Pound/Euro breaks €1.40 on BoE minutes and Greek uncertainty

Wednesday 22nd April 2015
As you can see from the chart below, today we have seen the GBP/EUR rate climb above the €1.40 mark, after the Bank of England released its latest minutes confirming interest rates will remain on hold at 0.5%. This is the best it's been in over a month, and only a few cents away from an 8 year high.

Bank of England minutes 

Today the Bank of England (BoE) confirmed they would be keeping interest rates at the record low again. This wasn’t a surprise, but the minutes to the meeting were quite hawkish, and it was these comments that have caused the Pound to rise. 2 of the members said their decision was finely balanced, and after some recent uncertainty which way rates will go in the coming months, it is now quite certain that the next move will be up. 

This speculation of higher interest rates, probably in early 2016, boosted the Pound due to the higher return that may be on offer for investors. Consequently we have seen Sterling/Euro break the 1.40 level, and not far at all from the best we’ve seen in 8 years. (Those needing to buy Euros should consider taking advantage of these levels that may not last for long.)

The strengthening Pound also pushed higher against the US Dollar, breaking back above the $1.50 level. 

Greek worries keeping Euro week 

With an election only a few weeks away, it’s surprising the Pound is holding on against the Euro. Most expected it to drop away, however the Euro is very week indeed due to uncertainty over Greece. A Greek exit from the euro could still happen as they on course to run out of money and be unable to make their loan payments net month. There is still faith that European policymakers will avert that scenario, but while no bailout deal is in place, expect the Euro to remain cheap to purchase. 

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Why has Pound fallen against Euro? JUL/AUG 2013

Wednesday 31st July 2013
Good afternoon.  Sterling has not had a very good run in the last few weeks, and exchange rates have continued to fall since my last post. This is a bit of a surprise, as the most recent economic figures for the UK have actually been pretty good. It’s all down to speculation on what the Bank of England will do with interest rates, and in today’s report I will explain why the Pound has been falling against the Euro to the lowest rate since February. In today’s post:

• Why the Pound has fallen against the Euro
• How will the Bank of England move forwards?
• What data releases could affect rates in the next week?
• Find out how good our exchange rates are. 

Why the Pound has fallen against the Euro? 

The Pound has fallen to its lowest levels since February, and at the time of writing GBP/EUR rates sit at 1.1425. Just a few months ago rates were approaching 1.20. In some respects it’s quite a surprise the Pound has fallen as there have been some decent economic numbers out of the UK. Let’s take a look at these in more detail… 



Above shows the decline in GBP/EUR rates over the last 3 months. Last week we saw the latest UK GDP figures. These showed that the UK economy is "on the mend" after figures showed it grew by 0.6% in the three months to June.  The latest growth estimate implies that the economy has now recouped almost half of its total 7.2% contraction during the 2008-09 recession, with output remaining 3.3% below its pre-recession peak. 

Great, so good growth means a strong Pound, right?

Not necessarily, and this hasn't been the case this week. The growth figure was in line with market expectations, and share prices on the London Stock Exchange did not react to the news. However, the pound did drop on the currency markets. This was partly due to some market participants believing the data may support further monetary intervention by the Bank of England. Mostly though, the numbers gave little reason to buy the Pound. Some thought the figure would be above 0.6% and because the numbers weren’t a surprise, Sterling lost value. 

This trend has continued with the Pound falling most days since, mainly due to speculation on what the Bank of England will do to keep growth going.

Are you buying or selling Euros? Worried about rates moving against you? Looking for the very best exchange rates? Click here to send me a free no obligation enquiry now. 

How will the Bank of England move forwards?

At the most recent bank of England meeting all 9 members voted against more Quantitative Easing. This indicates that in the short term at least, there will not be any further money pumped in to the economy. Again you would think this would strengthen the Pound, but you have to look at what other tools are left in the box now QE is off the table. 

The tool kit is very thin to say the least! Another good explanation for the drop in rates is speculation the Bank of England are going to announce tomorrow (Thursday) some "guidance" on the future of interest rates; specifically, that it will set out a framework to keep rates at near-zero levels for up to 4 years. So, investors are dumping the Pound ahead of this. Keeping rates at near zero is all they can do. 

This would mean little return for anyone holding Sterling, and so despite better economic figures, the Pound has fallen as a result, and could well continue to do so. At 12pm tomorrow we will see the latest decision from the BoE on interest rates and QE. 

