Will Pound/Euro drop or go up?

Wednesday 27th February 2013 
Good afternoon. The Pounds rollercoaster ride has continued, with GBP/EUR rates moving between 1.1350 and 1.1650 in the last few days alone. In this afternoon’s post, first I will take stock of what has caused all the volatility. I will then look at what may happen in the coming days and weeks that might affect the exchange rate.

Finally, for those that are trying to time their purchase and who want to know whether to buy currency now or wait in order to get the best rate, I will go over the case for rates falling further, and also what might cause rates to recover. So in today's post you will find out all about....

• Overview of why the Pound has fallen
• Euro weakness could push rates back
• Why rates may continue to fall
• What needs to happen for rates to recover
• How to get the best exchange rates

I’ve gone in to quite a bit of detail today, but there’s lots to talk about so I make no apologies for this! So, read on below to get a full understanding of what is happening in the currency markets, and armed with this knowledge you can make an informed decision on when to fix a rate. 

When the time comes to do this, the rates I can source are up to 5% better than banks or other financial institutions. If you want the best exchange rates send me a free enquiry now. 

Pound falls to new lows after credit rating downgrade 

On Monday, the Pound fell to its weakest in nearly 2 years against other major currencies after Moody's stripped the UK of its triple-A credit rating. Although the news wasn’t a massive surprise, most didn’t expect this to happen until later in the year. 

Further falls in the pound are expected in the coming weeks given the grim outlook for the British economy, the prospect of more Quantitative Easing from the Bank of England (BoE), and growing evidence that the BoE is comfortable with a falling currency as it seeks to re-balance the economy and encourage exports. Rates did recover though after political uncertainty in Italy… 

Italy’s Election weakens Euro 

The single currency has rallied strongly in recent weeks as fears of an imminent break-up of the Eurozone eased, pushing Pound/Euro rates lower, but all this changed this week. Panic spread through the currency markets as political paralysis in Italy sent the Euro tumbling. The result in Italy is expected to slow the country's recent economic gains, and threatens to tip the entire Eurozone back into full-blown crisis mode. 

Markets hate uncertainty, especially political uncertainty, and so if investors begin to doubt that Italy will enact reforms to keep its economy on track, the damage will quickly spread to other European countries, amidst fears that Italy is too large for an EU bailout. This is why rates bounced back from the lows we saw on Monday.

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Some rare good news for the UK as GDP figures revised upwards 

Earlier today, the Office for National Statistics confirmed the economy had contracted by 0.3pc in the final quarter of last year. However, it revised up its estimates of previous quarters, and said there was 0.2pc growth in 2012, up from the zero growth it had estimated previously. There wasn’t much reaction in the markets, the Pound gained a little but these gains were short lived, as focus is still on the Bank of England and possible Quantitative Easing on the horizon. 

So, now that we have taken a look at what has been causing all the recent volatility, inevitably what my readers will want to know is will rates fall or will they rise. I don’t have the answer to this. Nobody does as the markets are impossible to predict. What I can do is explain the case for each scenario, and what may cause movements in either direction. Hopefully this will help you make a decision on what to do. 

So let’s have a look at each scenario now… 

Case for the rate continuing to call. 

The BoE have themselves stated they want rates to fall further. A senior Bank of England policymaker indicated that the pound may need to weaken further to help make exports cheaper and spur growth. Martin Weale said in a speech earlier this month: “Provided the calmer atmosphere we have seen since the summer is sustained, we may see further benefits of the depreciation.” 

Other credit rating agencies may downgrade the UK, and more QE may be on the cards. The recent downgrade compounds pressure on the pound that emerged last week after minutes of a BoE policy meeting showed officials, including Governor Mervyn King, edged closer to another round of the bond-buying programme that pumps more money into the economy -- a policy known as quantitative easing (QE). 

We also have the threat of a contracting economy and of course uncertainty over our future in the Eurozone. All these reasons combined do suggest that Sterling could weaken further and rates may fall. 

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Case for rates climbing back 

Although the pound has been weakening, Capital Economics believes the "biggest falls in the pound may now be behind us". They said that since Tuesday, Sterling had been fairly stable and that the pound could benefit soon from a shift in perceptions of sovereign credit risk in the UK compared to elsewhere. "The threat from a potential divergence in the unconventional monetary policies of the Bank of England and its peers abroad is probably also overstated," said Capital Economics. 

We may not see the UK economy shrink, and any good news may boost Sterling slightly. There is also the issues resurfacing in Italy, and if the debt crisis becomes centre focus again, the Euro could weaken pushing GBP/EUR rates back up. 

