Sterling falls after Super Thursday

Friday 7th August 2015
Super Thursday was anything but for the Pound, as a dovish tone from the Bank of England caused a large sell off for Sterling, pulling GBP/EUR exchange rates lower. The decline has continued this afternoon so in just 48 hours exchange rates have dropped from from €1.44 to nearly €1.41: 

Super Thursday pushes GBP/EUR lower 

On Thursday, the Bank's Monetary Policy Committee voted to keep interest rates at their current historic low of 0.5%. What surprised many was that only 1 of the 9 members voted for a rate hike. The markets had been expecting at least 2 or more to vote for a hike. 

This means that earlier in the week expectation was for interest rates to go up at the end of the year. Deputy governor Ben Broadbent said the Committee had no specific time in mind for a rise and comments by governor Mark Carney had been misinterpreted. 

Following yesterday’s news it now looks like mid 2016 is more likely. Investors sold the Pound on the back of the news, pulling the Pound lower against other currencies. I said that exchange rates were likely to change yesterday and that has proved to be the case. 

Pound/Dollar rates fall on US Jobs data 

GBP/USD fell yesterday after the Bank of England’s releases, and today the USA posted much better than expected jobs data, which has strengthened the US Dollar further and pulled GBP/USD rates even lower: 

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€1.43 - Will Sterling go higher against Euro?

Thursday 16th July 2015 
The Euro remains incredibly weak today, with GBP/EUR rates settled around the €1.43 mark, a fresh 8 year high. In today’s post I’ll look at the developments over the last few days, what happens next with Greece, why the Euro remains weak, and what might happen to exchange rates in the coming weeks. First, let’s look at how exchange rates have moved so far this week:

ECB agree €7bn loan to Greece

Last night as expected, Greek MPs passed through the reforms that were part of the recent EU bailout deal. As a result, today the European Central Bank (ECB) agreed to provide a €7bn loan to Greece to help it until an actual bailout is approved. The ECB also said it would give more emergency funding to Greece, which could help the banks to open in the coming weeks after being closed all month so far. 

Why is the Euro still weak? 

Many thought once an agreement had been made that the Euro would strengthen and exchange rates would drop back away, however the single currency remains very weak indeed. I’ve seen €1.4350 on the markets today however at the time of writing, GBP/EUR sits around the €1.43 mark. 

The reason the Euro is still weak, is that when you pick apart the current agreement, it’s clear that it’s not actually likely to fix anything. Yes a loan has been granted, but all that means is there will now be a new round of talks on a full third bailout from the EU. Not a great deal has changed, the can has just been kicked further down the road, and what a long road it is!

What happens next with Greece? 

The EU will likely provide the lending to Greece tomorrow. Germany now needs to agree to continue negotiating on the full €86bn bailout. Later this month Greece needs to pass further reforms, and if all that happens, then talks begin again to a full bailout using the European Stability Mechanism. So actually, we are still a long way off from a proper solution to help Greece, hence GBP/EUR exchange rates the best they have been in close to a decade. 

Which way will exchange rates move now? 

It’s impossible to predict of course, but with everyone now likely to have to go back to the negotiating table, and the IMF stating much more needs to be done, all the uncertainty that has been keeping the Euro weak remains. This could keep the Euro weak, and other developments may now push GBP/EUR higher. 

Perhaps they should start printing the Euro on Greece proof paper in the meantime!

If we look at interest rates in the UK, USA and EU, then it’s clear that Britain and the United States will start to raise rates before our European partners. As I explained in a post earlier this week, the rumour of higher interest rates drives investment in a currency due to the higher return. With the EU still pursuing a Quantitative Easing programme, interest rates there are likely to remain low for a long time to come. This means investors will move funds away from the Euro into Sterling and the US Dollar, and this also means the Euro is likely to weaken, and GBP and USD will strengthen. This could mean that GBP/EUR goes higher, but we’ll have to wait and see. 

