Pound/Euro forecast; rates could drop further

Monday 26th November 2012

Good morning. The Pound/Euro exchange rate fell quite a bit last week, and the forecast is for this to continue. This is partly due to events in Europe, but also due to the fact the Bank of England governor is speaking again this week, and could well talk the Pound down further. So what have I got for you in today's post?

 

In this week’s Report: 

• Pound/Euro rates in decline last week
• Bank of England speech this week could weaken Pound further 
• EU fails to resolve Greek/EU debt issues 
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

Pound/Euro rates last week were largely dominated by discussions between the IMF and EU Finance Ministers, over a €44 billion Greek bailout. The single currency strengthened considerably, due to the optimism of the aforementioned plan, but was clouded mid-week by continued disagreements between the two deciding factions. As you can see by the chart below, rates have been in decline now for a few weeks. 

Reports on Monday last week outlined that an agreement was expected the following day that would allow Greece to access the bailout monies allocated from December 5th. However, following a twelve hour meeting no solution to Greece’s debt problems could be met, prompting Christine Lagarde to say that the meeting had yielded progress but the technical details could not be ironed out. 

The euro, which had been steadily strengthening due to the meeting’s publicity, retraced part of its gains as speculators were reminded that solving the region’s debt-crisis cannot be done by simply releasing bailout funds. 

What caused the Greek debt crisis?

 

The Greek crisis emanated from enormous borrowing which grew exponentially since joining the euro. Public spending soared after adopting the single currency; costs which were not offset through taxation, largely due to widespread tax evasion, making it impossible to balance the books. When the Global Financial Crisis occurred it wiped the foundations from Greece’s house of cards, and essentially made it impossible to repay their lenders due to the staggering debt-levels they had accumulated. 

The high emphasis on a Greek rescue stems from a fear of contagion. Contagion is the notion that if Greece were to default on their debts, a similar cycle of events could affect countries like Spain, Italy and Portugal. The cause is a result of the fear that these countries could follow Greece’s example and default on their obligations. 

Not only this, but the losses associated with a Greek default would significantly dampen Global liquidity; in a nutshell, when people are fearful and refuse to spend, economies become stagnant. Talks are on-going which for the GBP/EUR rate means that an agreement could see the rate drop further as the euro strengthens. However if there are more delays or compromise can be met, this could see the rate bounce back as the single currency will weaken. So things really could go both ways in the coming weeks. 

Mervyn King could talk the Pound even lower

One argument for rates dropping further, is a continuing weakness in Sterling. The Governor of the Bank of England is speaking on Thursday and is largely expected to pour cold water on Britain’s economic progress, as he did a few weeks ago. Many believe that this is an attempt to weaken the pound as a ploy to increase our competitiveness in the export market; as the EU is major trade partner. This comes despite some positive data from the UK which saw momentary retracements on the euro’s strength last week. 

How to protect against the rate dropping

If the euro is your currency of interest, send me a free enquiry and I can get in touch to discuss your options. If the Market appears to be moving against you, Forward Contracts and Stop Orders are great ways of protecting yourself from adverse Market movements. If the rates are going in your favour, Limit Orders allow you to set an optimistic level in the Market which can be automatically purchased, 24 hours a day, seven days a week. 

Send an enquiry now to find out how we can help you.

Weekly Economic Data that may affect exchange rates 

Monday – The main data that could affect GBP/EUR rates today is from Germany. We have a host of data from Europe’s largest economy, including Retail Sales, Import Prices and a Consumer Confidence Survey. Staying in Europe, we also have the EcoFin meeting, which covers areas such as coordinated economic measures, budgetary policies, public finances, capital movements and financial markets. Elsewhere we have Trade Balance figures from New Zealand, and manufacturing data from the USA. 

Tuesday – An important day for the Pound, as we will have GDP figures, House Prices and Business Investment measures. There is nothing major from Europe, but across the pond we’ll see US House Prices, Consumer Confidence, and Speeches by various members of the Federal Reserve. 

Wednesday – Nothing from the UK today. We do have some German inflation figures along with Spanish Retail Sales. IN the USA we will see some further Home Sales data, which is a good barometer of overall economic health. 

