Pound/Euro rates fall after BoE Minutes

Wednesday 23rd April 
We’ve had good news and bad news about the UK economy today, but the bad news won the day and as a result we have seen the Pound fall, as I suggested that it would in my post yesterday, and it was for the reason I predicted, the Bank of England minutes. I’ll give you the good news first after a quick snapshot of today's Pound/Euro movements:

The good news: 

At 09:30am this morning we actually had some very positive UK data – figures showed that Public Sector borrowing by the government was much less than expected. Markets expected a number of £9.1bn, but the actual figure was only £4.86bn. This was very good news, however failed to make any impact on the value of the Pound as everyone waited for the Bank of England minutes. 

The Bank of England's Monetary Policy Committee (MPC) has increased its UK economic growth forecast for the first quarter of the year, from 0.9% to 1%. There was further good news for the economy from a survey by the CBI, which indicated strong growth in orders for UK manufacturers. 

The bad news: 

Now for the bad news, and this is what affected the currency markets today. Focus today was always going to be about the Bank of England minutes. These showed that there is no real consensus within the Monetary Policy Committee, and they highlighted a growing debate between policymakers about slack in the economy and the medium-term inflation outlook. 

The markets took this as a sign that an interest rate hike in the UK is some way off, and as the chart below shows we saw the Pound/Euro level drop from 1.22 down to 1.2130 where it settled. 

What next for Pound/Euro 

I actually think this dip may be short lived. The next main data is tomorrow’s speech by the ECB president Mario Draghi. As I outlined yesterday, he may hint at monetary easing, such as Quantitative Easing, to stop the Euro getting to strong. If he does hint at this in his speech at 11am tomorrow, then expect GBP/EUR to bounce back. 

Those with Euros to sell should therefore consider taking advantage of the dip we have seen today. Euro buyers should hold off for gains, but place a Stop Loss order to protect you in case he says nothing about easing and the rate drops further. 

We also have UK Retail Sales on Friday which I think could be better than many analysts expect, so I don’t think we’ll see the rate drop much further in the short term. 

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Pound remains strong in the run up to Christmas

Friday 20th December 2014 
This will be my last post for a week, and I’ll be back in action on Monday the 30th of December. 

With regards to exchange rates, Sterling remains strong after figures showed the UK economy is growing faster than previously estimated. The Office for National Statistics (ONS) said gross domestic product was up 0.8%; however it revised its growth figures for earlier quarters. 

This means the estimated annual growth rate has now risen from 1.5% to 1.9%, a revision that has surprised economists. Sterling currently sits at €1.1955 vs the Euro and $1.6377 vs the US Dollar. 

In other UK economic news, ONS data showed that Britain's current account deficit - the difference between the money received from exports and imports - widened sharply in the third quarter to £20.7bn, up from £6.2bn in the second quarter. This countered any gains the growth figures would have caused, and so there has not been much volatility in exchange rates. 

So that’s it from me for a while. I hope everybody has a lovely Christmas, and I will be back with more currency news on exchange rates on the 30th December. 

Remember if you are looking for the best exchange rates, I can help you source levels up to 5% better than banks can offer. You can click here to send me a free no obligation enquiry and one of my colleagues can get in touch to discuss your requirement and explain the service we offer. 

Once again a very Merry Christmas and a Happy New Year. 

Alastair Archbold

Pound/Euro rates jump to 2 week high of €1.18

Friday 1st November 2013 
Good morning.  It’s only been 2 days since my last post, but things can move very quickly in the currency markets. For most of this week exchange rates have been very stable, however yesterday was saw some significant negative data from the Eurozone that has weakened the Euro and pushed Pound/Euro rates back up. This is what we will look at in today’s report.

Why have Pound/Euro rates jumped to a 2 week high?

This week we’ve moved from a 2 month low to a 2 week high, due to poor data from the Eurozone. So what has caused the surge in rates? The single currency's weakness was caused by a number of factors, and we have seen the single currency fall pushing Pound/Euro rates to their highest in 2 weeks.

Data on Thursday showed euro zone inflation fell to the lowest in 4 years, which increases the chance of an interest rate cut in the EU.  We also saw German retail sales fall by half a percent, against a forecast of gains of half a percent. EU unemployment was also worse than expected, and all of this combined weakened the Euro significantly.

“In light of those inflation numbers, we have changed our call and are now expecting the ECB to cut its main refinance rate at next week's meeting," said Geoffrey Yu, currency strategist at UBS.

ECB about to cut interest rates?

Next Thursday both the Bank of England (BoE) and European Central Bank (ECB) announce their decision on interest rates. I expect the BoE to leave things on hold, but in light of the poor inflation numbers from the EU, there’s now a good chance the ECB could cut the rate.

This is the reason the Pound/Euro rate has risen. An interest rate cut would mean less return for savers and investors in the EU, and so these investors have been selling Euros in anticipation of the cut. This means the cut has now started to be priced into exchange rates, and Pound/Euro has climbed by over 1% as a result.

What does this mean if you are converting Euros to Pounds?

Those that took note in my last post of my suggestion to take advantage of the 2 month EUR/GBP high will be pleased, as it was short lived. Moving forwards, if the ECB do indeed cut rates, we could see the market continue to get worse for you. Some forecasts suggest rates will climb to €1.20 by the end of the year.

Looking for the best Euro to Pound rates? Click here.

What does the latest news mean for those converting Pounds to Euros?
 
It’s good news as we have seen rates rise significantly. We’re now 2 cents below the best it’s been all year. A rate cut in the EU could push things higher, however for the most part this may now be priced in. Next week’s GDP estimate for the UK will also have an impact, as it will indicate whether the UK economy is still growing.

So good GDP and a rate cut could push things higher, but as we’ve seen this week trends can change very quickly. If I needed to buy Euros, I would place a ‘Stop Loss’ order, so if rates drop below a certain level my currency is purchased. In this way, you can still take advantage of further gains should the rate rise further, however have a worst case scenario should rates start to drop again. Stop Loss orders are very useful when markets are moving in a positive direction for you.

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Pound/Dollar rates fall

In contrast to the euro zone, U.S. data was far more encouraging this week. A strong Chicago activity survey strengthened the US Dollar, and the good data means there still may be the case for the Federal Reserve scaling back its QE stimulus programme.

This has boosted the US Dollar, making it more expensive to purchase, and as a result Pound/Dollar rates have dipped back below $1.60 again.

Look for the best Pound/Dollar exchange rates? Click here.

Have a free consultation to help you get the best exchange rates
 
Regardless whether you are buying or selling a foreign currency, market movements such as we have seen this week can have a huge impact on the cost of your currency.

I can offer you a free consultation on your currency requirement, and explain the current trends and forecasts for which way rates will go. This, combined with the excellent rates of exchange I can offer can save you a significant sum on your conversion.

Therefore if you need to get the best exchange rates, why not take advantage of a free consultation with me. Click below to send me a free no obligation enquiry today, and I can get in touch to explain the options available to you. Our rates are up to 5% better than banks can offer, so find out today how much you could save.

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