If you need to buy Euros 

I think that chance of further drops far outweigh the likelihood of recovery. There really are dark skies on the horizon for the UK economy and for this reason if I needed Euros I would do one of 2 things. Either fix the rate now to protect against potential falls, thereby removing your exposure to the volatile market and budget effectively. Alternatively, if I really thought rates might recover, I would fix a rate on at least half my requirement, thereby hedging my bets and giving some level of protection regardless what the market does. 

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If you need to sell Euros 

Rates rate are their best in quite some time. Moving €250,000 back to Pounds would get you £12,000 more than back in January. Rates may drop further, but you don’t want to hold out for a little more and risk losing the gains. I would place a ‘Stop Loss’ order to fix a rate if it starts moving back up. In this way you can continue to take advantage of any gains, but should the EU debt crisis start to move the market the wrong way, you know your worst case scenario and can have a specific rate should the market move against you.

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Get the best exchange rates now

Hopefully my post today will have been helpful to anybody needing to buy or sell currency that are worried about the current volatility of Sterling. I am a senior FX Trader for one of the UK’s leading foreign exchange brokerages, and in addition to the insight I provide on exchange rates, we provide commercial rates of exchange that are significantly better than banks or other financial institutions. 

 I am happy to speak to anyone that needs the best rates, and discuss requirements in detail. I knowing what you need to do, I can then suggest options you can consider. When you decide to fix a rate, the levels I can source often save my clients thousands of pounds. 

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Sterling to Euro predictions Feb March 2013

Monday 25th February 2013

Good morning. I hope you all had a nice weekend. As usual for a Monday morning, today I will have a look back at last weeks movements, look at what might be in store for exchange rates this week, and also look at what I think are the most important economic data releases that might affect currency. 

In this week’s Report: 

• Bank of England weakens Sterling, again. 
• More Quantitative Easing on the horizon 
• UK loses AAA Credit Rating 
• Round up of the week’s other data that may affect rates 

Sterling vs. Euro; 

Well, what a week for the Pound, especially against the Euro, with the pair starting and finishing the week trading at mid-market levels over 1.16, but a low on Wednesday of 1.14. Sterling fell also during the weekend during trading in Asia as financial markets reacted to the loss of Britain's top AAA credit rating. The pound fell to a 31-month low against the dollar and a 16-month low against the euro.

So, let's have a little look back at what happened last week

The week started off slowly due to Presidents Day in the USA so the markets were quiet and Sterling vs. Euro remained close to 1.16 all day. This however turned out to be the only calm day for the currency pair as Tuesday kicked off with surprisingly good economic sentiment figures from Germany and the Eurozone as a whole which forced the rate down 1 cent, and this slide was exacerbated by the impending Bank of England meeting minutes which were due the following morning. 

Bank of England minutes push Sterling lower 

The 9:30 am release then fuelled a further sell-off in Sterling over the course of the day, helping the Pound to retain its title of the worst performing major currency of 2013 so far. The minutes showed that since the last time the MPC sat down to discuss the UK interest rate (currently at an all-time low of 0.5%) and asset purchase programme (currently standing at £375billion) 2 more members have started to vote for more Quantitative Easing.

The current 6-3 vote to hold QE where it is means we only need to see another 2 members join the other “Doves” to give a majority, and the fact that one of the new voters is the BoE Governor, Mervyn King, means that kind of majority could even be reached at the next meeting. 

Thursday’s data helped to show just how finely balanced both the GBP/EUR cross is, and also both economies as it started to climb off the back of weaker than expected Eurozone manufacturing data and figures which showed that UK public sector borrowing fell by more than forecast. The Pound recovered most of Wednesday’s loss against the Euro and the rate ended the week pretty much back where it had started. 

What might affect the rate this week?

This week’s data releases are looked at in more detail in the market data section but the key release will be the 2nd estimate for UK GDP for the fourth quarter 2012. The last reading showed a -0.3% fall and any revision either way could be huge for Sterling. We have bodies such as the CBI & NIESR suggesting that we may narrowly avoid recession, but we will not actually see the initial reading for the current quarter until the end of April, so we expect the Pound to remain on a knife-edge as this reading will be a huge influence on how the Pound will perform over the rest of the year. 

Any further news from the Eurozone will also be closely watched, and we are sure to hear more on a potential currency war (discussed in detail in one of last weeks posts) where the ECB & BOE will try to devalue their currency to help keep exports attractive and therefore encourage economic growth. 

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Weekly Economic Data that may affect exchange rates 

Monday – Today’s UK data comprises of House Prices and Mortgage approvals, reflecting the health of this sector. Elsewhere we have Trade Balance data from Germany and Italy. Over in the USA we have a speech by a FED member, manufacturing numbers. Also of note is a speech by the Bank of Canada Governor Mark Carney, the soon to be governor of the Bank of England. 

Tuesday – Today we see a speech by BoE member Mr Bean; watch out for any negative comments that could de-value Sterling. Not much from Europe today other than German retail sales. We have a raft of data from the United States: House Prices, Consumer Confidence, Manufacturing figures, Homes Sales and a speech by the FED. Further afield, New Zealand has Trade Balance figures. 