Thursday – A fairly busy day today. Starting in the UK we have Consumer Credit, Mortgage Approvals, and a Speech by the Bank of England governor Mervyn King. Be very mindful of this, as last time he spoke he talked the Pound down by a significant amount. It’s followed by a UK Financial Stability report. In Europe we will see Consumer Confidence, Economic Confidence, Industrial confidence along with German unemployment numbers. In the states we have Jobless Claims, Homes Sales and manufacturing numbers. 

Friday – The only UK data of note is consumer confidence and an inflation report. In the Eurozone we have Inflation numbers, unemployment numbers and Retail Sales. We end the week in the Americas with inflation numbers from the USA and GDP figures 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

Pound/Euro rates falling. December forecast

Wednesday 21st November 2012 

Good morning. In today’s post I’m going to look at the developments so far this week that have affected exchange rates, including the Bank of England minutes, UK public sector borrowing, The latest on the Greek bailout, and the downgrading of Frances Credit rating. Of course I will also take a view on how this could affect exchange rates in the coming weeks and months. Let’s start in the UK. 

Bank of England minutes 

This morning the Bank of England released the minutes from the latest decision to hold off any more Quantitative Easing (QE) and leave interest rates on hold.

There were no real surprises; only one member voted for QE, so the vote was split 8-1. 

This indicates there is less chance of further stimulus in December, however many think it’s only a matter of time before more funds are needed, so I think depending on economic figures, we could see further QE in January. If so, then expect the Pound to weaken if it starts to look more likely stimulus will be needed. The decision to leave interest rates at 0.5% was unanimous. 

Public Sector borrowing increases 

The Pound hasn’t fared very well this morning though, falling half a point so far from the open this morning. One reason is the news that the government borrowed much more than expected in October, reducing the chances that the UK will hit its deficit reduction target in 2012-13. 

UK public sector net borrowing hit £8.6bn in October, which is a blow to the government as they were hoping that the deficit would fall by around 5%. At the moment this is moving in the wrong direction, and this is causing the Pound to lose out to other currencies, pulling exchange rates down. 

No Greek deal – what does this mean for Euro? 

Over in the Eurozone, the main concern continues to be Greece. They have failed to reach a deal to give Greece its latest bailout payment, and this threatens the whole bloc, leaders have said. Following nearly 12 hours of talks in Brussels, the Eurogroup said it needed more time for technical work. Greece needs the next tranche of its second bailout worth 130bn euros ($166bn; £104bn) to avoid insolvency. 

The Eurozone "would be threatened if we did not reach" a deal, French Finance Minister Pierre Moscovici said, before adding that "we are very close to a deal." The news initially caused some weakness in the Euro, pushing exchange rates up slightly. 

These gains were short lived however, and rates have already dropped below the level we have been sat at for most of the week. The reason that a weak Euro is not really pushing up GBP/EUR rates is the fact that problems in the EU have a knock on effect on the UK, so even if more problems arise, don’t expect Pound/Euro rates to shoot up. 

French credit rating downgraded 

In a further blow to the EU, Moody's downgraded France's debt from Aaa to Aa1, and kept its negative outlook, meaning it could be cut again. Moody's blamed stalled economic growth, the risk of a Greek euro exit and the risk that France has to contribute to bailing out other Eurozone countries. This leaves only Germany and the UK with AAA credit ratings from all agencies, reflecting the health of the 2 large economies. 

So what does all this mean for exchange rates? 

Surprisingly it hasn’t really affected rates that much. Pound/Euro rates have been range-bound around the 1.24 to 1.2450 level for a while now, and the markets are not reacting too much to the latest news. The main driver continues to be investor confidence, and at the moment the UK is not performing too badly. 

What is a concern is the Bank of England’s determination to weaken the Pound to try to help our exports. Also, problems in the EU will affect the Pound, as I’ve already talked about in detail over the last week or two. 

If you need to buy Euros, consider a Forward contract 

I think it’s unlikely we will see any gains in the GBP/EUR rate any time soon, so if you need to buy Euros then consider a Forward contract. This is where you can fix today’s rates for up to 2 years, and only pay 10% of the Sterling now. The remainder would be due when you want to take delivery of your currency. 

