Pound/Euro exchange rate forecast

Sterling/Euro rates fall ahead of ECB meeting this week 

Pound/Euro rates have recovered in the last week, partly due to some positive UK employment data, but also due to speculation the European Central Bank (ECB) may announce further stimulus this week. Interest rates there are as low as they can go (0.05%), and in order to ward of the threat of deflation, they may have to increase their stimulus measures. I don’t think they’ll announce anything on Thursday, but it’s important to listen out for any hints the ECB president Mario Draghi may give in his press conference. 

To me it’s quite obvious that their QE programme will need extending, and that’s why the Euro has been weakening off in recent days as this eventuality gets priced into the market. However today the market starting correcting itself, pulling GBP/EUR back down to around the €1.36 level as you can see from the chart below. If he does hint at further measures, there may be a short term spike in GBP/EUR rates. 

If you need to buy Euros, then it’s worth looking into placing a ‘Limit Order’ to take advantage of any spike we may see. This works by placing a target level with me that may be above the current rate. If the market does spike and your level becomes available, your trade is executed automatically and your currency is purchased. 

What else could affect exchange rates this week? 

Wednesday 21st October 2015 – Today the UK government releases its Public Sector Borrowing figures, which show the amount of debt they hold. The last release showed a deficit of £11.3bn, and today I expect this number to be around £9bn. If it’s higher than this, then Sterling exchange rates could fall, and vice versa. Later in the day there is another Speech by BoE Governor Mark Carney, and any hints about UK interest rates could also affect the Pound. Elsewhere, those with an eye on GBP/CAD rates should look out for the Bank of Canada’s (BoC) rate decision and policy statement. 

Thursday 22nd October 2015 – It’s quiet in the UK today, but over in the Eurozone we have the European Central Bank (ECB) decision on interest rates. As I mentioned at the top of this report, while it’s highly unlikely interest rates will change, the press conference at 13:30pm is very important for Sterling/Euro buyers, because there may be hints at further stimulus in the EU. If that proves to be the case, expect the Euro to weaken pushing GBP/EUR higher. Elsewhere, the USA has Jobless data and House Price info. 

Friday 23rd October 2015 – Nothing for the UK today, but GBP/EUR could be affected by EU and German inflation numbers. Canada and the USA also release inflation numbers today that could affect GBP/CAD and GBP/USD respectively. 

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Sterling rises against Euro and US Dollar

Tuesday 8th September 2015 
Sterling has continued to gain against both the Euro and Dollar today, and as you can see from the charts below, we’ve seen rates rise steadily since the lows of last week: 

  GBP/EUR

   

    GBP/USD

Why has the Pound gained against the Euro and Dollar? 

Only a week ago, a raft of quite poor data from the UK had poured cold water on the idea that the Bank of England (BoE) would be able to raise interest rates any time soon, and due to this the Pound had weakened against other currencies. The BoE’s governor Mark Carney also said that the slowdown in the Chinese economy could affect UK inflation, further denting the Pound. 

Despite this however, this week we have seen the Pound fighting back. According to Reuters, the main reason for today’s GBP gains was an agreement from a Japanese insurance firm to buy a British insurer in a cash deal for £3.5bn. This huge demand for the Pound is what drove it up against other currencies. Even against the Euro, we saw the Pound rise by 1.5 cents, despite strong EU GDP data and Trade Balance data from Germany that would normally have caused the Euro to gain strength and cause rates to drop. 

What next for Sterling exchange rates? 

Looking forwards, in my view the next 2 days will be very important indeed for Sterling. Tomorrow we have Industrial and Manufacturing production data for the UK along with a GDP estimate. If these are better than forecast then the Pound may gain further. 

Of more importance though will be Thursday’s Bank of England announcements where the BoE's 9 member Monetary Policy Committee will meet and release minutes from the meeting. Last month just one MPC member voted in favour of an immediate rate hike, and there may well be further clues as to when the UK may begin raising rates. If 1 or more of the members vote for higher rates, then expect the Pound to make further gains. However if the minutes suggest that a rate hike is a long way off, with all 9 members voting to keep the status quo, then the Pound is likely to drop back away wiping out the gains we’ve seen this week against the Euro. 

