped far more than expected during the second quarter.

Having said that, the fortunes of cable were reversed later in the week. Firstly the comments from the ECB president, also mentioned in the Euro report, caused confidence to return to the markets. In recent times fears over the future of the Euro has caused investors to seek the safe haven of the US Dollar, which in turn has been causing it to gain strength. The ECB support for the Euro caused risk appetite to return, bolstering riskier currencies such as Sterling. The net effect of this was a weakening of the Dollar and a rise in GBP/USD rates to the best in over a month.

We also saw the latest US GDP figures on Friday, showing that the US economy slowed in the second quarter as consumer spending eased, compounding the weakness in the Dollar.

Last month, the US Federal Reserve cut its forecast for economic growth and the figures made dismal reading for the White House. The US economy is still growing but only just and at nowhere near the level required to make a significant dent in high levels of American unemployment, which in turn is bad news for President Obama's chances of re-election in November, however any worry will be tinged with a sprinkle of relief: the figures could have been worse.

The recent gains could well be short lived however, as sterling may be vulnerable to more weakness in the coming weeks as investors price in the prospect of further QE by the Bank of England, or even a cut in interest rates.

This week, watch for the latest interest rate decision from the US and UK on Wednesday & Thursday respectively, and the US Non-Farm payroll numbers on Friday, all of which could cause significant market volatility.

It is of course impossible to predict market movements, however if the economic data from the states this week continues to be weak, then it is more and more likely that the US will opt for more Quantitative Easing. However with the UK also expected to either cut rates/pursue more stimulus, it’s likely that events in the Eurozone will continue to drive the USD's value. If the bad news keeps coming out of Europe, expect Pound/Dollar rates to retreat back down as its safe haven status comes back into focus. This is likely to be the case until political uncertainty takes the driving seat towards November.

Need the best exchange rates? Send a free enquiry.

Weekly Economic Data that may affect exchange rates

Monday – There is a good mix of data today. Starting in the UK we have Consumer Credit, Consumer Confidence measures and Mortgage approvals. Moving to the Eurozone we have the estimated GDP figures, Retail Sales, Consumer Confidence, Economic Sentiment and Industrial Confidence.

Tuesday – Starting down under today we have Australian Building permits and New Zealand Business confidence. There is no UK data of note today. In the Eurozone we have Producer Prices, Unemployment and Spanish Retail Sales. Over in the states we have some inflation numbers, Consumer Confidence and Home Price Indexes.

Wednesday – The start of a new month, and the European Council meeting starts today. Staying in Europe we see Spanish Inflation data & French Manufacturing data. Fairly quiet in the UK with a bond auction the only data of note. In the states we have an interest rate decision from the FED, construction and manufacturing spending.

Thursday – An important day for the UK today as we have the Bank of England interest rate and QE decision both of which will likely drive Sterling value in the coming months. In Europe we also have an interest rate decision so could be interesting for GBP/EUR today. Elsewhere we have Australian and Swiss Retail Sales, and various jobless and unemployment measures from the USA.

Friday – We end the week with a host of data from the Eurozone including Retail Sales and Inflation data. There are no UK releases of note. In the states we have the all-important Non-Farm Payrolls data in addition to various other measures of unemployment.

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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Pound falls from highs after GDP figures

Thursday 25th July 2012
Good morning everybody. The Pound has dipped against the Euro. At the beginning of the week Sterling was riding high, and at the time I warned that it may not be the case rates will remain at those levels and we could be in for a drop. Indeed the pound fell quite sharply against the Euro and other currencies, after data showed the British economy contracted by more than three times the rate it was expected to in the second quarter, increasing the prospect of more monetary easing by the Bank of England.

UK recession worsens after 0.7% GDP fall

After the figures were released, most news websites and organisations took a very political slant to the news, either hailing the figures as ‘Conservatives Ruin Economy’ or ‘Labour ruined the economy and Conservatives try to fix it' depending on which newspaper you read and their political affiliation. I’m not going to bother with any of that here; all I aim to do is analyse what it means for exchange rates, and what direction they may take in the future. In this way you can hopefully make an informed decision on when to exchange your currency, and of course use us to get the very best exchange rates.

So why did GDP make the Pound drop?

The GDP figures yesterday were much worse than expected, and the Pound took a bit of a hammering as a result, as the graph shows. The reason it fell is that the poor growth figures show that we’re still mired in the worst double dip recession in 50 years, and so we now expect more action to try and combat this.