In this way you can protect against adverse exchange rate movements and budget effectively for any purchase either soon or in the future.

Click here to send me a free enquiry now, and find out more about our commercial 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

Pound/Euro exchange rate forecast outlook

Monday 19th November 2012
Good morning. Another Monday morning, so let's take a retrospective look at what happened with exchange rates this week. In today's post I'll also look at some of the tools you can use to protect against exchange rates moving against you.

In this week’s Report: 

• Bank of England warns of triple dip recession
• Greek bailout casts shadow over Eurozone 
• US Dollar strengthens 
• Round up of the week’s other data that may affect rates 

Sterling vs. Euro; 

After a crazy week on Sterling/Euro last week, many people will be looking at this week a little unsure as to how their own requirements will play out. Many thought sterling would start to stretch its legs against the single currency as it started the week by pushing up to a 6 week high on the cross by Tuesday. 

This bullish run for the pound was, as often is these days, more of a dash than a marathon as BoE Governor Mervyn King poured his customary glass of icy water over the hopes of strong UK economic growth. By predicting that growth will follow a long and winding road, and saying there could be scope for further QE as it is only assessed every month and not forecasted; King and his MPC colleagues moved the market down over a point in a single trading session on Wednesday after their inflation report. 

It should come as no surprise that the pound fell on the back of Kings’ speech, as it is certainly not the first time. It is also no coincidence either; throughout the financial crisis a tenet of BoE policy has been to keep the pound weak to aid UK exports to both boost economic growth and support the UK’s payments deficit. We will find out even more detail from the central bank when they release their minutes of the last meeting, on Wednesday.

The effect of the Eurozone crisis on Pound/Euro rates

What Mervyn King cannot control however, is the performance of the much maligned Euro zone economy. Figures at the end of last week showed that the 17 nation currency area returned to recession and gave the weekly graph a kick in its tail with the rate forced up on Friday, just not quite as high as it got to on Tuesday. 

One of the reasons the rate did not drive further and may not do so is the closeness and interdependent nature of the UK and Euro zone economies. Although the Euro zone appears to be teetering on the edge of disaster and the UK has posted good growth for the last quarter, the short-term forecasts still do not expect a sustained sterling rally. 

Every bail out of sovereign states strengthens the Euro as investors take it as a signal of solidity in the euro zone and the threat of a Spanish bailout, an economy which dwarfs Greece’s, would potentially see a large swing in the Euros favour. 

How to protect against rates moving against you

So going forward, if you are looking to buy Euros you should consider placing a Stop Loss order.This is where you can instruct us to purchase your currency should it drop below a pre-agreed level. 

For example, if you have set your budget at 1.22 you can then take a bit of a gamble on rates getting better, but have a safety net in place should rates fall. This is a good way to approach the current market, as it means you don’t lose out on all the recent gains and can still trade at a reasonable level. 

Click here to find our more about our rates and service.

Weekly Economic Data that may affect exchange rates 

Monday – Rightmove releases the latest UK House Prices this morning showing how that sector is performing. Eurozone data includes Italian Industrial Sales & EU wide construction output. We may also see news on Greeks latest bailout. Over in the United States we have House prices. 

Tuesday – There are no UK releases today. In the EU we have German inflation data and the EcoFin meeting. Further afield we have the latest minutes from the Reserve Bank of Australia. 

Wednesday – Quite an important day for the UK as we have the BoE minutes from the latest MPC meeting, which will show the discussions regarding Quantitative Easing. There are no EU releases of note. USA data today comprises of Jobless Claims, Mortgage Applications and a Consumer Sentiment survey. 

Thursday – Fairly quiet in the UK today with only a minor industrial trends survey being release. There is a host of inflation numbers from across Europe that could affect GBP/EUR rates however. There is also an EU consumer confidence survey. 

Friday – Mortgage approvals is the only notable release from the UK this morning. In the EU we have German GDP figures and a European Council meeting. There is nothing of note from the US.  

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 fall on BoE Inflation report. Forecast.