Remember that EU data was very strong today, if it wasn’t for the huge Sterling purchase by the Japanese earlier today as I mentioned above, then Pound/Euro would actually have fallen today. 

Do you need to buy or sell Euros at the best rate? 

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Sterling gains on BoE MPC minutes

Wednesday 22nd July 2015 
Yesterday was not a good one for Sterling/Euro rates, with levels sliding all day from €1.44 to €1.42. The reason for the drop was renewed confidence about Greece, and in particular credit rating agencies increasing Greece’s rating as they felt there is now much less chance of them leaving the Eurozone. 

This morning, Sterling has fought back slightly after the release of the Bank of England (BoE) minutes from this morning’s Monetary Policy Committee (MPC) meeting. The full minutes can be read here.  

The key phrase I noticed was “the decision between holding Bank Rate at its current level versus a small increase was becoming more finely balanced”. This means that despite all 9 members voting to keep the interest rate at the record low of 0.5%, it shows that they are going to start leaning towards finally raising rates towards the end of this year. The next meeting is in 6 weeks’ time, and we may start to see some of the members voting for a hike in rates. 

This has given Sterling a boost, as the rumour of an interest rate rise usually does. The same effect has been seen on the US Dollar this week. 

View live currency graphs here

Today’s Data 

All eyes were on the Bank of England and the inflation report this morning, and at 10am there is a parliamentary inflation report. For the remainder of today, the only data of note is an Interest Rate decision and policy statement by the Reserve Bank of New Zealand. Their inflation is very low at the moment, and the NZD is very weak due to the low commodity prices (See my post about commodity currencies to learn more). I think there is a chance they will cut interest rates to try and boost the economy. If they do, then expect GBP/NZD rates to go higher. 

Getting the best exchange rates 

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Pound falls further on low inflation

Tuesday 14th October 2014
Sterling has fallen by a further cent today against the Euro, with rates dropping down into the €1.25’s. Against the US Dollar, rates have dropped by 1.5 cents bring rates down into to around $1.59. What has caused the Pound to fall? 

It is due to very low UK inflation numbers. Figures this morning showed that UK inflation fell to a 5 year low of 1.2%. The reason this has caused rates to fall is that these new low inflation numbers meant that an interest rate rise in the UK is very unlikely in the short term. I expect the Bank of England will now hold off well into 2015, probably after the general election. 

On the one hand, the UK economy is the fastest growing in the developed world, and this would normally mean a rise in interest rates. Indeed it’s this speculation that has been driving the Pound up in recent months. However these latest figures change all of that, so it looks like the Pounds run has come to an end for the time being. 

In my most recent report I warned that this could well be the case, and that rates were unlikely to go higher. That has proved to be true and rates have now tumbled away, repeating the trend as I suggested would be that case. 

If you need to buy or sell Euros, click here to make a free enquiry. 

What else could affect exchange rates this week? 

Tomorrow is a key day for Sterling/Euro rates, as we have the latest Unemployment figures for the UK In addition to this we have 2 speeches by the ECB president Mario Draghi at 8am and 7pm respectively, and his comments could cause a change in the value of the Euro. 

For Sterling/Dollar, watch out for a host of economic data from the states such as Retail Sales, manufacturing, Unemployment and House data. Also on Friday we have a speech by FED chair Janet Yellen. If these figures are impressive as recent US data has been, then we could see the US Dollar strengthen and GBP/USD rates drop even further. 

Are you looking for the best exchange rates? 

If you have a currency transaction to conduct in the coming weeks or months, then get in touch with me to see how I can help. I can provide excellent commercial exchange rates that are usually significantly better than banks and other brokers. I can also explain what is likely to move exchange rates in the coming weeks to help you make an informed decision on when to fix a rate. 

I have worked in financial services for over 15 years, specialising in commercial foreign exchange for the last 10. Why not take advantage of my free consultative service to see if I can save you money on your currency exchange. I look forward to hearing from you. 

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Pound/Euro hits new 2 year high €1.28+

Thursday 25th September 2014 
The Pound/Euro rate has surged today, smashing through the €1.28 level to a fresh 2 year high. In fact this is now very close to the best Euro buying rates we’ve seen in 6 years. 

Pound/Euro level breaks €1.28, why has this happened? 