What shape will this action take? It’s probably going to either be Quantitative Easing shaped, or take the form of an Interest Rate cut in the UK. Both of these would weaken the Pound further due to the lower return Sterling will give investors.

Analysts confirmed these fears yesterday when they said that sterling could be vulnerable to more falls as the market starts to price in the prospect of further quantitative easing or even a cut in interest rates by the BoE.

Paul Robson, currency strategist at RBS, said the GBP/EUR rate could drop even lower if the market starts to price in an increasing probability of a cut in interest rates from their current record low 0.5% in the coming months.

So that’s it then, rates are going to keep falling?

Probably not by too much. Despite all the doom and gloom, I do not expect sterling to stray too far from its recent high against the euro. As fears grow about whether Spain will need a full bailout and whether Greece will leave the euro, I expect that Sterling will still be a very attractive option for investors seeking alternatives to euro zone assets.

Having said that, things are so uncertain we may not test the highs again.

How to avoid getting caught out by market movements.

Clients that read my reports knew that continued gains were not a given. In a recent post I suggested 2 options – a Forward contract to fix rates while they were high, or a ‘Stop Loss’ order where your currency is bought if it drops below a pre-agreed level.

Those that pursued either of these options will have saved a significant sum given the recent market movement. If you had fixed forward, the drop would have had no impact on you as your rate is already fixed. If you had a Stop Loss in place, then you had a worst case scenario and your currency will not have cost you any more than you had budgeted for.

Both of these options still hold true as a sensible strategy to ensure you have some control over the market. Those selling Euros should consider taking advantage of the spike to the downside. Those buying really should have some protection in place as outlined above.

Don’t just sit there and hope rates will go back up. Of course they might well do, but a Stop Loss means that if they do keep dropping you won’t be kicking yourself of what 'could have been'.

Sounds great. How do I get involved?

Make a free enquiry with me now. It doesn't cost or obligate you, and it give you access to excellent market knowledge, great rates of exchange, various market contracts and a direct line to me on the trading floor. I trade millions of Pounds in the FX markets on behalf of my clients every week, and it is this volume that allows me to source commercial rates that are significantly better than you can get elsewhere. Find out how good my rates and service is by contacting me now.

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Pound/Euro exchange rate forecast/outlook

Monday 23rd July 2012
Good morning. It appears the jet stream has shifted to bring some warm weather to the UK at long last, however one thing that has not shifted is the resilience of the UK pound against the Euro, which surged to new 4 year highs last week, touching €1.2870 at one point. In today's report I will give a detailed overview of the Sterling/Euro exchange rate forecast, and analyse whether rates will get higher or not.


Sterling vs. Euro;

Below is a graph spanning the last four years showing the journey that sterling has gone on to reach the point we are at today.












In the past nine months, sterling has strengthened by 12% against the Euro and the culmination of this movement was felt last Friday when the mid-market price hit €1.2858. This meant that we were back at levels not seen since the middle of 2008, which was just before the pound’s decline to near parity with the Euro.

So what has caused the rise in rates?

There has been a constant threat of collapse in the Euro zone for a while now and endless problems with Greece, Italy, Portugal, Ireland and Spain have contributed to the fact that investors refuse to back the beleaguered single currency.

Spain was caught up in the latest drama last Friday with news that finance ministers in the Euro zone will soon need to approve a deal to lend up to 100bn Euros to Spain so that it can re-capitalise its banks. Investors continue to worry about Spain's financial health which is pushing its borrowing costs higher. There are also fresh signs in Spain of public opposition against the demands being imposed on the country by Euro zone leaders, with more than a week of violent demonstrations and the very real threat of contagion spreading throughout the country and potentially spilling over into neighbouring nations.


So the UK economy is faring well then?

The problems in the Euro zone are well documented, but it is not like the British pound is without its issues. For example the UK government borrowed more than expected in June, leading some analysts to question whether it will meet its deficit reduction target this year. Last Thursday, the International Monetary Fund (IMF) said the government should slow the pace of budget cuts next year if growth does not recover and earlier last week Prime Minister David Cameron admitted that austerity measures may have to last until 2020.

The IMF and Bank of England continue to warn that interest rate cuts may be necessary in the UK, so while rates may keep going up due to the UK debt crisis, it's by no means a given.