Wednesday 14th November 2012 

Good afternoon everybody. It’s been quite a mixed week so far in the currency markets, with big swings in the Pound/Euro rate along with other currencies. As the week started, Sterling was at a 6 week high against the Euro, and things were looking very good for Euro buyers. As is often the case with sharp upward spikes however, it was not to last. By Wednesday, a dire report from the Bank of England took the wind out of the Pounds sails, and we saw GBP/EUR rates drop by over a point.

In today’s report I’m going to take a look at what caused the Pound to fall, and what the events in the EU may mean for rates going forward.

Sterling/Euro highs were not to last 

Sterling hit its best rates against the Euro in 6 weeks recently after the Bank of England left interest rates and the size of its bond-buying programme unchanged, as outlined in my last post. The decision had been broadly expected by most analysts after a great run of UK data.

However the gains were not to last, firstly due to a dire report from the Bank of England this morning, and fears over what effect the deepening EU crisis will have on the Pound. Let’s take a look at what the Bank of England governor said and what effect it had on Sterling.

Pound falls after BoE Inflation report 

This morning, Sir Mervyn King gave the latest Bank of England inflation report, and during this he has downgraded the growth forecast and warned the economy will be below pre-financial crisis levels for the next three years as it continues its recent "zig-zag'' pattern. The comments did not bode well for Sterling.

Often when Mervyn gives a speech he talks the Pound down, and today was no exception. He said that the Pound/Dollar rate had gained by 8% and the Pound/Euro rate by 12% in recent times, and that these gains were unsustainable. I think he is worried what effect the strong Pound will have on exports, and so purposefully caused some weakness to try and drive the economy.

In the report he said that the Bank of England expects GDP growth of just 1% in 2013, and also said that inflation would to fall back towards the Government's target of 2% in the latter part of next year.

“There seems a greater risk that the UK economy may be in a period of persistent low growth,” Sir Mervyn said. He added that the outlook for inflation was the main reason why the policymakers decided to stop the purchases of gilts - or quantitative easing - in November. There is a real chance more QE could be on the cards however in December or early next year, so those that need to buy Euros should seriously consider their position now.

EU fears could also affect Pound/Euro rates

Little sign of a recovery in the euro zone any time soon is likely to weigh on the single currency against sterling. Weakness across the board would normally cause GBP/EUR rates to rise, however there are real concerns about whether the UK's economic recovery can be sustained, given a deepening recession in the euro zone which is one of our key trading partner.

If the EU economy continues to struggle, then it’s going to affect the Pound and this could keep rates in check.

The Greek economy is doing very poorly. It shrank 7.2% in the third quarter compared with the same period a year earlier, and has now been in recession since late 2008. They’ve had 2 bailouts from the EU and IMF, and there will probably be more to come.

Eurozone finance ministers will meet next week to discuss releasing the latest 31.5bn euros as they seek agreement on how to make Greece's debt sustainable going into the next decade. In the shadow of all of this, workers across the European Union are staging a series of protests and strikes against rising unemployment and austerity measures. General strikes in Spain and Portugal have halted transport, businesses and schools, and led to clashes between police and protesters in Madrid. Smaller strikes were reported in Greece, Italy and Belgium, and rallies were planned in other countries.

Summary 

Many clients are convinced that the problems in EU will drive rates back towards the 4 years highs of €1.28 we saw in the summer. I don’t agree with this. These were the highest rates for years, and despite much better expected UK data we have failed to get back to them.

Rates have fallen further this week due to fears over the UK economy, so if I needed to buy Euros I would give serious consideration over what to do now. We are still trading comfortably above the 1.20 level, and this time last year rates were as low as 1.13. Holding out for more gains could easily mean you lose out.

A wise strategy in this climate would be to place a Stop Loss order. This is where you can instruct me to purchase your currency should it drop below a pre agreed level. For example, 1.22. You can then take a bit of a gamble on rates recovering, but have a safety net in place should rates fall. This is a good way to approach the current market, as it means you don’t lose out on all the recent gains and can still trade at a reasonable level.

If you're looking for the best exchange rates, or just want to have a chat about the options open to you, then send me a free enquiry by clicking below. There is no cost or obligation involved, and you could be very surprised on how much you can save through the commercial rates I can source for my clients.  
 