There are 2 reasons for the rise, and both involve the heads of Central banks. Early this morning we saw the European Central Bank president Mario Draghi give a speech, in which he said that they were willing to instigate further stimulus measures if necessary. In other words, it’s likely they will pump money into the economy to try and spur it along, and this has weakened the Euro making it much cheaper to buy. 

He said that "We stand ready to use additional unconventional instruments within our mandate, and alter the size or composition of our unconventional interventions should it become necessary to further address risks of a too prolonged period of low inflation". He also forecast only modest growth in the second half of this year, due to "weaker than expected" preliminary economic data over the summer. 

This afternoon, it was the turn of the Bank of England governor Mark Carney. In his speech which you can read in full here, he said that “with many of the conditions for the economy to normalise now met, the point at which interest rates also begin to normalise is getting closer. In recent months the judgement about precisely when to raise rates has become more balanced.” Adding that “While there is always uncertainty about the future, you can expect interest rates to begin to increase.” 

This has really given the Pound a push higher, and you can see the results of these comments from the ECB and BoE in today’s GBP/EUR chart: 

 

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Will rates keep going up? 

Nobody can predict where rates will go, but I think all the good news about the UK economy is now priced into the market, and I personally can’t see much more gains to be had. 2 years ago we were in a similar position, with many thinking the rate would break €1.30, but within 6 months it was down at €1.15. 

I’m not suggesting it will plummet again, but with the future of the rate impossible to forecast, if you needed to buy Euros is it worth risking these amazing levels currently available? I think those that do have much more to lose than to gain. In my view, you are holding out for an inch and risking losing a yard! 

How to get the best rates of exchange

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Exchange Rates Forecast: Scottish Referendum/Central Banks

Wednesday 10th September 
Good afternoon, and welcome back to my regular currency updates which will resume my blog today. I’ve been in Europe for a week so apologies for the lack of news in recent days. 

Much has happened since I’ve been away however that has had a big impact on exchange rates, so I’ll run over the recent developments and what this means for the Pound against other currencies. The main topic is the Scottish independence vote, so read on to find out how this might affect Sterling. 

If you're reading this, you probably have an interest in which way the exchange rate is going, and in turn want to achieve the best exhcange rate you can, at the right time. Click here to send me an enquiry, have a free consultation, and a quote on the exchange rate I can offer you. 

The topics I’m going to cover today are as follows: 

• ECB cuts interest rates 
• Mark Carney signals no interest rate rise until 2015 
• Scottish independence vote causing big swings for the Pound 

ECB cuts interest rates 

Last week’s surprise was the European Central Bank cutting interest rates. I mentioned before I went away that I thought they would announce some sort of stimulus, but I didn’t think they would cut rates again. The Euro weakened and Pound/Euro rates went up, but not by much. 

I was quite surprised to see rates in the €1.24’s against the Euro, but that is because the Pound has also weakened which I will cover in a moment. Against other currencies, the Euro is very weak indeed. 

Mark Carney signals no interest rate rise until 2015 

The Bank of England governor said yesterday rates aren’t going up in the UK until spring 2015. The Pound has weakened on the news, as regular readers will know that in the last few months, talk of an imminent rate rise has been giving Sterling strength. 

However, Carney doesn’t seem to know what he wants, giving conflicting information, and so watch out for any other speeches or comments he makes. If he indicates interest rates may rise, the Pound could gain. If he indicates it’s some way off as he did yesterday, the Pound will fall like it did this morning. 

Scottish independence vote causing big swings for the Pound 

This is the big one. Just today, this story has caused the GBP/EUR rate to drop from 1.25 down to 1.24, and then recover all the way back to 1.25 again. This might not sound like much, but it’s a huge change in a single day, and can make an enormous difference to any currency conversion you may need to do. 

So what’s been going on? The vote for independence is only a few days away, and polls at the moment are around 50/50 as to which way it will go. 

If they vote Yes, then it has serious economic implications. For exchange rates, it could mean the Pound weakening by up to 15% which would send exchange rates plummeting. If they vote No, then the Pound would likely gain strength and rates go up. Either way, there is likely to be significant movement in the price of the Sterling. 

Shell, BP, Standard Life have all made comments today about the potential economic effects, and it is these comments that have been pulling rates all over the place today. 

My View?