So with this in mind it is a surprise to see Sterling sitting at such a high against the Euro. It is argued that this cannot last forever and there are murmurs from market analysts that there will soon be a shift in rates. The pound may continue to make further gains against the Euro but it is hard to believe that the Bank of England will let things continue like they are because it makes UK exports so expensive and ultimately an unattractive option.

The chart below shows the cost of a €200,000 property abroad over the last 4 years, and you can see that it has become much more affordable. To ensure you don't lose out on the current rates, get in touch with us today.











With so many conflicting opinions on where markets are headed, it’s more important than ever to know your options, and take advantage of the knowledge we can offer you at the Foremost Currency Group. We have an expert understanding of not only what moves exchange rates, but strategies and tools you can use to help you achieve the best possible exchange rate.

Click here now to find out how good our exchange rates are.

Weekly Economic Data that may affect exchange rates

Monday – The only UK data of note today is the Nationwide Housing Prices. Elsewhere we have some inflation data from Australia, and some Consumer Confidence from the United States.

Tuesday – It’s quiet again for the UK today with UK Mortgage Approvals the only data of note. It’s busy in Europe however with various data including Manufacturing, Services, Inflation data, and a Spanish bond Auction.

Wednesday – Nothing of note from Europe or the UK today. Stateside we have housing prices and manufacturing data. New Zealand releases its trade balance data showing imports and exports.

Thursday – We finally get going with some UK data today with the latest GDP figures being released at 9.30. The Eurozone has some consumer confidence figures, along with German assessment of the current business climate. Over in the USA we see home sales and mortgage approvals. Lastly, New Zealand has an interest rate decision at 10pm UK time.

Friday – The EcoFin meeting is in Europe today, which could give further clues on the direction of the debt crisis. Also in Europe are some confidence numbers from Germany. At lunchtime we see jobless claims and home sales from the United States.

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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Pound/Euro remains strong despite rate cut possibility

Thursday 19th July 2012
Good morning. Sterling/Euro rates remain supported well above the €1.27 level. This was despite some poor data from the UK; the number of people claiming unemployment rose more than forecast, and yesterday’s Bank of England minutes were pretty bearish, hinting at interest rate cuts to come for the UK. The pound shrugged this off and rates quickly recovered back against the Euro and other currencies. Today I’ll give an outline of recent data, and what it may mean for the future of Pound/Euro exchange rates.

Bank of England Minutes

Yesterday we saw the latest minutes from the Bank of England where they decided to pump another £50 billion into the economy. It was prompted by fears that the UK economy will see little growth this year. As I already reported though, the extra stimulus didn’t really have much of an effect on the Pound as it was so widely forecast and therefore already priced into the rates.

The MPC minutes also said that the "near-term outlook for GDP growth has weakened". The UK economy is currently in recession, having contracted by 0.3% in first three months of this year and by 0.4% in the final quarter of 2011. The first estimate of how the economy fared during the April-to-June quarter will be released next week. The markets initially dipped quite a bit when the minutes were released, but the bad news was quickly shrugged off by the markets, with the Pound recovering its losses and then some against the Euro, hitting new peaks of €1.2770 before settling back down in the mid €1.27’s.

What was interesting was to see the vote and the discussions held. The MPC voted 7-2 in favour of increasing its quantitative easing (QE) programme by £50bn, but of more interest was the fact that they also discussed the possibility of interest rate cuts.....

Interest Rate cut for the UK soon?

The Bank of England may cut interest rates to below its current record low of 0.5% in the coming months to try to revive Britain's depressed economy. IMF boss Christine Lagarde has already urged the Bank to lower its base rate and use more quantitative easing to help the UK weather the Eurozone debt crisis.

The BoE said that 'Information during the month suggested export prospects had weakened, which would further impede the UK economy’s rebalancing away from domestic demand towards net exports. The fact they have considered the case for a cut in the last 2 months should be a warning for those betting on rates rising further.

If we do see an interest rate cut, it means less return for investors and will drive investment elsewhere for a better return. This would have the effect of weakening the Pound and pulling rates down. The noises coming from the BoE don’t surprise me; they actively want a lower exchange rate to help our exports, so I do think a cut is on the cards in the coming months – they even alluded to this in their statement saying that “would further impede the UK economy’s rebalancing away from domestic demand towards net exports” … translation: we want a lower exchange rate and will cut interest rates to help make this happen.