Wednesday – An important day for Sterling, as we have the latest GDP figures, in addition to business investment numbers. In the Eurozone we have various measures of confidence: Industrial Confidence, Economic sentiment and consumer confidence. Over in the states we see further Home Sales numbers, another Speech from the FED, and durable goods orders. 

Thursday – Nothing of note from Britain today other than a measure of consumer confidence. Eurozone data includes Spanish GDP, German unemployment, French inflation numbers, and EU wide inflation figures. In the USA we have GDP numbers & Jobless Claims. 

Friday – UK data today includes inflation numbers, Credit/Money Supply & Mortgage approvals. In the EU we have another host of inflation figures from a number of countries, in addition to EU wide unemployment figures. We end the week with US Inflation, Manufacturing, construction spending and a measure of consumer sentiment.  

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 falls after BoE MPC vote. Will GBP/EUR keep falling?

Wednesday 20th February 2013 

Good morning. Sterling has dropped again dramatically this morning, after The Bank of England released the minutes to its latest Monetary Policy Committee meeting, showing that some members voted for more Quantitative Easing. In today’s post I will look at the effects of the news, and what this means for those looking for the best exchange rates. 

Bank of England minutes

At 09:30am this morning, the minutes were released. It looks like the Bank of England took a dovish tone, as it showed that three members of the Monetary Policy Committee voted for an increase in quantitative easing, including Bank governor Sir Mervyn King. 

The members of the rate-setting committee showed the nine-member committee split 6-3 in favour of holding the asset purchasing programme at £375bn, but the fact that 3 voted for more QE, including the governor, weakened Sterling significantly as you can see from this morning’s daily chart below. You can read a full breakdown of the minutes here on the Bank of England site.

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So why has this weakened the Pound? 

It’s because there is now a very high chance of further Quantitative Easing in the coming months. The split raised the prospect that the central bank might restart the QE programme. The last time there was a similar 6-3 split on the MPC was in June 2012, and the following month a majority of the MPC backed a £50bn increase in asset purchases. 

Quantitative Easing effectively floods the market with Sterling, and reduces its value as a result. In the past when QE has been announced, the Pound has dipped sharply and so should we see more stimulus then the Pound may well fall further. 

Along with Sir Mervyn, executive director for markets Paul Fisher and external MPC member David Miles voted for an increase in the central bank's bond purchases of £25bn to take the total to £400bn. The release of the dovish minutes caused the pound to continue its decline, falling 0.9pc to hit the lowest level in more than 15 months against the euro. At the time of writing Pound/Euro rates sit at 1.1425. 

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So will the Pound fall further? 

There is a very good chance of this in my opinion, given that more QE is now likely, our credit rate is under threat, and there is still the ever present risk of the UK slipping back in to recession. 

 Also of worry to those hoping the Pound will recover is comments made recently by the BoE governor. He said that “there are limits to what can be achieved via general monetary stimulus” as he urged the Government to “find ways of boosting overseas demand for our products” and push through “supply reforms” – often associated with tax cuts and deregulation. 

This means that they want the Pound to weaken further to try and boost exports to help the economy recover. 

Your options if you need to convert Sterling to another currency 

If you are looking for the best exchange rates, it’s likely you have been watching the markets in dismay as the rate has fallen all year. In January GBP/EUR rates were at 1.2350, and rates have fallen over 7% since then to the lows of 1.1420 we see today.

Given the huge volatility we're seeing at the moment, don't simply leave things to chance and hope things will move your way. You should take control of what you need to do, know your options and allow yourself to make informed choices on when to fix a rate.

So what to do if you need to convert funds? 

The first option is to simply fix the rate now. Even if you don’t need your funds for some time, you can lock in the rate today by lodging 10% of the total you want to convert. This protects you against further falls in the rate, removes your exposure to the market, and will allow you to budget effectively. 

Alternatively you could hold off and hope rates recover. This is a risk of course, as there is every chance rates could continue to drop away.

A third option is to hedge your bets. For example if you need to convert £100,000.00 to Euros, you could fix a rate today for £50,000.00. You can then take a gamble on the remaining funds. In this way you have some level of protection regardless what the rate does. If it gets better, then you can convert your remaining funds at a higher rate. If it continues to fall, then at least you converted some of your funds at a better rate. 

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Take the next step to getting the best exchange rates 

If you need to buy or sell foreign currency, send me an enquiry now. I can get in touch to discuss your requirements, run over the options you have, and provide all the information you need to make an informed decision on when to fix an exchange rate. When you do this, the rates we can provide are up to 5% better than the banks. 

