Pound/Euro at 1 year low after GDP figures

Monday 28th January 2013   

Good morning. Well last week was a very disappointing one for the Pound, with GBP/EUR rates falling to a one year low due to poor GDP figures. Today’s report will consider the dramatic fall in sterling/euro rates that has occurred recently. We will examine the effects of the UK’s forecast and announced GDP figures, EU data, Bank of England policy, as well as, David Cameron’s recent speech on Britain’s role in the EU. I'll also look at how you can protect against further falls.

In this week’s Report: 

• UK GDP disappoints at -0.3%
• Pound/Euro at 1 year low
• Pound/Dollar at 6 month low
• Round up of the week’s other data that may affect rates  

Sterling vs. Euro falls to 1 year low; How and When Did this Begin? 

Sterling euro rates have been subjected to a perfect storm with regard to news and data as of late. GBP/EUR had fallen away from the summer highs but appeared settled in the low to mid €1.20’s; this was before the European Central Bank's (ECB) interest rate decision and the initial predictions for Britain’s Gross Domestic Product. The spike in sterling/euro rates this summer was due to an interest rate cut by the ECB. Interest rate cuts can be used by Central Bankers as a means to stimulate the economy and the ECB used one of the major tools in their arsenal. 

 

The well-publicised issues in Greece, Spain, Portugal, Italy, and even France, left many euro-bears expecting a similar cut to rates at the beginning of this year which would prompt another round of euro weakness. Yet when Mario Draghi took the stage to announce the ECB’s decision earlier this month, not only did he leave rates unchanged, he offered a far more positive prediction for the Eurozone in 2013. This initial piece of euro-strength saw a drop in rates which was compounded by the news that the UK was forecast to have contracted in the final quarter of 2012. 

GDP figures cause Pound to fall even further

The announcement came at 9:30 last Friday; the official figure was -0.3%, and the contraction prompted a significant drop in rates; a 10.2% drop in mining and quarrying was one of the more significant contributing factors. There was a degree of trepidation when Britain exited recession in quarter three of last year; there were many claiming that the growth was mostly due to anomalous events, such as the Olympics, and once that artificial stimulus was over we would continue down a similar path. 

The contraction is the clearest sign yet that the UK could fall into a Triple-Dip Recession and there is a genuine fear that the Britain could lose its Triple-A credit rating. 

Unfortunately there is little continuity with our current coalition government; particularly when last week Nick Clegg, in typical dissenting fashion, publicly declared that capital spending cuts were a mistake. With continual U-turns and no discernible consensus on policy, other than anti-EU rhetoric and deficit reduction speeches, there is a genuine fear that the coalition may have led the UK down a very rocky road to recovery indeed. Markets are never fond of uncertainty and the poor data and lack of congruent direction have been a major factor in sterling’s recent decline. 

Contact me now to find out how to get the best exchange rates

How Has Data From the EU Affected the Rates? 

Despite the recent ECB positivity Europe remains an incredibly polarised continent. This was particularly evident last Thursday where two very different sets of data caused brief swings in the rates. French PMI came in much poorer than expected and Spanish unemployment continued to grow; now at a staggering level of 26.02%. 

The data was a brief reminder that there are still significant problems in the Eurozone and it was only last year that Citi were predicting a Greek exit from the Eurozone and Spain to apply to ECB’s bond purchasing program by November. Once again Germany rode in to the rescue; a less than expected contraction in manufacturing and growth in services PMI saw the single currency retrace the ground lost by its constituents’ weaker counterparts. 

What Could the Bank of England do to Intervene? 

The most recent Bank of England minutes revealed a unanimous vote to keep interest rates at the current level and Mervyn King has spoken at length about the pros and cons of quantitative easing. Governor King has outlined that that particular form of monetary policy is subject to the law of diminishing returns; in short this means that the more the BoE do it, the less effective it becomes. On this matter all but one of the deciding members opted to leave QE on hold. 

There is now the risk however that more QE will be needed given the recent figures, and this would weaken the Pound and potentially cause exchange rates to call even further. 

Find out how to protect against the rate dropping further. 