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Pound rises on interest rate comments from BoE

Tuesday 14th July 2015
We have seen a sharp spike for Sterling this morning, after the Bank of England governor Mark Carney has said that the time for a UK interest rate rise is getting closer. This is despite figures this morning showing that inflation sits at 0%. This really shows how simple things like a few words from a central bank governor can affect exchange rates. Here's a look at how the Pound rose by over a cent against the Euro as soon as he made the comment at 09:53am:

Why did his comments cause the Pound to rise?

It's due to the fact that he has hinted interest rates may go up in the UK this year. Higher interest rates make Sterling a more attractive investment for investors due to the higher return on offer, and so the Pound has strengthened, pushing exchange rates up against other currencies. 

In recent times it's been things like Greece and elections that has affected the rate, but years ago things like interest rate movements and economic data were the main things that caused exchange rates to move. I'm sure there will be further developments tomorrow from Greece, and once that issue is resolved, focus is likely to return to traditional economic stats and things like interest rates.  

Getting the best exchange rates 

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Greece votes ‘No’ but markets remain calm

Monday 6th July 2015
This weekend the Greek people voted against the terms of their latest bailout proposal. 61% voted against it, and 39% voted to accept it. The reaction on the currency markets has been surprisingly muted. Greece's finance minister, who often clashed with creditors, has resigned. Varoufakis was seen as a major obstacle in negotiations and now that he has stepped down the possibility of a last minute deal to keep Athens in the Eurozone may have increased, and this could be a reason that the Euro hasn’t weakened more. 

What does all this mean for Pound/Euro exchange rates? 

Over the weekend we saw some weakness in the Euro on the Asian markets, with GBP/EUR rising to nearly 1.42. However as soon as European markets opened this morning, prices had corrected to €1.4050, so little change from where we were last week. 

Actually nothing has really changes. Greece will now go back to the negotiating table to try to strike a deal to re-structure Greek debt. Something needs to be done as without emergency assistance from the European Central Bank, Greek banks are going to run out of money within a few days, so despite the Greek people voting against Austerity, if they want their economy to survive then they still need to make a deal with their creditors. 

With the referendum out of the way, talks can resume and things are back to where they were a week ago. However while the market seems stable at the moment, the Euro could be vulnerable to selling on the market, so as the saga continues, we could see the Euro weaken further. At the moment however it seems a deal could be still be done. If it is, expect GBP/EUR to drop. If it isn’t, expect rates to remain firmly above 1.40. So all in all nothing has really changed! 

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UK data disappoints, pulling GBP/EUR rates under €1.40

Last week we saw the Pound/Euro rates above the key €1.40 level, however as with the other 4 or 5 times that’s happened this year, the high rate was not to last, and at the end of last week, poor UK data weakened Sterling, and pulled rates back into the €1.39’s:

Why has the Pound fallen against the Euro? 

On the one hand, it looks increasingly likely that Greece will be able to meet its upcoming debt payments. My view is they are simply trying to negotiate a better deal, hence the delays. This expectation is giving some strength back to the Euro making it more expensive to buy. 

On the other hand, the Pound is coming under pressure due to a poor run of economic data. Investors are starting to worry about the implications of the UK leaving the EU, and this uncertainty is stopping investment and weakening the Pound. Prime Minister David Cameron's introduced a law last week that will guarantee the EU referendum will be held by the end of 2017. 

Also last week we saw other poor data, such as slightly weaker than expected growth figures. This coupled with other data signals that interest rates in the UK aren’t likely to rise until well into 2016. 

Which way will exchange rates move this week? 

Below I’ve listed the main data releases that I think will affect Pound/Euro rates, and exchange rates for other major currencies. Of course any further developments with the Greek situation are also likely to affect rates. 

If you are looking for the best exchange rates, then click here to send a free enquiry about the rates and service I can offer you, which are up to 5% better than available at banks. 

This week’s economic data releases 

Monday 1st June 2015 – This morning we have already seen manufacturing figures for the UK that were worse than expected that weakened the Pound slightly. We have also seen a raft of US data, most of which was better than analyst forecasts, which has strengthened the US Dollar and taken GBP/USD rates to around $1.52. 