So now that you’ve finished reading, take the next step to making the most of your currency, and send me a free enquiry now by clicking here 

Will GBP/EUR rates go back up? 2013 forecast predictions

Monday 18th February 2013

Good morning. The GBP/EUR rate continued its roller coaster ride last week, starting off at a relatively good level around 1.18, recovering after the European Central Bank president talked the Euro down (more on that shortly). 

As you can see from the chart below, the recovery was short lived as the Bank of England followed suit and talked the Pound down. In today’s report we will look at what is causing the swings, explain what is moving exchange rates both in the UK and the Eurozone, and look at what may happen to the exchange rate in the coming weeks and months. 

In this week’s Report: 

• Central Banks risk engaging in ‘Currency War’ 
• BoE comments and Retail Sales weaken Sterling
• Pound/Euro forecast for next 6 months
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

This week’s moves can be attributed to 4 main areas – Bank of England Comments, UK data such as Retail Sales, EU growth figures, and the increasing danger of an all our ‘currency war. So let’s look at each area in a little bit more detail. 

Bank of England weakens Sterling 

The Pound weakened heavily on Wednesday, falling to the lowest level against the Euro in 15 months, after Bank of England governor Mervyn King delivered the latest inflation report. He said that risks to economic growth are to the downside, and that he expects inflation to rise over the year. His negative comments caused investors to sell the Pound, which was probably his intention as usually when he gives a speech he takes the opportunity to talk the Pound down. 

So it seems increasingly likely that Sterling will continue to weaken, and his comments also suggest that the economy may well suffer a triple dip recession following the deep contraction at the end of last year. 

Retail Sales 

In addition to the gloomy inflation report, UK retail sales fell unexpectedly in January, confounding economists' expectations for a rise. The retail data raises concerns about the strength of the UK economy, which shrank by 0.3% in the fourth quarter of 2012. Some analysts had already feared that it could contract again in the first quarter of 2013, which would mean the UK would slip back into recession. 

"This probably brings the question of 'triple-dip' back on the table again," said Rob Wood, economist at Berenberg Bank. This caused the Pound to weaken further, wiping out all its gains over the previous week. This caused a sharp fall in the value of Sterling. 

Eurozone GDP 

In other data last week, figures showed the Eurozone recession deepened in the final three months of 2012, official figures show. The economy of the 17 nations in the euro shrank by 0.6% in the fourth quarter, which was worse than forecast. It is the sharpest contraction since the beginning of 2009 and marks the first time the region failed to grow in any quarter during a calendar year. The GDP numbers sent the euro lower, pushing GBP/EUR rates up slightly, however the gains were not to last due to the Retail Sales numbers and UK economic outlook, as outlined above. 

The recent strength of the euro has been a source of concern for France in particular. France has called for a target to be set to stop the single currency from becoming so strong that it damages the recovery. A high valuation makes exports more expensive and so it’s in countries interest to have a weak currency to try and spur investment. This has led to renewed talk of "currency wars" where countries compete to devalue their currencies to help boost exports. Let’s look at what this means in more detail. 

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Currency Wars 

Finance ministers of the G20 group of nations have tried to dampen speculation of a currency war. The value of a country's currency has a big impact on its trade and there are fears countries are trying to influence markets to help boost their economies. Indeed in the last few weeks we have seen both the European Central Bank & Bank of England use its press conferences as a platform to weaken their respective currencies. 

The G7 group of nations issued a statement saying they would not set targets for exchange rates of their currencies. The head of the European Central Bank, Mario Draghi, attempted to dampen talk about currency wars ahead of the meeting, by saying loose talk about currencies was "inappropriate, fruitless and self-defeating". 

 The meeting comes at a time when some of the world's biggest economies and regions are still struggling to spur economic growth. A weak currency makes goods from a country, or region, cheaper to foreign buyers and also boosts profits of firms when they repatriate their foreign earnings back home. 

What is said, however, and what may actually happen could be very different things indeed. We are now entering a very dangerous area, and as economies battle to weaken their currencies, it makes the currency markets very volatile indeed, and means we see rates move sharply and without warning. 

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If you have currency needs this year, take stock of your options now 

This year alone, a purchase of €250,000.00 has differed in cost by over £15,000.00, clearly illustrating how quickly things can change, and the impact it can have on any currency requirement. 

For this reason, and the market uncertainty surrounding exchange rates at the moment, you should contact us today to discuss your currency requirements in detail. In having a free consultation, we can let you know what is happening in the market, so you can make an informed choice on when to purchase your currency, and what type of contract is best for you.

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Weekly Economic Data that may affect exchange rates 

Monday – Today’s UK data is House Price data from Rightmove. It’s relatively quiet today, with the only other data of note Vehicle Sales from Australia. The US is closed for President’s Day. 

Tuesday – Nothing from the UK today and only minor data from Europe; Construction Output and an Economic Sentiment Survey. There are also housing figures from the USA, and Inflation data from New Zealand. 