So will Pound/Euro rates go up or down?

For now, most analysts expect sterling will continue to rise against the euro because the EU’s deepening debt problems is encouraging investors to search for perceived safer alternatives. All the recent movements have been due to what happens to the euro, and the crisis is having a disproportionate effect.

That’s the short term view. As outlined above, don’t be surprised to see the Pound being dragged back down to help our exports, so these 4 year highs may be short lived. However forecasts among the big players still differ from as high as €1.33 to as low as €1.20 showing that nobody knows which direction things will take. It's more important than every to know your options if you don't want to end up with a worse rate than necessary.

So do I buy/sell my Euros now or wait?

In the current climate, one of 2 options should be considered. Whether buying or selling Euros, the safest option is to fix your rate now to protect against further uncertainty. Nobody knows for sure which way rates will go, and by fixing now, you remove all the uncertainty and exposure to the market and are protected against the market going the wrong way. Of course, if rates get better you cannot take advantage as your rate is already fixed.

If you want to take the risk of rates getting better, then don’t leave yourself exposed. A sensible strategy if you want to go down this road is to place a Stop Loss order, where we can buy your currency should it drop below a pre agreed level. In this way you can still benefit if rates continue to go your way, but if they don’t you can budget on your ‘worst case scenario’.

To discuss your requirement and how we can help you get excellent exchange rates, contact me now for free.

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

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

Monday 16th July 2012
Good morning. The volatility continues in the Eurozone, and markets have reacted by dumping the single currency. This pushed GBP/EUR rates to new highs last week above the €1.27 level. As always for a Monday morning, today I will take a detailed look at what happened last week, what data may affect rates this week, and the different ways you can protect yourself against adverse exchange rate movements, and achieve the best exchange rates.

In this week’s report:

• Pound/Euro hit’s new highs of €1.27
• Sterling/Dollar tumbles to $1.54
• UK Could cut interest rates, weakening Pound
• Weekly market data that could affect rates

Pound/Euro breaks through €1.27

Sterling/Euro rates fared very well last week, pushing through the €1.27 several times, only to drop back away. Most recently on Friday, Moody's cut Italy's credit rating, sending the country's borrowing costs higher and putting further pressure on its struggling economy. The effect was further weakening of the single currency, creating great buying levels.













Analysts said trade in sterling would continue to be guided by sentiment towards the euro, which remained vulnerable to further declines against a range of currencies. Moody's unexpectedly cut Italy's sovereign rating by two notches to Baa2, just two notches above junk status, warning further cuts could be on the cards if Italy's access to debt markets dried up. This came after Spain announced a further round of austerity measures following their €30bn bailout.

It’s important to remember the Pound is not very strong; it is the Euro that is weak. Any bad news from the UK could pull rates back down. There is nobody that can predict which way rates will go, but we do have tools to help you take control of your currency requirement such as Forward Contracts, Stop Loss & Limit Orders.

Some clients I speak to are holding out hoping rates will continue to climb, and of course they may well do that. Do beware however than in holding out for an inch, you may well lose a yard. The Bank of England have openly said they want a weak Pound to help exports; don't be surprised to see them talk Sterling down and these highs become a distant memory.

Of course you can hold out for more, but don't leave yourself exposed. Place a 'Stop Loss' to cover you should things not go your way. Those that always hold out for 'just another cent' usually end up with their hand caught in the cookie jar, and end up with a much worse rate than was necessary.

If you need to buy or sell Euros, and are worried about the exchange rate, then send me an enquiry. I can discuss your options and help you make an informed decision on what to do.

Pound/Dollar drops to new lows

In contrast to the Euro rate, the GBP/USD rate has been falling. This again is due to the EU debt crisis. The Dollar is a safe haven currency, and as global sentiment is very poor at the moment, the US Dollar is benefiting. This I’m afraid makes it more expensive to buy, and is the reason rates have fallen down to the $1.55 level.













Analysts also expected worries about a weak UK economy to keep sterling under pressure against the dollar, even as it continues to benefit from investors seeking alternatives to the euro. Those looking to convert Dollars to Euros however should note that the rate is close to the best it has been in years.

UK Could cut interest rates; will the Pound fall?