David Cameron’s Speech on Europe 

Last Wednesday David Cameron stood at the Bloomberg offices in London to announce he was to propose an in/out referendum for the UK on Europe. The crux of his argument was that he intended to renegotiate Britain’s seat at the European table; with many wondering how much of it was simply a ploy to keep Nigel Farage and the Tory Euro-Sceptic Motley at bay. 

John F. Burns, writing for The New York Times, described the announcement as a “giant political poker game” and it appears Mr Cameron has gone all in. Former Prime Minister Tony Blair called the move “holding a gun to his own head” and whilst a referendum could be beneficial to the UK the implications of Britain exiting the EU are unclear and could be very damaging. Blair’s comments will have referred to the fact that the referendum is not due until 2015 and the uncertainty will be detrimental to sterling and the UK economy; but also, there seems to be an obvious self-motivated element. 

Cameron’s popularity will likely increase with those in the UK harbouring anti-EU sentiments; as there are surveys that suggest UKIP have moved to third in the polls ahead of the Liberal Democrats. Also, the referendum is conditional on the Conservative Party, and Cameron, remaining in power after the next general election. 

What Can I do About It? 

Despite all the doom and gloom for the UK there are way you can maintain a level of control of your finances; if not your government or the markets. If you will need to purchase euros, and are worried the rate could continue to fall further, you could enter into a forward contract that lets you lock in today’s rate which would only require you to lodge a 10% margin against the total amount you want to convert. 

Alternatively you could use a stop loss that allows you to buy the euros 24/7 if the rates falls below a pre-agreed level. If you are selling euros the rate has certainly gone in your favour; it is important to keep in mind that market movements are fickle and if there is another well-publicised issue in the Eurozone we could see these gains retraced. 

Limit orders allow you to set an optimistic level in the market which, like the stop-loss, can be bought any time of any day if the level is triggered. Certainly with this much market uncertainty it is worth taking a free consultation 

If you need the best exchange rate, contact me now.  

Quote 'AJABLOG' when you get in touch.  

Weekly Economic Data that may affect exchange rates 

Monday – There is no UK data today. In the Eurozone we have German Trade Balance numbers in addition to Retail Sales. The USA releases its most recent home sales data and Durable Goods orders. Further afield New Zealand has trade balance numbers at 21:45pm.

Tuesday – Again nothing today from the UK. In Europe we have German & French Confidence measures, Spanish Retail Sales, and Greek inflation data. The US also has confidence measures. 

Wednesday – The UK today releases consumer credit numbers, Mortgage Approvals and Lending data. In the Eurozone we have a Spanish GDP estimate, Italian business confidence measures, and a German bond auction. We also see Portuguese Consumer and Business Confidence. In the states we have GDP numbers, Mortgage applications, and an interest rate decision. New Zealand also has an interest rate decision at 8pm. 

Thursday – Fairly quiet in the UK with only House Price data being released. In the Eurozone we have various inflation measures from most countries, in addition to German unemployment. The USA also releases unemployment numbers and inflation data. We also see the most recent GDP numbers from Canada. 

Friday – It’s been a very quiet week for the UK, and today is no different; manufacturing PMI is the only release of note. In the Eurozone we have inflation number; unemployment figures. In the United States we have unemployment, inflation data, construction spending, consumer sentiment, and Non-Farm Payrolls.

  
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 - Quote 'AJABLOG' when you get in touch.  

Pound/Euro exchange rate forecast 2013 outlook

Wednesday 23rd January 2013 

Good afternoon. Right then, this afternoon I’m putting up my thoughts on what has happened this week with exchange rates, what has been moving the Pound against the Euro and other currencies, in addition to what may happen in the next few days in the currency markets. 

The Pound continued to fall at the start of the week, dropping to a 10 month low against the Euro. We have since seen things stabilise, and Pound/Euro is steady just above 1.19, with Pound/Dollar around 1.5850. 