This is my personal blog, and my personal view is that many people, especially the 16 & 17 year olds, will be voting with their heart and not their head. They will be using this as a protest vote against the current government. What they don’t realise is this isn’t anything to do with politics, and if they vote Yes, there will be no going back, and a 300 year old union will be gone. I was born in England, but I’m half Scottish, most of my family live there, and I class myself as British. I hope they vote no. A Yes vote will probably bankrupt the country and create a pointless border. 

I think when it comes to the crunch the vote will be no. The alternative could send exchange rates plummeting.

Getting the best exchange rates 

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Pound rises on MPC vote, but gains likely to be limited

Wednesday 20th August 2014 
The Pound has recovered slightly this morning after 2 members of the Bank of England's Monetary Policy Committee (MPC) voted to raise interest rates in August, the first time in three years that policymakers have done so. In today’s post I’ll explain why this caused Pound/Euro rates to rise, and why I think any gains will be limited and that Euro buyers should consider fixing rates sooner rather than later. I’ll also give my views on the Pound/Dollar forecast. 

Bank of England Split on interest rates 

This morning’s data showing 2 of the 9 members voted for a rate hike shows division within the BoE. It is the first time there has been a split in over 3 years. (Interest rates have been unchanged since March 2009.) It also suggested an early interest rate rise was desirable as a way of anticipating inflationary pressures from wage rises. 

Despite the split vote, it doesn’t really change all that much because yesterday’s inflation figures showed the Bank remained under no immediate pressure to raise interest rates. With inflation well below target and wage growth stagnating, any increase in interest rates at the moment would be premature. It’s for this reason that I think that the GBP/EUR rate will now be settled at around 1.25 or so for the moment and is unlikely we’ll see any more gains. Sterling has actually been in decline of late so this is likely a temporary spike upwards. 

Therefore if you need to buy Euros in the next 3 to 6 months, consider fixing the rate sooner rather than later while it’s still within a few cents of a 2 year high. You can do this by simply lodging 10% of the total you want to convert, and guarantee today’s rates for up to 2 years. 

Click here to find out the Pound/Euro rates I can offer 

Sterling /US Dollar 

We saw this rate increase too today, but gains were limited and short lived. The current rate sits a little above $1.66. Later this after we have the US version of today’s UK BoE release – the FED minutes. Any indications that they discussed easing policy or raising rates would cause the USD to strengthen and become more expensive to buy. 

Exchange rates to buy Dollars were at a 5 year high recently, but has since dropped from $1.72 to $1.66. I personally expect this currency pair to keep dropping as the US economy recovers. Rates closer to $1.60 are likely in 2015. 

Other data this week that might affect exchange rates. 

The remaining data this week is thin on the ground. We have UK Retail Sales tomorrow morning which are a good indicator of economic activity. I expect a rise of 0.4% and as usual if the number is lower than this, Sterling will likely drop in value. 

We have US Jobless numbers tomorrow, along with some EU inflation numbers. Friday is very quiet, and markets are closed on Monday for Bank Holiday. 

What does this mean for your currency requirement? 

The currency markets are very volatile, and when converting large sums even a small movement in the rate can end up costing you thousands. The service I provide is twofold. Firstly you can have a free no obligation chat with me about the exchange rate, and I can explain what is moving the rate and discuss which way it could move in the future. In this way you can make an informed choice on when to fix your exchange rate. 

When the time comes to fix a rate, I can provide commercial exchange rates that are significantly better than banks offer, by as much as 5%. This means that I can save you thousands of Pounds when converting one currency to another. 

If you need to convert funds and would like to discuss what is happening with rates, and obtain a quote to compare with your bank to see how much you can save, click below to send me a free no obligation enquiry today. It is free to make an enquiry and does not obligate you in any way. 

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Pound/Euro, Pound/Dollar, up or down in July 2014?

Monday 14th July 2014 
The Pound has fallen further against both the Euro and the US Dollar today, pulling exchange rates down to €1.2530 and $1.7070 respectively. There has been no economic data of note today to explain the movements, and the reason for the fall is the market positioning itself ahead of Speeches by the heads of the 3 major central banks, the Bank of England (BoE), European Central Bank (ECB) and US Federal Reserve (FED). In today’s post I’ll take a look at why rates have fallen and what these speeches may mean for whether the Pound will go up or down against the Euro. 