We recently saw another round of Quantitative Easing, however it didn’t weaken the Pound too much due to the fact is was widely predicted and priced in already. However the BoE can’t do QE forever, and should the economy not return to growth quickly, their only remaining option will be cutting the already low interest rate further.

There are reports this may happen soon, and if so could really take the steam out of Sterling’s rally against the Euro. The United Kingdom is still in recession, growth is slow and sooner or later focus will shift from the beleaguered Eurozone to the state of the UK economy.

When it does the Pound could well fall and I expect lower rates against most currencies. Whether we will see if fall against the Euro depends on developments within the Eurozone.

If you need the best exchange rates, click here to send me a free enquiry.


Weekly Economic Data that may affect exchange rates

Monday – The main data today is from the EU, where we see the latest Trade Balance figures and Inflation data. We also have some trade numbers from Italy. In the USA we see Retail Sales, inflation data and a speech from the FED. There are no UK releases of note.

Tuesday – UK Inflation numbers are released this morning, in addition to Retail Sales. In the EU we have some economic sentiment figures at 10am. Later in the day we have some US Inflation data. Moving on to interest rates, we have a decision from Canada today, in addition to the minutes from the recent Australian decision.

Wednesday – Today is important as we have the BoE minutes, so we’ll see what was discussed during the decision to conduct more QE. There are also a host of UK unemployment numbers today, so could be a choppy day for the Pound. Elsewhere we will see US Housing data, EU construction output, and a monetary policy report from Canada.

Thursday – UK Retail Sales numbers are seen at 09:30am this morning, following by some Jobless Claims and Homes Sales data from the states. We also have US manufacturing numbers. There are no scheduled releases from the EU; however the ECB is conducting its mid-month meeting.

Friday – We end the week with Import/Export prices from Europe, followed by inflation data from Germany. The only UK data of note is Public Sector borrowing. Other than that data is from Canada; consumer price index which could affect Canadian interest 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

Pound/Euro rates hit €1.27, best in nearly 4 years

Thursday 12th July 2012
Good morning. Today I’ll give you all a quick mid-week update on what has been happening with exchange rates. We have seen the Euro continue to weaken off, with rates briefly breaking through the €1.27 level – the best in nearly 4 years! In today’s post I will look at why rates have gone up, what events could make rates continue to rise, and other scenarios that may result in rates dropping back away.

Nobody can predict which way rates will go, but hopefully you will find my outlook useful. What I aim to do is explain in simply terms why the rate has moved where it has, and what could happen to push rates up or down in the coming weeks and months. With my insight and knowledge, you can gain a better understanding of the currency forecast to help you decide when to fix your exchange rate.

Pound/Euro rates hit €1.27, best in nearly 4 years

The Pound rose yesterday to the best in nearly 4 years against the Euro. The reasons for the gains were continuing doubts about the currency bloc's ability to activate bailout funds help bailout countries struggling to repay its debts. Investors worldwide have been dumping the single currency in favour of safer havens such as the US Dollar.

The reason people are shunning the Euro is due to the lack of progress towards solving the bloc's debt crisis. Adding to the overall bearish mood towards the euro, Italian Prime Minister Mario Monti said on Tuesday his country could be interested in tapping the euro zone's rescue fund for bond support. This came after Spain announced a further round of austerity measures following their €30bn bailout earlier in the week.

All of this has weakened the Euro even further, pushing rates to €1.27 which is the best in nearly 4 years. For those that need to buy Euros, this is good news and serious consideration should be given to a Forward contract, to lock in the rate now to protect against a fall.

The case for rates dropping away

The deepening crisis in the euro zone is a huge risk to the UK economy because the region is Britain's largest trading partner. Bank of England governor Mervyn King on Tuesday warned the British economy was showing few signs of recovery and analysts predicted output would prove to have remained sluggish in June due to a double holiday.

The Government and Bank of England don’t want a high GBP/EUR rate – it’s hurting our exports and stalling our recovery. There is a good chance of an interest rate cut to try to pull the rate down to make the Pound more attractive.

Indeed we have seen several times in the last few years the BoE talking the Pound back down, and if this happens the rate may fall away.

The case for rates climbing further

Should we see further weakness in the Eurozone then there is every chance rates could pull higher, assuming we don’t see the UK powers try to weaken Sterling.

Many forecasts do suggest rates may climb, however we have seen such forecasts before only to see a drop. If you do think we will see more gains, then don't leave yourself exposed.