Now, it's quite a long post today so bear with me while we dig a little deeper and find out what has been going on. I’m going into quite a bit of detail covering: 

• UK borrowing worse than expected 
• Better UK Jobs data halt Sterling’s decline 
• The effect of Cameron’s EU speech on exchange rates 
• The Bank of England and Quantitative Easing 
• UK Growth Figures this Friday 
• How to get the best exchange rates and time your execution

 Excited? I am. Let’s get started! 

Public Sector Borrowing knocks the Pound further down 

Earlier this week figures showed that the government borrowed slightly more than expected in December, fuelling fears that the UK could lose its coveted AAA credit rating. The result was that Sterling continued its recent decline against the Euro. 

All three of the major credit ratings agencies now have the UK's AAA rating on negative outlook, meaning they could downgrade its rating if performance deteriorates. The risk of this happening is really weighing on Sterling at the moment, and the Pound fell further to a 10 month low against the Euro as a result. 

Better UK figures halt Sterling’s decline 

After a very poor start to the year in which Sterling lost 3.5% of its value compared to the Euro, some better figures this week finally halted the decline in rates. It is by no means a recovery, but rates have not fallen any further in the last 24 hours. 

This morning we saw the latest UK unemployment figures, showing that the total has fallen to 2.49 million. The UK unemployment total has fallen to its lowest level for 18 months while the number of people in work has reached another record high – in fact total UK employment is now at 71%, which is the highest it’s been since records began in 1971! You can read more about the employment figures here 

Despite these great numbers, the Pound hasn’t gained much ground. The number of people out of work in the UK has been falling steadily for almost a year, despite concerns over the economy's sluggish growth. This is strange however, and probably the reason Sterling hasn’t gained much strength. It seems unlikely to me that employment can continue rising while the economy is flat lining, and this can’t go on forever. There are worries that figures to be released on Friday, which I’ll go into more detail about shortly, which will show that the economy contracted during the final quarter of the year. 

Cameron on EU 

Also today, we heard David Cameron give his long awaited speech on the future of Britain’s position within the Eurozone, and he said the British people must "have their say" on Europe as he pledged an in/out referendum if the Conservatives win the election. 

The prime minister said he wanted to renegotiate the UK's relationship with the EU and then give people the "simple choice" between staying in under those new terms, or leaving the EU. 

You can read a detailed report on the speech here 

What Cameron’s EU speech actually mean for the Pound and exchange rates? 

In my opinion he has simply kicked the issue 5 years down the road. This also means that there will now be continued uncertainty over the UK’s membership of the European Union for 5 years. Markets do not like uncertainty, and so I think this could hinder investment in to the UK until our position is resolved once and for all. So all in all it’s probably bad news for Sterling, and another reason we haven’t seen rates recover significantly despite the better jobs data this morning. 

Bank of England's effect on currency rates

Today we saw the latest Bank of England minutes, which showed that all 9 members of the Monetary Policy Committee voted to keep interest rates on hold. All but 1 of the members also voted to hold off with any further Quantitative Easing, for the moment. 

So as expected really and not much movement on exchange rates. OF more importance was the governor Mervyn Kings speech yesterday evening. In it, he called for further action to boost the UK's ailing economy. 

To combat the downturn, the Bank has cut interest rates to record lows and pumped £375bn into the economy to try and stimulate demand under the programme known as quantitative easing (QE). QE was "crucial in avoiding a depression," he said. So while the MPC have decided to hold off more QE for the moment, we will probably see more of it this year, particularly if Friday’s GDP numbers disappoint. 

GDP figures this Friday – very important for the future of GBP/EUR rates 

On Friday the latest UK GDP numbers will be released. At the moment most forecasts suggest that this will show the economy shrank by 0.1% in the last 3 months of 2012. You can read more about what the GDP number means here

 In a nutshell, if the number is lower than this, expect Sterling to fall against other currencies. This is because it would increase the chance of the UK heading back into recession for a 3rd time, making it very likely we would lose our prized credit rating, and also mean more QE is on the cards. 

Find out about the exchange rates I can offer. 

What you need to know if you need to buy or sell currency 

Regardless whether you need to exchange Sterling for Euros, Euros for Sterling, or indeed change any other currency pair, the markets are extremely volatile at the moment. 