Click here to send me a free enquiry

Pound/Euro exchange rate forecast November 2012

Monday 12th November 2012
Good morning everyone. As usual for a Monday, today I'm going to take stock of last weeks movement in exchange rates, look at why GBP/EUR rates have climbed. In addition I will analyse what may happen in the coming weeks to affect the rate, and of course as usual give you a detailed breakdown of economic data releases that I think will affect exchange rates this week.

In this week’s Report: 

•  Pound/Euro rates hit 5 week high
• Eurozone growth forecasts could affect UK 
• Round up of the week’s other data that may affect rates  

Sterling vs. Euro; 

Pound/Euro rates had a very good run indeed last week, with Sterling hitting a 5 week high against the Euro. In this report we will look at the reasons rates have increased, and look at what the coming weeks and months may hold for the Sterling/Euro cross.

First things first; Why have Pound/Euro rates gone up?

The main reason for the gains was the fact the Bank of England left interest rates on hold, and the size of its Quantitative Easing bond-buying programme unchanged. The decision had been broadly expected after recent strong UK third quarter growth figures, however some investors had positioned themselves for more QE, so when this didn’t happen the Pound gained strength as a result, pushing GBP/EUR rates up.

Only a few weeks ago, everybody convinced further QE was pretty much a given, and that it would happen the first week in November. In the last few weeks however, we have seen very robust UK data, including the fact the UK came out of recession recently, growing 1% between July and September.

However, a succession of poor economic indicators and corporate results has led many observers to believe that the economy is still weak, leading to speculation that more QE would be needed, just not right now. Indeed, the minutes from the last MPC meeting in October showed that some members thought more QE would be required at some point in the future.

All in all, for the moment the UK’s economic position looks relatively healthy, and this is the main reason for the strong Pound at present.

Pound/Euro rates also being driven by events in Europe 

The European Central Bank (ECB) also decided to keep rates on hold at 0.75%, with President Mario Draghi saying a euro zone recovery is likely to be slow and gradual but solid. Explaining the decision, he said that economic activity in the euro area was "expected to remain weak".

The weak data coming out of the Eurozone is another reason for the gains in the GBP/EUR rate. As the Euro weakens it becomes cheaper to purchase, pushing rates up. This was compounded on Thursday when data showed German exports fell in September at the fastest pace in nearly a year, raising concerns about the effects of the euro zone crisis on Europe's largest economy.

The European Commission has also cut its 2013 growth forecast from 1% to just 0.1% and said it expected unemployment to continue rising next year. This is stoking fears that the Eurozone crisis is far from over, and has caused further weakness in the Euro.

So if the Euro weakens GBP/EUR rates will continue to rise? 

Not necessarily. It’s extremely important to remember that around half of Britain's trade is with Europe. If the revised growth forecasts are accurate then this could have a significant effect for the UK in terms of our exports. While the UK is enjoying growth and a strong pound, weakness in the Eurozone could easily cause investors to also shun the Pound, and this is what is keeping GBP/EUR rates in check. Indeed on Friday rates stopped climbing and started to drop back away, indicating we had already hit the peak on Thursday afternoon.

Regardless of whether you need to buy or sell Euros, there is so much going on in the currency markets that rates could move either way in the coming weeks. In the last few weeks alone rates have fluctuated by over 2.5%, meaning a €250,000.00 purchase has differed in price by over £5000.00 in just a few weeks, clearly showing how quickly things can change and the impact it can have on your currency requirement.

If you need the best exchange rates, the first step is to contact us to have a free consultation. We can then let you know the options available to you, making sure you are not caught out by adverse exchange rate movements, and ensure you make the most of your currency.

Click here to send a free no obligation enquiry now. 

Weekly Economic Data that may affect exchange rates 

Monday – We’re fairly light on data releases today as it’s a market holiday in America and France. We do have some German Whole sale prices in addition to the Eurogrup meeting, which is attended by Finance Ministers of each Member State of the euro area. There are no UK releases of note. 