Pound/Euro 

The rate had recently hit a 2 year high of €1.2680, however in the last week has slipped back away. This is partly due to a run a worse than expected UK economic data. Today rates fell further ahead of a speech by the ECB president Mario Draghi. The Euro has been weakening recently on speculation that the ECB may pursue some sort of stimulus, perhaps in the form of Quantitative Easing. 

This evening’s speech is therefore very important. The Euro is actually still quite strong against other currencies, and this strength is hurting the EU recovery. So he may well hint at some easing, in which case I would expect Pound/Euro to rebound. 

We will also see a speech by the BoE chief Mark Carney tomorrow. In recent speeches he has given mixed signals on the future of UK interest rates, which has caused the Pound to fluctuate up and down. In short, if he hints at rates going up, the Pound will rise. If he is not forthcoming with any indication of a rate rise, the Pound could fall. 

Pound/Dollar 

This currency pair recently enjoyed trading near 6 year highs, but has dropped off a little recently. The future movements of GBP/USD will partly depend on Mark Carney’s comments tomorrow, as I have explained in the Pound/Euro section. 

Of more importance in my opinion will be Federal Reserve Chair Janet Yellen's congressional testimony tomorrow, in which she may well give clues on the outlook for U.S. monetary policy, and interest rates. If she hints at an interest rate hike on the back of an improvement in U.S. data in the second quarter, Pound/Dollar could fall more. 

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Pound/Euro exchange rate forecast for 2014 changes after BoE comments

Wednesday 19th March 2014
It’s been a very busy day in the markets today, with UK Unemployment being released, along with the Bank of England minutes, a speech by governor Mark Carney, and of course the budget statement. This afternoon I will look at the effect each event had on exchange rates, and how this has affected my view on where rates are headed. 

First, let’s look at today’s GBP/EUR chart that reflects how exchange rates were affected: 

Mark Carney warns against strong Pound 

As you can see from the chart above, as soon as the market opened at 8am this morning, the Pound started to strengthen as I predicted it would yesterday. This was due to comments last night by BoE governor Mark Carney, in which he said the current low interest environment won’t be around forever. This gave the Pound strength on speculation of interest rates going up. 

It didn’t last long, and as you can see from the chart above, when the MPC minutes were released, it shows that many of the BoE members are concerned about a strong Pound. Sterling strengthened by 1.5 percent in the month running up to the March MPC meeting, hitting its highest in several years, but in the last week or so has weakened to the lowest it’s been all year. 

The MPC members noted the further strength in sterling, with Deputy governor Charlie Bean recently saying the BoE could keep interest rates lower for longer if sterling strengthens much more, adding that its current level was "fine". Another member recently said that that further strength in sterling would be a worry. 

What does this all mean? To me this means if you need to buy Euros at the best exchange rate, the current levels could be as good as it's going to get for some time.

UK Unemployment 

The latest Unemployment figures were released at the same time, and while the overall rate remains at 7.2% as I expected it would, the number of overall people in employment hit record highs. This did little to help the Pound, as all focus was on the BoE warning against the Pound getting stronger. 

UK Budget Statement 

As I predicted, it had absolutely no effect on exchange rates. Here I will only look at what could affect currency – basically Growth forecasts were up a little, and we’re getting a new Pound coin. Yay.

Look at the chart above, and you can see the markets were, as usual, underwhelmed by the Budget, with the Pound barely moving at all throughout the speech. The rest was mostly guff, and if interested you can read a full report on the budget here on the BBC site.

What does this mean for those looking at the best exchange rates? 

I have changed my view since my forecast yesterday. I now think it will take a few months before we get back through €1.20, in light of the BoE warning about the Pound getting stronger as I've outlined above. If I needed to buy Euros I would look to fix a rate now, or put protection in place against adverse movements.