For those exchanging Sterling, I would say the real and present risks to the UK economy mean further drops in exchange rates are very likely. Many clients are choosing to fix their exchange rate for now for any requirement in the next 6 months. You can do this by only lodging 10% of what you want to convert now, thereby protecting against rates falling further. 

If you are converting another currency to Sterling, then things may get better should the GDP figures be poor, however this is not a given. You should consider placing a Stop Loss order to protect you in case the rate starts to get worse for you. 

To discuss how we can help you get the best exchange rates, or to find out all the options you have open to you, contact me for a free consultation. I can discuss what you need to do, give you my opinion on the currency market movements and where analysts think rates are headed, and run over all the available options open to you. I look forward to hearing from you. 

Click here to send me a free enquiry now. 

Will the Pound/Euro rate keep dropping?

Friday 18th January 2013

Good morning. The UK is in a cold snap, and snow is falling across the country. The UK economy and Sterling has also been getting a pretty frosty reception from investors recently. This week was another torrid one for the Pound/Euro cross I'm afraid, with exchange rates continuing to fall and dropping below the €1.20 level. In today’s report we will take a look at why Sterling has fallen & what the forecast and predictions are for the coming months. We will also look at what tools we can provide to help protect you against adverse exchange rate movements to help you make the most of your currency. 

In this week’s Report: 

• Pound/Euro tumbles below €1.20
• GDP figures this week could confirm negative growth
• Pound/USD drops below the $1.60 level. 
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; Why have the rates fallen so much? 

The pound has now fallen 3% so far this year. Last week continued poor data pulled rates below the €1.20 level. It looks increasingly likely that 2013 could be a very disappointing year for sterling.

There are three main areas of concern for the pound: firstly, a raft of poor data shows the UK economy is struggling and that we could be headed back in to recession. Secondly we have the potential loss of the UK's AAA credit rating which is becoming increasingly likely. On Tuesday, the Fitch ratings agency warned that the UK's top-notch sovereign credit rating could be cut if the Chancellor of the Exchequer's March budget shows debt levels continuing to rise. 

Thirdly, Britain's unclear position in the EU is also weakening the Pound. We only have to look back a few months to see that currencies react badly to uncertainty. The longer this debate drags on, the harder sterling will fall. 

What could happen to rates this week?

So part of the reason for the drop is uncertainty over the UK economy. Next week will give some important clues on which way things are headed. On Wednesday we have the Bank of England (BoE) minutes, which will show how they voted on the recent decision to hold off changing interest rates or pursuing more Quantitative Easing. This may indicate further QE is on the cards and so could pull the Pound down further. 

Of even more importance will be Friday’s GDP figures. A recent estimate indicated the economy shrank by 0.3% in the last 3 months of 2012. If these figures are confirmed, it would mean the economy didn’t grow at all last year, and increases the chances of the UK heading back into recession for a 3rd time. 

The decline in the rate is not all down to the UK however, it’s also partly due to a strengthening Euro. In recent weeks we have had the ECB giving a very robust outlook for the Eurozone, and the markets now see the EU debt crisis being tackled. This has given confidence back to the single currency, and it has gained strength as a result.

So what are the forecasts for the rest of the year? 

The UK economy is still very soft and that adds up to testing times for sterling," said Daragh Maher, foreign exchange strategist at HSBC. He has forecast the Sterling/Euro rate to drop to 1.1250 by the end of the year. "There's going to be an erosion of the view that sterling was the best of a bad bunch," he said. In stark contrast, Barclays Capital still have their 12 month forecast at 1.28! This shows how uncertain things are for Sterling/Euro rates and that nobody knows which way it is going. 

In truth, nobody can accurately predict which way exchange rates will move. There are however ways you can protect yourself against adverse exchange rate movements, and make sure your currency doesn’t cost more than necessary.

How to protect against the rate getting even worse. 

Regardless whether you are buying or selling Euros, one option is fixing your rate now for up to 2 years with a Forward contract. You only have to lodge 10% of the total you want to convert, and you are then protected against the rate moving against you, and this allows you to budget effectively. 