Tuesday – UK data today comprises of House prices, Retail Sales, and a raft of the latest inflation numbers. We also have inflation numbers from France, Germany and Europe. Also in the EU we will see the latest Economic Sentiment surveys. In the USA we have a monthly budget statement and a Business Optimism survey. 

Wednesday – Various UK releases today including Average Earnings, Unemployment, Jobless Claims, a BoE Inflation report and a Speech by Mervyn King. Expect volatility in the value of Sterling today. In Europe we have French Inflation, Spanish Unemployment & GDP, in addition to EU wide Industrial Production. Stateside we have Retail Sales, Inflation data, and the latest minutes from the FOMC. 

Thursday – Another important day for GBP/EUR. Starting in the Eurozone, we have GDP numbers from Spain, Germany, Italy and France. We also see EU wide inflation numbers. In the UK the only release today are the latest Retail Sales numbers, which are a good barometer of overall economic activity. Over in the USA we have inflation numbers, Jobless Claims, Manufacturing numbers, and speech’s by various members of the Federal Reserve. 

Friday – We end the week on a quieter note, with nothing released from the UK. There are global Trade Balance numbers from Europe however that could still affect Pound/Euro prices. Industrial Production numbers from the states round off the week.  

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

US Election effect on exchange rates / GBPEUR hits new high

Wednesday 7th Novmeber 2012
Good afternoon everybody. Things have moved around in the currency markets quite a bit today. We've had the US election dramatically affect the value of the US Dollar and riskier currencies. We have also seen Pound/Euro rates hit a new one month high due to poor UK data. In my post today I'll take a look at the election, then the Pound/Euro situation. I'll also have a quick look at Thursdays central bank decisions and how this might affect exchange rates going forwards.

US Election – effect on exchange rates

It dominated the news today, so I’m sure you all know that Barack Obama has won a second term as president of the United States. There are many sources where you can read about the election, so here today I will only focus on the effect it has had on exchange rates.

 Effectively, it has weakened the US Dollar significantly, and pushed rates up above $1.60 before falling back away. The reason the USD weakened is the fact is was sold off fairly comprehensively once the results were known. This is because the victory for Barack Obama in the U.S. presidential election is seen ensuring easy monetary policy.

It has calmed the markets now there is more political certainty, and the fact Obama won means economic policy will remain the same and the Federal Reserve's easy monetary policy is likely to stay for some time to come. This weighed on the dollar and gave a boost to commodity currencies such as the Aussie Dollar and Canadian Dollar. Gains were limited however over a little uncertainty over Thursdays Bank of England decision, which I’ll cover in more detail in a moment. First, the Euro…

Pound hits new 1 month high against Euro 

Initially when the markets opened on Wednesday Pound/Euro rates dropped back away. This was due to the move into riskier currencies, as I mentioned in the election paragraph above. This gave the Euro some strength and it became more expensive to buy.

The drop didn’t last long though, as at 10am this morning we saw the latest German Industrial Production figures, and they were far worse than expected. The German industrial output data also lowered growth forecasts from the EU Commission, and this weighed on the single currency ahead of a crucial Greek parliament vote on reforms.

The net result? A weakening Euro and a spike of nearly one sent from the low to the high today. This shows how quickly things can change in the markets, and on a purchase of €250,000 today, the cost has varied by £1600.00 this afternoon alone. It’s good news for Euro buyers, as rates are the best in over a month, and only a few points away from the best in over 4 years. If you need to buy Euros in the next 6 months, get in touch with me by clicking here.

Bank of England announcement Thursday 

The next main event is the Bank of England decision on interest rates and Quantitative Easing at midday Thursday. A few weeks ago, everybody thought it was certain more QE would be announced. In the last few weeks though, better UK data has greatly reduced the chance of this happening.

Of course nobody knows for sure, and some MPC members are split on what to do. The reduced chance is the reason the Pound has strengthened. Things can turn the other way very quickly though, so if they do announce further stimulus, expect the Pound to fall. Personally I think they will hold fire on more easing until early next year.