Wednesday – An important day for Sterling; we have the latest unemployment and earnings data. There are also the latest minutes from the Bank of England which may indicate whether more QE is on the cards. In the Eurozone we have German and French Inflation data, along with Industrial order numbers from Italy. In the USA we also have inflation numbers, and the latest FOMC minutes. 

Thursday – The only UK data of note is Public Sector borrowing which is quite an important release. In the EU we have a raft of inflation numbers from Germany France and the EU as a whole. Over in the states we also have inflation figures, along with Jobless Claims and Home Sales. 

Friday – Nothing from the UK today, but GBP/EUR could be affected by Euro data – we have German GDP and Trade Balance numbers, Italian Inflation figures and Retail Sales, and an EU wide measure of inflation. Nothing from the USA, and we end the week with Canadian Inflation numbers and Retail Sales.   

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Exchange rates fall after BoE Inflation report

Wednesday 13th February 2013 

Good afternoon. In my last post I outlined the fact that Sterling had made a recovery against the Euro. However I’m afraid the recovery was short lived, and the Pound has continued to lose value and rates have fallen. In today’s post I’m going to explain why this has happened, and look at the Pound/Euro trend for the coming months. 

So let's get straight on to why rates have fallen again...

Bank of England weakens the Pound pushing exchange rates lower. 

This morning at 10:30am, the Bank of England (BoE) released it’s latest inflation report, delivered by outgoing governor Mervyn King. A link to the full report is here. This afternoon I will simply run over the effects on exchange rates rather than analyse the full report in detail. 

Recent figures have shown that the economy shrank by 0.3% in the last three months of 2012, fuelling fears that the UK could re-enter recession, defined as two consecutive quarters of contraction. In todays report, Sir Mervyn said: ‘The UK economy is set for a recovery. That is not to say that the road ahead will be smooth. This hasn't been a normal recession and it won't be a normal recovery.’ 

A more recent GDP estimate indicates that there may not be a contraction in the first 3 months of this year. Indeed, the BoE does not expect a triple-dip recession but said GDP was likely to continue at below pre-financial crisis levels for around another two years. 

"Growth is likely to be weak in the near term but further out a continued easing in domestic credit conditions, supported by the Bank's asset purchase programme and the Funding for Lending Scheme, together with the stronger global backdrop, underpin a slow but steady recovery in output," the governor said. 

So why did his comments weaken the Pound? 

The key to why the Pound fell is that the markets see his comments as Sterling negative. Sir Mervyn King said “there are limits to what can be achieved via general monetary stimulus” as he urged the Government to “find ways of boosting overseas demand for our products” and push through “supply reforms” – often associated with tax cuts and deregulation. 

Reading between the lines, what he means by this is we need a weaker Pound in order to make our exports more attractive. There is now the increased chance of further Quantitative Easing. The BoE actually want the Pound to weaken further and their policy moving forwards will likely reflect this. That is the reason the Pound fell so sharply when the report was delivered. 

Also of concern is the fact that the Bank’s update on the state of the economy came as the head of the Government’s Debt Management Office claimed that markets expect the UK to lose its prized AAA sovereign credit rating – this is also weighing on the Pound and knocking exchange rates lower. 

 Sir Mervyn was delivering his penultimate Inflation Report. His last Report will be in May, before he is replaced by Mark Carney as governor in the summer. It will be interesting to see if Mr Carney also pursues the policy of trying to weaken the Pound to encourage an export led recovery. We shall see. There are some interesting charts on the telegraph website which you may find of interest here. 

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So will the Pound keep dropping or recover? 

Nobody can predict which way the markets will move. My personal view is that we could well see more weakness, especially if we do lose our AAA credit rating and/or see more Quantitative Easing from the BoE. So for those needing to buy Euros, you should consider your options now to protect against adverse exchange rate movements. 

Rates for those converting back to Sterling are close to an 18 month high, so if I needed to convert Euros back to Sterling I would be keen to take advantage of the rate while it is favourable. 

In the EU, there is talk of the European Central Bank also trying to weaken the Euro in the same way as our central bank is weakening the Pound. This could cause rates to climb back but there is no way of knowing if this will happen. We are entering the dangerous arena now of a currency war, where central banks race to try and devalue their currencies to make investment into their country more attractive. This makes predicting where exchange rates may move impossible and also makes swings in the rate extremely volatile, such as we have seen over the last few weeks. 

As you can read here, G7 nations have recently agreed not to engage in so called currency wars, however what is said and what actually happens are often very different things.

What to do if you need the best exchange rates. 

I am a senior FX Trader for one of the UK’s leading foreign exchange brokerages. Our rates are up to 5% better than achievable at banks and other financial institutions. It’s not just about better rates though; we offer a free consultation to anyone who needs the best rates. 