If you think the rate will get better for you, then another option you can look at is a Stop Loss order. This allows you to set a rate below the current level, and if it drops below this your currency is automatically purchased. Using this tool allows you to take advantage of any gains in the rate, but should the market drop then you have a worst case scenario allowing you to budget. 

Make an enquiry today for free

Given there is so much uncertainty surrounding the exchange rate at the moment, with very different forecasts from major banks, now is the time to take stock of your requirements for the year. The first step should be a free consultation. In this way I can discuss your requirements and look at all the options available to you, allowing you to make an informed choice on when to fix your rate. 

Don’t simply leave things to chance and hope the rate will get better. Hope is not a reliable economy tool. Contact us today and take the first step to making the most of your currency.

Weekly Economic Data that may affect exchange rates 

Monday – Fairly quiet today as it’s a market holiday for Martin Luther King day. We do have some House Price data for the UK, and some inflation numbers from Germany, the EU’s largest economy. 

Tuesday – In the UK today we will see the latest Public Sector borrowing numbers, in addition to an industrial trends survey. In the Eurozone we have the EcoFin meeting and an economic sentiment survey. In the United States we will see the latest Home Sales and manufacturing numbers. 

Wednesday – An important day for the Pound: First we have the Bank of England minutes, showing how the vote went for the most recent QE and interest rate decision. This is followed by a raft of unemployment numbers. The only EU data of note are Trade Balance numbers from Italy. In Canada we see the latest interest rate decision. 

Thursday – UK Mortgage applications is the only data of note for Britain today. In the EU however we have Inflation data from France, Spain Germany, and the EU as a whole, which may dictate interest rate movements this year. Over in the states we have unemployment and jobless claims numbers. 

Friday – We end the week with the all-important UK GDP numbers. We could see confirmation the economy is in retraction again. Elsewhere there are some business climate assessment figures from Germany, and Home Sales data 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.  

Click here to send me a free enquiry

Will Pound/Euro drop further? 2013 Exchange Rate Forecast

Wednesday 16th January 2012 
Good afternoon. I thought I’d post up a mid-week update on what’s been happening with exchange rates, and Sterling in particular. In a nutshell the Pound is still struggling to make any headway, remaining between 1.20 and 1.21 against the Euro, and just below $1.60 against the US Dollar. In today’s post I’m going to have a look at recent UK economic data, and what effect this may have on exchange rates in the coming weeks, including the forecast and outlook for the best exchange rates in 2013. 

Euro strength means GBP/EUR is quite low 

The Euro has gained much strength in the last week, pushing GBP/EUR rates to their lowest in 9 months. A European Central Bank policymaker soothed investor concerns today however, that officials might take steps to undermine the currency's recent strength. 

ECB member Ewald Nowotny said the exchange rate was "not a matter of major concern", contrasting with comments from Eurogroup head Jean-Claude Juncker who on Tuesday prompted investors to sell the euro by saying it was "dangerously high". This is what caused the slight uplift in rates in the last 24 hours, but after the recent comments, the general downward trend has now continued. 

UK Inflation: Could there be more Quantitative Easing on the cards? 

UK consumer prices inflation held steady at 2.7% in December, official figures have shown this week. John Longworth, the director general of the British Chambers of Commerce, said however that he expected inflation to rise in the near term, as further rises in utility and food prices kicked in. Higher inflation is clearly a concern for the UK economy as it increases the squeeze on both businesses and consumers, further exacerbating an already weak economic environment. 

Now usually, the Bank of England would combat this with higher exchange rates, and this in turn would strengthen the Pound. At the moment though, rates are at a record low of 0.5%, and there is little prospect of them being raised to head off rising inflation. Instead, they would likely do more Quantitative Easing, which many are rumouring will happen again this year. If so, there is a risk to the downside for the Pound as QE would weaken Sterling. 

UK Credit Rating at Risk 

 

There is more risk to Sterling than just QE however. Part of the reason rates have plummeted in the last week is the fact that the UK continues to risk losing its top AAA credit rating if it does not reduce its debt, as a senior figure at Fitch Ratings agency recently said. Fitch has had the UK's AAA rating on "negative" outlook since March 2012, meaning that it is warning it may cut it. 