ECB also meet on Thursday

The European Central Bank also meets on Thursday and while no rate cuts are expected, growing evidence that they are in the midst of a recession is likely to boost expectations of more easing in the coming months. Watch out for the press conference at 13:30pm Thursday, as any comments positive or negative about the Euro could quickly affect GBP/EUR rates. That’s all for now, remember to send me a free enquiry if you need to secure 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

Pound/Euro exchange rates best in a month

Monday 5th November 2012
Good morning. Pound/Euro rates have recovered well over the last few weeks, hitting their best in over a month. This is mainly due to a raft of better than expected economic data from the UK, lessening the chances of further Quantitative Easing and giving the Pound a boost. In today's report I'll take a look at what the forecast is for Sterling/Euro rates, and what data to look out for this week that could affect exchange rates.

In this week’s Report:

•    Pound/Euro rates hit one-month high
•    Pound performs well against a basket of currencies
•    Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

Last week the pound rosewell  against the euro, hitting its highest levels since the beginning of October, breaking through the 1.25 level on Friday before finishing down around 1.2480 where we remain this morning. As well as the recent better than forecast GDP data showing the UK is no longer in a recession, we have seen mortgage, retails sales and consumer credit data all come out better than expected.

Less chance of Quantitative Easing from the BoE

All of these recent releases suggest there will be less chance of the BoE pumping more money into the economy via the QE program. (Pumping more funds into the British economy would effectively dilute the pound, bringing the GBP/EUR rate down). This was supported by MPC member Charles Bean last week who said he believed the successive rounds of QE by the BoE has led to a drop in bond yields and an increase in equity prices. However, he was less certain at this stage of the effect that lower yields will have on demand for government bonds and even stated there were reasons to believe the effect of lower yields in boosting demand may be weaker than usual.

These comments only corroborated the belief that he will vote against further QE at the November MPC meeting this Thursday. Another reason for the rise in exchange rates is the continued uncertainty around the euro countries’ ability to deal with the ongoing financial crisis and the doubts surrounding the future of Greece and Spain within the Euro. Spain reported a 5th successive quarter of negative growth, reporting a -0.3% contraction in Q3. This weakened the Euro and has compounded the increase in rates.

Spain's woes continue

Many analysts believe that the actual numbers from Spain could actually be much worse than the release suggests. This is because people were bringing forward purchases to avoid the VAT increase in September. This also helps explain the Spanish retail sales figures which were down by -10.9% when they only fell -2.0 in august.

Even with good news from the Eurozone, in the form of the German economic minister’s prediction that the German economy will grow by 0.8% in 2012 and 1% in 2013, the euro still failed to gain any significant strength. The UK just mirrored these predictions when The Confederation of British Industry raised its UK growth forecast to 1.4% in 2013 from a previous 1.3% forecast, and said growth in 2014 could reach 2%, meaning this had little effect on rates.

Looking ahead, the main mover of rates this week, other than the BoE and ECB rate decisions on Thursday, will be whether Spain will ask the EU for further assistance in the form of a bailout, which has been widely expected for some time. If Spain does secure a further bailout, it would actually be good news for the EU, and therefore we could see confidence increase in the single currency, strengthening it against sterling and pushing the rate down.

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Weekly Economic Data that may affect exchange rates 

Monday – We start the week with Spanish unemployment figures, Eurozone investor confidence measures and services PMI from the UK. We also have non-manufacturing PMI from the US. 

Tuesday – Focus will be on the US on Tuesday with the presidential elections taking place. We aslo have a raft of data from the UK and Eurozone. We start the day with Spanish and Italian services PMI followed by services PMI for the Eurozone as a whole. We then have manufacturing and industrial production figures from the UK with a ten-year bond auction. From the EU we have German factory orders. 

Wednesday – A quieter day for data releases on Wednesday, we have no data of note from the UK. In the US we have a ten-year bond auction and over in Europe we’ll see the release of German Industrial Production figures and retail sales for the Eurozone as a whole. 

Thursday – Another busy Thursday this week with key announcements from the Bank of England, including an interest rate announcement and a decision over another round of quantitative easing. There’s also a European Central Bank press conference coupled with an interest rate decision. From the States we have trade balance and unemployment figures. 

Friday – A quiet end to the week with minor data releases of little significance. From the US, we have consumer sentiment and inflation expectations. No data of note from the UK with French and Italian industrial production figures from the Eurozone.  

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