We can discuss your requirements, explain what is happening with the market and run over the different options you can consider. In this way you will be able to make an informed decision on when to fix your rate, and you may be surprised how much you can save by taking advantage of the best commercial exchange rates available.

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Pound/Euro recovers after GDP estimate

Monday 11th February 2013
Good morning. After weeks of decline, Sterling made a modest comeback last week, pushing up from a low of 1.1475 breaking 1.18. In today's report I'm going to go into detail on what caused rates to bounce back, and also look at what the coming weeks may hold. If you are keen to know what is moving the market, in order to try and get the best exchange rates, then read on.
 
In this week’s Report: 

• Pound/Euro makes modest recovery 
• UK GDP estimate better than expected 
• Mario Draghi talks Euro down helping GBP/EUR 
• Round up of the week’s other data that may affect rates  

Sterling vs. Euro; 

This week’s report will focus on the erratic swings in GBP/EUR rates, the news and data that caused the fluctuations, and potential moves in the coming weeks. The story dominating FX headlines recently has been sterling’s rapid decline. The pound has been subject to an aggressive sell-off as fears mounted that the UK may enter a triple-dip recession, which could result in the loss of our Triple-A credit rating; and the now looming prospect of an in/out referendum on Europe for 2015, has created greater uncertainty. Last week, however, we saw the first significant retracement of this pressure and, once again, ECB President Mario Draghi was at the centre of the move. 

The single currency began last week on the back foot as news broke of corruption and scandal in the Southern European States. Spain and Italy were both back in the headlines with surprising allegations of undeclared payments from a secret slush fund being received by Spain’s ruling conservative party. A petition containing over one million signatures was collected calling for the immediate resignation of Mariano Rajoy, Spain’s current Prime Minister. 

This news was coupled with the announcement that Banca Monte dei Paschi di Siena, the World’s oldest surviving bank, was involved in a derivatives scandal which caused a renewed surge in Silvio Berlusconi’s fresh bid for power. This is because the aforementioned bank has strong traditional ties to the incumbent Democratic Party. 

So why has this affected euro rates? 

Essentially this calls on the old cliché “Markets hate uncertainty”. Under Rajoy’s stewardship Spain has placated much of the negative press it garnered towards the end of 2012. Spain were largely expected to subscribe to the ECB’s bond-purchasing program by the end of 2012 which aimed to intervene in their growing borrowing costs; yet, they have so far been largely self-sufficient, more so than Greece for example, and his resignation would threaten the current stability which aided a stronger single currency.

Incoming BoE Governor helps boost Sterling

Though this caused a rise in GBP/EUR rates the largest swing in prices can be credited to the words of Mark Carney and Mario Draghi. The incoming Governor of the Bank of England sat before the Treasury select committee on Thursday, and in his testimony to MP’s, he outlined his thoughts and intentions for the UK economy moving forward. Mervyn King has suggested before that Quantitative easing has a diminishing rate of return, with regard to effectiveness, though Carney outlined that the BoE could expand the range of assets it purchases, whilst supporting the pound from further weakening, all without effecting the UK’s inflation target. Sterling began strengthening both before and during Mr Carney’s words. 

ECB President weakens the Euro

Mario Draghi once again serenaded the currency markets with his announcement last Thursday; speaking on the euros current bull-run. He discussed the significance of the rate, with regard to growth and price stability, highlighting the dangers of a continual strengthening. His comments on inflation hinted that a cut to interest rates may not be entirely off the table; the last time such a measure was taken, we saw GBP/EUR rates surge to four year highs. His words came as a surprise to many, most expected him to touch upon the euros recent appreciation, though the announcement appeared more of a concerted effort to talk the single currency down. 

UK Growth not as bad as expected

Much of the recent coverage of GBP/EUR rates appears to show the UK, seemingly, in perpetual decline and the euro storming the markets. Yet the most recent NIESR GDP estimate for the UK came in at 0.0%; better than expected, however, sterling/euro is at a pivotal point. The UK certainly is not out of the woods, despite the recent flurry of positive data, the last official GDP figures have been below forecast. If this were to happen again the false hope could be doubly damaging for the pound. 

Not only this, but the euros recent appreciation has largely been built on rhetoric rather than any concrete data. Although Greece’s Finance Minister has suggested that they could begin the road to recovery by the end of the year, this remains to be seen, and if there was a cut to interest rates to stimulate the European economies, or more negative press, we could see the euro weaken again.

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Weekly Economic Data that may affect exchange rates 

Monday – A very quiet start to the week, with the only data of note from down under; Australian Home loans/lending data, and Retail Sales from New Zealand. 

Tuesday – UK data today includes Retail Sales, Inflation Data, House prices and economic index numbers. In the Eurozone there are some inflation numbers and Trade balance data for Portugal. Over in the US we have a monthly budget statement from the Federal Reserve, and a speech by one of the FED members. 