They have hinted that they won’t let the rate get too much higher, so if you need to buy or sell Euros, consider doing something sooner rather than later. I don’t think it will drop much either due to the economy being fundamentally strong, so for the next few weeks I expect rates to remain range bound between 1.19 and 1.20 

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Interest Rates moving the currency markets

Tuesday 7th May 2013 

Good afternoon. It’s been a week since my last post which focused on the UK’s stronger than expected growth figures. Since then, the markets have been anything but quiet with an interest rate cut in the Eurozone and Australia weakening their respective currencies. In today’s report I’ll take a look at the effect of these rate cuts on exchange rates, and also what else I would be looking out for this week if I needed to convert currency. So, in Today’s report: 

• European Central Bank cut interest rates, pushing GBP/EUR up 
• Australia also cuts rates, weakening Australian Dollar 
• Bank of England to meet this week to discuss Interest rates and QE 
• Strategies to help you achieve great exchange rates 

European Central Bank cut interest rates 

Last week the European Central Bank (ECB) cut its interest rate from 0.75% to 0.5%. As I pointed out in my last post, there was always the risk of a cut and my prediction of this cut weakening the Euro proved to be true. In fact, the cut itself didn’t really have an immediate impact on exchange rates; it was comments that the ECB president made afterwards that really caused some movement. 

He said it was "ready to act if needed", should more be required to boost the Eurozone’s economic health. Worries about Eurozone persist, with data showing manufacturing activity across the 17-nation bloc shrank in April. The ECB also extended its cheap loans to banks until at least July 2014. 

Mr Draghi said that the ECB was prepared to cut interest rates further should conditions make it necessary. He also said the central bank was "technically ready" for negative deposit rates. These comments caused the Euro to weaken and therefore cheaper to purchase. It pushed the GBP/EUR mid-market rate to 1.1900, which is the best we’ve seen it since back in January this year. 

But analysts were divided over whether the cut would have much of an impact on the Eurozone economy however.

Howard Archer, analyst at IHS Global Insight, said: "Admittedly, it is unlikely that the trimming of interest rates from 0.75% to 0.5% will have a major growth impact, especially given fragmented credit markets, but any potential help to the Eurozone economy in its current state is worthwhile."

One interesting analogy I liked which I read on an article by Stephanie Flanders of the BBC, likened it to “opening the windows in a convertible when the top's already down”. You can read her views on the cut here which as usual gives a very comprehensive outline. 

So what does it mean for exchange rates?


Initially it caused them to rise as I outlined above. The spike was not to last however, as this morning we had some pretty decent numbers out of the Eurozone, which has caused the Euro to regain strength, pulling the rate down from 1.19 to 1.1833 at the time of writing, as you can see from today's chart above. French Trade Balance numbers were better than expected, as were German factory orders, which combined to pull rates back down. 

I think that the next main driver for the Pound/Euro rate will be what the Bank of England does this Thursday. More on that below. 

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Australia also cuts interest rates 

Australia's central bank has cut its benchmark interest rate to a record low, in an attempt to counter slowing growth. The Reserve Bank of Australia (RBA) cut its key rate to 2.75% from 3%. It wasn’t expected, as most thought that they would leave rates on hold. When markets opened this morning the GBP/AUD rate rose by a point as a result of the weaker Aussie Dollar. 

Australia's economic growth in recent years has been fuelled by the growing demand for its commodities, such as iron ore. That resulted in a resources boom in Australia and helped it sustain growth through the global financial crisis. In turn, this has kept the AUD strong and exchange rates low, so this spike will be welcome for anyone who is looking to buy AUD in the coming weeks or months. 

Need to buy or sell Australian Dollars? Click here for the best rates. 

Bank of England to announce interest rates/QE decision this week. 

As always for the first Thursday of the first full week of the month, the Bank of England’s Monetary Policy Committee (MPC) will announce their latest decision on interest rates this Thursday at 12pm. It’s quite likely that rates will be left on hold, and I don’t expect any change to Quantitative Easing, but there is an outside chance this could be increased. 

In the last few months, 3 of the 9 members have voted to increase QE, including the banks governor Mervyn King. So only 2 more would be needed for this to be pushed through. Given the latest growth figures in the UK were better than expected, I think there is now less chance of this happening, but it’s still a possibility. 

If more QE was announced, expect the Pound to fall. No announcement may cause a slight gain, but don’t expect much. We’ll have to wait another 2 weeks to see how the vote went, and this again could cause the Pound to change in value. 

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Getting the best Exchange Rates 

If you need to get the best exchange rates, regardless whether you are buying or selling a foreign currency, the worst thing you can do is simply sit back and hope the rate will move in your direction. Hope is not a reliable economic tool, and often more is lost through indecision than a poor decision. 