What you can do is place a 'Stop Loss' order where should rates fall back away, your currency is purchased at a preagreed level. In this way you can take advantage of any gains, but not leave yourself exposed to a substantial loss should the market move against you.

I need to buy/sell Euros; what should I do?!

There is real cause for concern regardless whether you are buying or selling Euros right now, as outlined above there is a strong case supporting rates moving in either direction. What you shouldn’t do is simply sit on the fence hoping rates will move in your favour.

The first step should be a free consultation with us so we can discuss your particular requirements, timescales, and let you know the different options you have. There are ways to protect against adverse rate movements, and in the current climate you should take the time to speak to us.

Click here to send me a free enquiry now, and I will call you the same day to let you know all the options you have available. You can then make an informed choice on what to do. I look forward to hearing from you.

Don’t just hope things will move your way; hope is not a reliable economic tool.

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Weekly Pound/Euro forecast report. Rates are looking good!

Monday 9th July 2012
Good morning everybody. Well, what a difference a week makes - I've been on holiday in Greece for a week, and much has happened in my absence. The Bank of England announced more Quantitative Easing as expected, but surprisingly it had no effect on the market. The interest rate cut in the EU however was a surprise, and has pushed GBP/EUR rates to new 3.5 year highs of €1.26+. I have much to catch up on, so in today's post I'll give a quick overview of what has happened while I've been away.

• UK announce an additional £50bn of Quantitative Easing
• Euro suffers its worst week in a year
• Dollar gains against the pound in light of jobless claims figures
• Round up of the week’s other data that may affect rates

Sterling vs. Euro;

Last week saw a very flat start to week for the GBP/EUR cross with no significant movement in the rates. The market awaited the Bank of England’s decision on whether more Quantitative Easing (QE) will be required and the European Central Banks interest rate decision on Thursday lunchtime.













The Bank of England made the expected decision to print more money and to add another £50bn to the £325bn already agreed previously. The last time Quantitative Easing was announced we saw a large drop in the value of the Pound; this was not the case with Thursday’s announcement.

The pound inched higher as the market awaited the Euro zone rate decision from European Central Bank President Mario Draghi. The policy move by the BoE and the interest rate cut from 1.0% to 0.75% had mostly been priced into the markets. The cut in the Banks deposit rate to 0.0% was unexpected and by the end of the London session the Euro had lost 1 cent against the Pound with the market closing at 1.2530 (mid-market). Decreasing the commercial bank deposit rate to zero is an attempt to try and boost growth within the Euro zone and get bank’s lending to customers or at least one another to bump start struggling economies.

UK manufacturing data surprised investors when it recovered by nearly three points to 48.6, beating even Switzerland's 48.1. Anything under 50 is seen as contraction although it is more the case off being the better of a bad bunch.

Friday saw the release of German Industrial Production figures which were much higher than expected at 1.6%; although the Euro did continue to weaken even further with the high of the day reaching 1.2606 (mid-market) as the deposit rate change seemed to over shadow all other news for the UK and Euro zone.

With the continuing problems across the Euro zone now is the time to get in contact with me to discuss your options and the types on contract you can use to your advantage when the markets are this volatile. The rate move on Thursday alone would have meant a difference of €2000 in a typical trade of £200,000.

The only other news from last week is that I have a nice suntan - 35c every day and not a cloud in the sky. I can highly recommend the Greek Islands for anybody who is not enjoying the British Summer, and the rates are very favourable too due to the issues in the country.

Weekly Economic Data that may affect exchange rates

Monday – A relatively quiet day for data releases but two important speeches, the first from ECB President Mario Draghi, and then MPC committee member Tucker discusses the resent decision to inject more stimulus into the UK economy.

Tuesday – German, French and UK industrial production figures released followed by trade balance figures and manufacturing data in the UK.

Wednesday – A quiet day for the Euro zone but important trade balance data from the US and Canada, followed by minutes from the FED.

Thursday – The monthly ECB bulletin and industrial production data make up the most important releases in the Euro zone, we see unemployment claims in the US which are a good indicator of where the market stands.

Friday – Friday 13th sees no releases from the Euro Zone but some important releases from the US in the form of PPI data, consumer sentiment, and also a speech by Federal Open Market Committee (FOMC) member Lockhart.

Getting the best exchange rates

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