Wednesday – Today we have an inflation report from the Bank of England which could affect the Pound. We have Eurozone Industrial Production measures released at 10am. In the USA in the afternoon we have imports/exports & Retail Sales. Over in New Zealand we will see inflation numbers. 

Thursday – Unusually quiet for a Thursday, with no data of note from the UK. There are some GDP numbers for Italy, France, Portugal and the EU as a whole. We also have the ECB monthly report, so much that could affect the value of the Euro. The USA releases its latest Unemployment and Jobless numbers at 13:30pm. 

Friday – We end the week with UK Retail Sales. In the EU we have Spanish and Greek inflation numbers, in addition to Italian Trade Balance figures. In the USA we have manufacturing and industrial production data.  

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 exchange rate forecast Feb 2013

Wednesday 6th February 2013

Good afternoon everybody. As usual today I'm posting up a quick mid week update on what has been happening with exchange rates, and the Pound/Euro rate in particular. As regular readers will know, Sterling/Euro has been in sharp decline over the last few weeks, however we have seen things steady a little over the last few days. Read on for more on what the predictions and forecast is for Sterling/Euro exchange rates over the next few weeks. 

Well let's get started then. To kick off, I'm going to take a retrospective look at what has happened this week, before moving on to where rates are headed. 

Pound steadies against Euro

On Friday, we saw rates fall as low as 1.1475, the lowest in around 16 months. this was after a particularly sharp decline in rates on Friday, reminding us all the exchange rates can often move very quickly and without warning. 

On Monday the Pound recovered nearly all its losses and rose back up to around €1.16. There was no particular reason for the rise - indeed we actually had poor inflation data from the UK. I think the main reason was simply a slight correction following the dramatic decline in previous days.

Tuesday saw the downward trend continue yet again, dashing any hopes amongst Euro buyers that a recovery was on the cards. We had cold water poured on the growth forecasts for the UK, this pushed rates down again to around 1.15.

Today, rates are on the up again, demonstrating what a yo-yo the GBP/EUR cross is, meaning it's impossible to predict where it will go - day to day it's fluctuating up and down by 1% or more. We've had some better than expected Retail Sales, and also signs the service sector is improving, which is part of the reason for rates climbing back a little. We're still way off the €1.23 of a month ago, and at the time of writing rates remains steady a little under €1.16.

Worried about rates? Have a free consultation now, click here.

So will rates continue to climb, or will they fall?

This of course is what everybody wants to know, but in reality nobody can predict which way rates will move. Instead I will now outline the arguments for both rates climbing and falling, and then you can make your own mind up on what you think will happen. I'll give my opinion after the summary. 

The case for rates continuing to fall
 
UK borrowing is likely to be £64bn higher in 2014-15 than forecast in 2010, according to a closely watched report. The Institute for Fiscal Studies (IFS) says a weak economy will mean the government has to borrow more than it forecast, unless it imposes tax rises and further spending cuts. 

We also have real fears the UK is heading back into recession which in turn means more Quantitative Easing is on the cards along with a downgrading of our credit rating. If the economy continues to disappoint, GBP/EUR could continue to fall towards €1.10.

The case for rates going back up

The weakness in Sterling is partly due to the fears of recession being priced in to the value of the Pound already. 

If figures later this year show growth, it could give the Pound a boost. 

Also the Euro is very strong at the moment, should they decide to 'talk the Euro down' in order to make it's exports cheaper, this would weaken the Euro.

What do I think?

Personally I think there is much more chance of rates continuing to fall than suddenly get back to €1.20. I believe there will be more negative GDP figures, further Quantitative Easing, and all the while most global investors are now much more confident on the Euro, giving it strength. 

In the short to medium term, I think the Pound will continue to struggle against the Euro, but in the latter part of the year would expect to see a modest recovery towards 1.20. 

To discuss things in more detail, send me a free enquiry. 

What to watch out for in the next few days. 

If you are buying or selling Euros in the coming days, then there is some important events you should watch our for. 

On Thursday at 12:00pm and 12:45pm respectively, we have the latest decision from the Bank of England and European Central bank on interest rates. I don't expect any change in rates from either bank, but there is a small chance of more Quantitative Easing from the Bank of England. Should this be the case, expect the Pound to drop against other currencies by some margin.

Also tomorrow, we have UK Trade Balance and Manufacturing/Industrial production figures. Poor numbers here would really weaken the Pound and could mean a further decline in the rate. 

Also on Thursday at 3pm, we have a GDP estimate, which will include the figure for January. This will give us some idea whether the UK is heading back towards recession, so the currency markets could be very choppy tomorrow. 

Send me an enquiry to find out more about how this data could affect your currency requirement. 