So what can you do? Your first step should be making a free enquiry with me by clicking here. I can get in touch to discuss your requirements, and run over the different options you can consider. Being fully armed with all the relevant information and knowing your options, will help you make an informed decision on what to do. 

There are various options from Fixing your rate on a Forward contract, to placing lower and upper trading levels through ‘Stop Loss’ and ‘Limit’ orders. 

To find out more about these and discuss your requirements, click here to send me a free no obligation enquiry today. I look forward to hearing from you.  

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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.  

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Pound at 4 month high vs US Dollar, flat vs Euro

Wednesday 28th March 2012
Good morning. The Pound/Euro rate has been pretty flat so far this week, remaining around the €1.19 to €1.20 range. Against the US Dollar rates briefly hit a 4 month high above $1.60, before retreating slightly. Today we will take a look at what is causing recent movements, and the forecast for GBP/EUR and GBP/USD for the coming weeks.

Sterling remains range-bound vs Euro

Let's start with the Pound/Euro exchange rate, which remains around the €1.20 level. It did briefly drop by half a point yesterday morning when the first round of economic figures were released, however the drop was not to last.

At 12:00pm yesterday the CBI Distributive Trades Survey was released by the Confederation of British Industry. This is an indicator of short-term trends in the UK retail and wholesale distribution sector, and tends to have an impact on the formulation of economic policy at the Bank of England and within Government, and so can often impact Sterling.

The figures were much better than analysts had forecasts, and the Pound steadily recovered throughout the day, pushing back towards the €1.20 level.

What is the Pound Euro Forecast for where rates may head?

We're getting mixed messages from analysts at the moment. On the one hand the EU debt crisis is not resolved and this is keeping the Euro weak. It's important to remember however that there is no fundamental strength in the Pound, it's simply the fact that we have our own central bank to print money, and a well established austerity plan that the markets like. This is keeping the Pound supported against other currencies... for the moment.

Supporting this view was Bank of England policymaker David Miles, who said earlier this week that economy had effectively stalled, with growth rates near zero over the last six months, keeping alive slim chances of another round of quantitative easing. A bulletin released by the BoE yesterday suggested that asset purchases by central banks have helped economies weather their crises, and so the sluggish UK growth is keeping alive the prospects of more QE.

My view is that while the threat of more QE is on the horizon, the Pound will not make any significant gains against the Euro. It will likely remain range-bound between €1.18 and €1.20, but any resolution to the EU debt crisis could pull rates back down. In fact for several years now, we have seen rates above €1.20 only to sharply drop back away within a month or two. If you need Euros at the best possible rates, then send me an enquiry now to find out how you can protect yourself against the rate dropping.

EU Debt crisis: OECD urges eurozone rescue fund boost

The OECD has said that the eurozone needs to double its bailout fund to €1 trillion, however German Chancellor Angela Merkel said she would favour only a temporary increase. The reason for the proposed increase is that some fear that the fund will not be able to cope with another bailout.

At the moment we've seen bailouts already for Greece, Ireland and Portugal. While this has given some stability to the markets and kept exchange rates stable, the chance is still there that other countries, namely Spain and Italy, could require some funding. This shows that the EU debt crisis is far from over, and is keeping rates supported around the €1.20 level.

Adding to the problems in the EU, Spain confirmed yesterday that they had fallen back into recession. It contracted again in Q1 this year, and in the last quarter of last year. 2 consecutive quarters of negative growth is a 'technical' recession.

Sterling hits 4 month high against US Dollar

Despite the stability in GBP/EUR rates, the Pound/Dollar rate actually gained quite well yesterday, and rose to its highest in more than 4 months. The dollar was hit by increasing chances of more U.S. monetary easing, which weakened it and made it cheaper to purchase.

Given rates are now quite favourable, those that need the best exchange rates for Dollars can look at a Forward contract - lock in the rate now for up to 2 years, and only lodge 10% of the funds now, the remainder due when you want the currency. If this is of interest to you contact us to discuss it further.

Today's Data to watch out for

We start in Germany again today, with inflation numbers at 7am. A few hours later the EU releases money supply data. US figures this afternoon include Durable Goods orders. There are no releases of note today from the UK.

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