While I don’t expect any change for either, watch for any accompanying statement from the governor that may dictate future moves, as this could impact on the value of the Pound. In 2 weeks’ time we will see the minutes from tomorrow’s meeting to see how the 9 members voted, and if all 9 are still against QE. 

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What data releases could affect rates in the next week? 

Thursday 1st August – The BoE and ECB both announce their interest rate decision. There are also some inflation numbers from the Eurozone. IN the USA we have jobless numbers and inflation data. 

Friday 2nd – We will see UK House prices today, which are a good barometer of overall economic activity. Most data today however is from the USA – Non Farm Payrolls, Earnings and Unemployment data. 

Monday 5th – Lots of numbers from the Eurozone today, mostly comprising inflation, but also Retail Sales and investor confidence measures. The UK releases its Retail Sales numbers. 

Tuesday 6th – Today is busy in the UK, with Industrial Production and Manufacturing numbers being release, in addition to Trade Balance numbers. At 2pm we have a GDP estimate, which could well move the Pound. 

Wednesday 7th – It’s the Eurozone’s turn for Import and Export numbers today. The only UK data of note is House Price data. And the Bank of England inflation report. 

To find out how data releases could affect the currency you need to buy or sell, click here for a free consultation. 

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Sterling steady ahead of GDP figures.

Tuesday 23rd July 2013 
Good afternoon. It’s very quiet in the currency markets at the moment, with the media hype currently focusing on the Royal baby and a lack of any significant economic data releases. The Royal baby news had the same impact on the markets as the announcement that Peter Andre and partner are expecting – none whatsoever! 

So in today’s report I will have a look at the most recent UK news that has helped Sterling, and a look at what other releases we have this week that might affect the currency markets. In today’s post: 

• UK Recovery set to gather pace in 2014 
• Government borrowing falls helping the Pound 
• UK Growth figures released this Thursday 
• How to get the best exchange rates 

UK Recovery set to gather pace in 2014 

The UK's recovery will gather pace into next year, as exports and business investment help to boost the economy, Ernst & Young's Item Club has predicted. The forecasting group predicted that UK economic growth would be 1.1% this year, rising to 2.2% next year and levelling out at about 2.5% thereafter. 

These are fairly positive numbers and will do no harm to the Pound, however they also acknowledged that growth currently remains reliant on consumer spending and the housing recovery. Spending all relies on confidence, and the good economic news of late has bolstered this, and the good weather has also boosted retail sales recently, all of which has given the Pound a push. 

 "With consumer confidence returning and the government's initiatives to stimulate the housing market bearing fruit, consumers are switching their attention back from saving to spending," the report noted. 

Elsewhere in America there is the risk of possible market reaction to the end of the Federal Reserve's monetary stimulus programme. This could strengthen the US Dollar and push rates down below the $1.50 mark again. Also, in China there is the risk of an abrupt slowdown in its economy. This would weaken the antipodean currencies such as the Australian Dollar, which could give GBP/AUD rates a lift. 

The other impact of a slowdown in China could be a strengthening of the Pound. This is because a successful re-balancing in China is expected to help the UK reduce its trade deficit in two ways - through more Chinese demand for UK exports of consumer goods, and less Chinese competition for the UK's imports of raw materials used in the construction industry. 

All in all the Pound has risen nicely since last week, however in the last few days has been very flat indeed. There have been no significant releases of note, so for the time being Pound/Euro remains range bound between 1.16 and 1.1650. 

Find out more about our exchange rates. 

Government borrowing falls helping the Pound 

Figures released this week shows that government borrowing fell in 2012-13. Public sector net borrowing was revised down to £116.5bn. It means that total borrowing actually fell, by £2.1bn, from the year before, contrary to a previous estimate in May. 

The Office for Budget Responsibility (OBR) has forecast that total borrowing in the current fiscal year, excluding the effect of financial interventions and the deal with the Bank of England, will be about £120bn, or 7.5% of GDP. The lower figures also lent some support to the Pound. 

UK Growth figures released this Thursday 

The main data release this week will be Thursdays GDP numbers. The Gross Domestic Product released by the National Statistics is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity. 

I expect the Quarterly figure to show growth of 0.6%, and the year on year figure to show growth of 1.4%. These forecasts will already have been priced in to where exchange rates stand, so if the actual number is higher than this, expect Sterling to make gains. If the number is lower, expect a drop in exchange rates. 

Other than some EU inflation numbers tomorrow, the GDP numbers are the most important release of the week in terms of what will affect exchange rates. 

How to get the best exchange rates 

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