Making the most of your currency

Regardless whether you are buying or selling a foreign currency, having a good broker that can keep you up to date with events in the markets is very important. In addition to my expert market knowledge, the rates I can source are significantly better than available at banks and other financial institutions, sometimes by as much as 5%. 

So if you are worried about which way rates are going, send me a free enquiry now. I can spend 5 minutes discussing your requirements, running over your options, and explain how our service works. I look forward to hearing from you.

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Will the Pound keep falling against the Euro?

Monday 4th February 2013

Good morning. Well readers, I'm sorry to say I do not bear good news for anyone needing to purchase Euros in the near future. Rates last week continued their decline falling significantly. A month ago rates were at 1.23 - on Friday afternoon they were as low as 1.1475 - this was the biggest one day fall for the Pound since 2008.

Rates have recovered slightly this morning, back to €1.1550. Today I'll review why rates are falling, and what effect data this week could have on rates.

In this week’s Report:

• Pound/Euro continues to fall to 14 month low
• US GDP figures disappoint, but GBP/USD still low
• UK decision on QE and the latest GDP estimate this week
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

Sterling’s fortunes remained unchanged last week as it continued to fall against the single currency. Rates fell a further 2.0% over the course of the week, which now means we have seen a 7% decline since the turn of the year and at its lowest point the GBP/EUR cross hit 1.1470, the lowest we have seen the cross since October 2011. In this week’s euro report we will take a look at what caused the rates to fall and what is around the corner for the pound. 

Although there was some positive data releases out of the euro-zone last week the recent drop in rates is still mainly down to sterling weakness. In recent weeks the UK has been under the microscope and with a black cloud hanging over the UK economy it is difficult to see where any positive moves may come from. 

Ever since the Initial GDP estimate was released at the start of January sterling has been in free fall against the single currency. Even with poor French and German retail sales figures released last week, which came in much lower than forecast, the pound could not recover any of its recent losses. 

Do you need to buy Euros? Send an enquiry and find out your options.

Bank of England meet this week; more QE on the cards?

This week will see all eyes turn back to the Bank of England; policymakers will meet to discuss interest rates and quantitative easing for the first time since the official GDP figures (released on the 25th Jan) confirmed the UK economy contracted in the final quarter of 2012. 

In their last meeting policymakers voted 8-1 in favour of not adding to their existing QE programme but that could all change this week. If the BoE opt for another round of QE it leaves the door open for rates to fall even further. 

Further important figures for the UK this week

This week also sees the release of the GDP Estimate from the National Institute of Economic and Social Research (NIESR) which is an estimate of growth over the last three months (this will report will give us the first GDP estimate for Jan 2013), the report is seen as highly reliable and has the potential to influence the UK monetary policy. A negative reading could have severe consequences for the pound and will push us ever closer to the dreaded tripe dip recession. 

Let's put this in perspective

With no signs of improvement it is more important than ever to have a good currency broker on your side, and to know your options. To put this year’s move into perspective, Purchasing €250,000.00 now compared to a month ago will cost you a staggering £15,000.00 more - that's just due to the decline in Sterling's value this year. It also highlights how important timing is when it comes to move your money. 

With the seemingly perpetual decline in the GBP/EUR rate and no signs of it slowing down, now is the time to take stock of your currency requirements and consider your options. Get in touch with me today and take the time for a free consultation on what is available to you. 

Don’t simply watch the decline and hope things will move your way. Take control of your position now by sending me a free enquiry now. 

When you contact us, quote the reference 'AJABLOG'

Weekly Economic Data that may affect exchange rates 

Monday – The UK releases its latest House Price Data today. In the Eurozone we have Inflation data and a measure of investor confidence. The only other data of note are some Factory Order figures from the United States. 

Tuesday – Lots of measures of inflation are released today for the UK, Spain, Italy, France and Germany. Also in the Eurozone we see the latest Retail Sales figures, which are a good barometer of overall economic activity. Fairly quiet stateside today with Manufacturing PMI the only noteworthy release. 

Wednesday – Nothing of note for the UK today, and the Eurozone is also very quiet with German Factory Orders the only release of note. Other than that, we have employment data from New Zealand that could affect the GBP/NZD rate. 

Thursday – As usual today is the busiest day of the week. We’ll start in the UK: Bank of England decision on Interest Rates and Quantitative Easing, the latest GDP estimate, Trade Balance Numbers, Industrial Production and Manufacturing Production. Eurozone: European Council Meeting, French Trade Balance, German Industrial Production and some EU growth forecasts. We also see the ECB’s decision on interest rates. So much today that will affect GBP/EUR rates. 

Friday – After yesterday’s flurry of UK data, today is very quiet. Nothing from the UK, some inflation and Trade balance figures from Germany, and we round of the week with Trade Balance numbers 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