If they do, it would mean the UK is a less attractive place to invest, and so this is weighing on the Pound and stopping any recovery in rates. 

Summary 

Pound/Euro Rates have been dropping for a while now, due to poor UK data and a stronger Euro. What will happen in the coming weeks depends on further UK data to come this month, and market reaction to the EU debt crisis. I do believe that longer term we will see rates recover as the UK economy picks up, however I think things may get worse before they get better. 

If you are buying Euros, then you can place a ‘Stop Loss’ order, which is where we can secure your currency if it drops below a pre-agreed level. This means if rates improve you can still take advantage, but have a worst case scenario should the market continue to fall. 

For those converting Euros back in to pounds, then if it were me I would probably take advantage of the 9 month high. It hasn’t got any better in the last day or two, and if we continue to get conflicting messages from the ECB, investors could sell off the Euro. 

Regardless which currency you need to buy or sell, send me a free enquiry today to see how we can help you achieve the best exchange rates possible. I look forward to hearing from you.  

Click here to send me a free enquiry

Pound/Euro falls to lowest rate since April 2012

Friday 11th January 2013

Good afternoon. Things have not gone well for the Pound/Euro cross I'm afraid. It's been in general decline now for a few months, and this week saw further drops. Today alone it has dropped from 1.2280 to 1.2075 in the course of a few hours. This is not welcome news for those needing to buy Euros, however those converting the single currency back in to Sterling should consider taking advantage of the current highs.

All is not lost for those buying Euros however, as there are still ways you can protect yourself against further declines in the rate which I will go in to more detail about below.

In this week’s Report:

• Pound/Euro rates drop further due to strengthening Euro 
• Dollar weakens, pushing GBP/USD rates higher 
• UK GDP estimate indicates triple-dip recession 
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

As I stated above, Pound/Euro rates have not been faring well so far in 2013. We have seen the rate drop steadily to the lowest since spring last year. In today’s Euro report we will look at what has caused the fall, and what may be in store for Pound/Euro rates in the coming months. 

Despite the UK government resisting pumping more money into the economy via its QE program at its latest MPC meeting this week, the pound weakened significantly, hitting its lowest levels for nearly 9 months. Any news that could have helped sterling was over shadowed when the president of the ECB Mario Draghi in a TV interview said he was confident the Euro economy as a whole should slowly recover throughout 2013. 

This news really gave the Euro a boost, giving the single currency some strength and making it more expensive to purchase. He did not however remove the possibility of further interest rate cuts in the future from the table. 

UK headed back in to recession

The decline in the rate continued today, when we saw further woes for the pound with much weaker than expected industrial production and manufacturing data being released, as well as a GDP estimate coming in below forecast at negative 0.3%, indicating a contraction of the UK economy in the fourth quarter. 

If the figure is confirmed by official data later this month, it will mean that the economy returned to growth for only a single quarter. It would also mean the economy saw zero growth for the whole of 2012. A triple-dip recession would likely weaken the Pound even further, so we might see raets drop even more.

With most data being released from the UK below forecast it also further outlines the threat of the UK losing its prized triple A rating and If Chancellor George Osborne continues to fall short of his targets, a downgrade could very much be on the cards which will hinder investors’ appetite for buying sterling as it indicates the UK could go into a triple dip recession. 

If you are buying Euros

For those looking to buy Euros, serious consideration should be given to fixing your rate now. Even if the funds are not needed for some time, you can lock in today’s rates for up to 2 years, and only lodge a 10% margin of the total amount you want to convert. This will protect you against a further decline in the rate. Alternatively, you can place a Stop Loss order. This is where your currency is purchased automatically if it drops below a pre-agreed level. So if rates recover you can still take advantage of any gains, however should the market continue to fall, you have a worst case scenario. Find out more.

If you are selling Euros

For those selling Euros, it’s the best it’s been in some time. Despite the outlook for the euro looking better, the euro economy as a whole is still walking a very fine tightrope. Greece for example has reported the highest level of unemployment ever recorded in the EU taking over Spain as the highest with a rate of 26.8%. This means we could easily see the rates swing back in the other direction if we see any bad data from any of the euro countries and especially any further indications of a rate cut. 