Tuesday 2nd June 2015 – Today we have UK Mortgage numbers, construction figures, and credit data, all of which could affect the value of the Pound. In Europe, a raft of inflation data is a very important release for those watching Pound/Euro rates, as it could affect how much money the EU pump into the economy through their QE programme. 

Wednesday 3rd June 2015 – today’s main release is the latest EU decision on interest rates. While no change is expected, the comments made in the press conference at 13:30pm could really affect the Euro, especially so if they make changes to their QE expectations. 

Thursday 4th June 2015 – Today is the UK’s turn for interest rates, and as with the EU, no change is expected. Any comments made by the Bank of England governor Mark Carney however could well affect Sterling. 

Friday 5th June 2015 – Today is jobs day in the USA, and there are lots of employment figures including the Non-Farm payrolls numbers. This release in particular often causes large swings in the GBP/USD rate as it’s so hard to forecast. In Europe today, the latest GDP figures could affect Pound/Euro rates. 

Getting the best exchange rates 

Rates are very volatile at the moment, moving very quickly. In order to get the best possible rates you need to have a good currency broker who can monitor the market for you, explain the options you can consider on when to fix a rate, and get you a much better rate than banks will offer. The worst thing you can do is just watch the rate and hope it will move your way, or use the bank to convert your funds. 

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GBP/EUR breaks €1.40 on strong UK Retail Sales

Sterling/Euro rates have today pushed through the €1.40 barrier again today, following stronger than expected UK Retail Sales data. This is the 3rd time in the last few months the pair has broken through the key 1.40 level: 

The much better than expected Retail Sales reflect a growing confidence in the UK economy, and as such Sterling has risen against other currencies. Also helping the Pound this week were the minutes to the recent Bank of England decision to hold interest rates. While all 9 members voted to keep rates on hold, it seems for 2 of them it was a finely balanced decision. This means that despite inflation turning negative this week, a 2016 interest rate hike could be on the cards, helping boost the Pound. 

Will Pound/Euro rates remain above €1.40? 

It’s impossible to predict of course, but looking at past performance it’s clear this level has been reached several times in the last few months before dropping back away. The only thing keeping the rate high is uncertainty over Greece’s next debt repayment. If they make progress in this respect then expect the rate to drop back away. If it looks like they will have difficulty meeting their commitments, the rate may be sustained above €1.40. 

Getting the best exchange rates 

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Pound/Euro rates drop to €1.39

Tuesday 17th March 2015
The spike of last week to €1.4255 appears to have been short lived, with the Pound falling during trading on both Monday and Tuesday, testing the €1.40 level before breaking below it. The drop continued today and at the time of writing the rate is a little above €1.39: 

 

Why has the rate fallen? 

It’s to do with events in Europe, the USA and the UK. Over in the EU the recent QE programme has been well accepted, and this shows confidence that the Eurozone will sort out their issues and return to growth. This view was supported with economic data released this morning, showing better than expected numbers for consumer sentiment, inflation, and employment. The better numbers have given the Euro back some strength, dragging down the GBP/EUR rate. 

Over in the USA, there are nerves ahead the FED’s meeting tomorrow, halting the Dollar buying and in turn Euro selling. The Dollar has weakened a little after weaker than forecast manufacturing, industrial output and housing data. 

Here in the UK, its Budget day tomorrow, and the Conservatives last chance to convince voters they are the only choice to protect the UK economy. Tomorrow is going to be a very important one for the currency markets, so let’s take a closer look at what’s on the agenda. 

Wednesday a very important day for exchange rates 

Tomorrow we will see much that could affect exchange rates. In the UK at 09:30am we have the latest Bank of England announcement, various unemployment numbers. Both of these could affect the Pound significantly better than expected figures could strengthen the Pound and vice versa. 

Later on we have the UK Budget Statement which is of more importance than usual, given there is a UK general election in less than 2 months. There could well be some surprises in this budget to woo voters ahead of the election, and given the economy is going to be the main weapon in the Conservatives arsenal, there is every chance we could see a significant effect on exchange rates for Sterling. 