So things remain very uncertain, however you can have some control over the markets by knowing the options available to you, in order to make an informed decision on when to fix a rate and which type of contract to take. Take the time for a free consultation with us to discuss your requirements today. 

To put these movements into perspective, in just the last week a property purchase of 200,000 Euros would have a difference of around £3500. This outlines the importance of staying in close contact with your account manager ensuring you are aware of the latest rate movements and news on the markets. If you have not already done so, follow the link to open a no obligations trading facility today. 

If you need the best exchange rates, send an enquiry now.

Weekly Economic Data that may affect exchange rates 

Monday – Data is mostly from Europe today, including German Wholesale prices in addition to Italian and EU wide Industrial Production. In the USA we have speeches by key FED members. 

Tuesday – UK data today comprises of House Prices, Inflation numbers and Retail Sales. We also have inflation data from Germany and Italy. There is also EU wide Trade Balance figure released at 10am. Over in the states there are also a raft of inflation figures & Retail Sales numbers. 

Wednesday – There is nothing of note from the UK today. In Europe we have EU wide inflation numbers. The rest of today’s data is from the states: Consumer Price Index, Industrial Production and Housing Market data. 

Thursday – Unusually for a Thursday, there are no UK releases today. The ECB gives its monthly report, and there are also some EU construction numbers. The USA has jobless numbers, and further afield we see inflation figures from New Zealand. 

Friday – We end the week with UK Retail Sales, Italian Industrial Orders, and a US Consumer Sentiment survey.  

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 & Dollar forecast for 2013

Friday 4th January 2013

Good afternoon, and a very happy new year to all my regular readers, and of course those finding my site for the first time!

It's the first post of the year, so this afternoon I'm going to go in to quite a bit of detail on GBP/EUR rates, GBP/USD rates, look what's happened recently and where rates may be headed in the coming months. 

If you need the best exchange rates, don't forget to send me a free enquiry to find out about the exchange rates I can provide - they are significantly better than you can get at banks and other financial institutions!

In this week’s Report: 

• Pound/Euro recovery short lived as rates start to drop again 
• Pound/Dollar also drops slightly from 16 month high 
• Fiscal Cliff deal agreed in United States 
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

In recent months the GBP/EUR rate has been falling; however at the start of 2013 we saw rates pick up slightly. This wasn’t to last however, as by the end of this week the rate had started to drop again. In today's report we’ll look at the reasons why, and where rates may be headed. 

How has Fiscal Cliff affected Euro

The New Year ushered in a late fiscal cliff deal, and with it a resurgent euro, at least initially. Much of the focus last week was on the United States; not only due to the fiscal cliff, but also on the US debt ceiling and the country’s most recent data releases. These results have largely been the driving force behind Sterling/Euro rates and this week’s Euro report will look at how this and other events have affected the GBP/EUR cross. 

The compromise between the White House and Congress’s dissident Republican faction meant that the US economy would not be automatically plunged into recession. As the world’s largest economy, the state of America’s finances will always have a peripheral effect on economies like those within the Eurozone; and as such, stalemate in the fiscal negotiations would have been disastrous for the single currency. 

Late on January the 2nd the act was signed into law, close enough to the deadline to avoid any drastic price movements. The equity markets, which largely mirror the euro, responded favourably with the FTSE 100 breaking through the 6000 mark. The euphoria was short-lived however, as the following day euro strength receded as fear began to re-enter the public imagination. An undesirable side-effect of avoiding the cliff is the effect on US spending. The debt ceiling has been an issue for some time and the new taxes imposed on the wealthy are viewed as not enough to justify current public spending. 

This meant that the risk-on approach adopted early in the week was side-lined in favour of repurchasing safe-haven assets, like the dollar, which had previously been subjected to aggressive selling. The shift from investors buying the euro to buying the dollar was further exaggerated by the publication of the Fed’s minutes, which hinted at an end to the QE infinity program, and by positive data stateside which would act as catalyst to a winding down of Central Bank intervention. 

How has UK data affected Pound/Euro

Friday saw a fight back from the single currency against the pound. Month on Month Italian CPI and Year on Year European CPI both exceeded expectation yet the UK’s PMI Services Index was down from 50.2 to 48.9; a score of 50 is the minimum level required to indicate growth. The move indicated that the UK economy could have contracted as much 0.2% in the final quarter of 2012 reawakening fears that our exit from recession may have been largely due to events like the Summer Games. If the UK were to fall into a triple-dip recession, sterling-euro rates could continue to fall, making the purchase of euros a more expensive process. 

Time will tell whether the Conservative Party can grow an economy through cuts; what is clear however, is that Friday’s data brought negative direction to a cross that was largely range bound, but erratic, in its path. 

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Sterling vs. US Dollar; 

As mentioned in the Euro report, the main driving force behind fluctuations in the GBP/USD rate this week has been the apparent resolution to the US ‘fiscal cliff’ problem. The fiscal cliff was the forecasted sharp decline in the US budget deficit that could have occurred at the start of the New Year, due to increased taxes and reduced spending. 

 

The deficit—the difference between what the government receives in revenues and what it spends—was projected to be reduced by roughly half in 2013. Although reducing a country’s deficit is seen as a positive move, the associated tax increases and spending cuts were forecast to plunge the US economy back into recession and increase unemployment levels as a result. 

The American Taxpayer Relief act of 2012 was signed into law by President Obama on January 2 and eliminated much of the tax side of the fiscal cliff. As a result, the safe-haven dollar fell sharply on Wednesday as investors moved away from the US currency into riskier assets. 

As a result, GBP/USD hit a seventeen-month high of 1.6337. However, optimism over the US budget deal quickly waned; giving way to concerns that more budget wrangling may lie ahead. Consequently, the dollar began gaining strength with safe-haven flows driving GBP/USD rates lower. The dollar is often favoured at times of market uncertainty and as initial optimism over the budget deal was replaced with scepticism, the trend in rate movements reversed and the dollar regained the ground it had lost over the previous two days. 

The greenback continued its march as the week drew to a close as minutes from the Federal Reserve’s latest meeting indicated the central bank looks set to continue its bond-buying scheme over the coming months, helping to stimulate economic growth. However, rate movements were not entirely one-directional as US employment figures caused a brief rise in Cable. However, this was only temporary with the rate sliding further as market players unwound their positions ahead of the weekend. 

Overall, it was a fairly eventful week for the currency pair, with a 2% difference between the high and the low. This is considerable, considering the short trading week and the usual post-Christmas lull in activity. To put this movement into perspective, the cost of purchasing $250,000 early in the week was around £3000 less than if the dollars had been purchased on Friday. 

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Weekly Economic Data that may affect exchange rates 

Monday – Today’s UK data comprises of UK House Prices, and the CB Economic Index, which looks at overall economic activity and is considered as a measure for economic stability. In the Eurozone we have some inflation numbers and a measure of Investor confidence. 

Tuesday – The only UK data of note are the latest Retail Sales numbers. It’s quite busy in the Eurozone however with Trade Balance data from Germany and France, EU wide Retail sales, Unemployment and Industrial orders. In the USA we have an economic optimism survey along with some consumer credit numbers. 

Wednesday – Today is the UK’s turn for Trade balance figures which show overall imports and exports. In Europe we have some important GDP figures along with industrial production numbers from Germany and Greece. Further afield we have Trade Balance figures from New Zealand at 21:45pm. 

Thursday – Today we have the all-important interest rate decisions from both the Bank of England and European Central Bank. We will also see the latest decision on whether the UK will increase its Quantitative Easing programme. Also in the EU today we have Inflation figures from France and Greece. We also see Greek unemployment figures. In the USA we will see Jobless Claim numbers, and speeches by some key members of the Federal Reserve. 

Friday – We will see the latest GDP numbers from the UK today, along with Industrial and Manufacturing production figures. The only EU data of note is the French budget and Portuguese inflation figures. We round off the week in the states with a Budget statement and the latest Trade balance figures.  

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