Over in the United States at 6pm we have the Federal Reserve’s monthly statement. The markets are nervous ahead of this as analysts try to determine when the FED will raise interest rates. This is very important for exchange rates, as flows in and out of the Dollar can have knock on effects for the Pound, the Euro, and other major currencies. 

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Pound/Euro €1.42, Pound/Dollar below $1.50

Wednesday 11th March 2015 
I read today that a pretend €100.00 euro note from a toy shop was accepted by a business in a County Down town in Ireland to purchase a sandwich. In the real world, it almost seems that an actual €100 Euro note isn’t worth much more, given the pounding the single currency has taken in the last few days! 

Since Monday alone, the weakness in the single currency has meant that the Sterling/Euro rate has risen from €1.39 hitting a high of €1.4255 before dropping back away:

Even today we’ve seen a rise from 1.4075 to 1.4250, before levelling back off to where we are now in the low €1.41’s. What an incredibly volatile few days. We are now seeing a new 7 year high on GBP/EUR, and in 2015 alone we’ve seen the exchange rate rise from €1.27 to the current highs above €1.40. To put this into real terms, a €300,000 property abroad is £25,000 cheaper than in January. 

Why has the Pound/Euro rate risen above €1.40? 

The fact the rate has smashed through the 1.40 mark and sustained itself above that level has surprised both me and the markets in general. Usually a technical level like that would act as a barrier. Most analysts agree that it’s due to renewed fears over the Greek position in the Eurozone, and this coupled with the launch of quantitative easing by the European Central Bank (ECB) continued to put downward pressure on the single currency. 

The weakening effect of the ECB’s bond buying programme seems to be more than offsetting the uncertainty surrounding the upcoming general election. Against the US Dollar, the Euro is now languishing at a 12 year low!

Which way will Pound/Euro rates move now? 

As I’ve said above it’s a surprise that rates broke through €1.40, however now they have it’s likely to stay above that level as it will be acting as a level of support. I now think that while the general election could still weaken the Pound, the risks of this are now offset by Euro zone uncertainty. 

Some forecasts I’ve read suggest €1.45+ later this year, but of course exchange rates depend on market sentiment, and this in turn will be driven by ongoing events in Europe. If you need to buy or sell Euros, don’t just watch the rate hoping things will go your way. I can help you achieve much better rates than the bank, and also have various tools to help you avoid unnecessary drops in the rate, such as Stop Loss orders, Limit Orders and Forward contracts. If you have Euros to buy or sell, then click here to send me a free no obligation enquiry today to get a quote, and find out how I can help. 

Pound/Dollar rates drop below $1.50 

In stark contrast to GBP/EUR rates, the Pound/Dollar rate has tumbled below $1.50 today. This is partly due to the Euro sell off. Investors dumping the Euro have been buying the US Dollar, which has given the greenback some strength. 

Will it keep dropping? I think so. The US economy is performing very well, and they are likely to raise interest rates this year. This will strengthen the currency, and while Europe suffers, the Dollar will continue to benefit. So I think we’ll see GBP/USD down in the low $1.40’s this year.  

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Sterling/Euro rates near €1.41!

Tuesday 10th March 2015 
A very brief update this afternoon to say the Pound/Euro rate has risen by almost 2 cents today, pushing through the €1.40 barrier and onwards towards €1.41 – a fresh 7 year high and the best rates have been now since the end of 2007: 

The pound has been gaining all day after the European Central Bank (ECB) began its government bond buying programme earlier this week. This also after the head of the eurozone finance ministers' group called on Greece to "stop wasting time" and engage in serious talks on reform. 

I’ll post a more detailed update tomorrow afternoon, as my time today has been spent on the trading floor assisting clients with Euro purchases. We’re offering trading levels of €1.40+ today and needless to say we have been very busy indeed performing a record number of GBP/EUR trades. 

Do you need to convert currency at the best exchange rates? 

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Oil Prices and Central Banks affect exchange rates

Tuesday 16th December 2014 
It’s been a pretty choppy day in the currency markets, with news from Central Banks and oil prices causing quite a bit of exchange rate volatility. Today I’ll look at what has been happening with some of the main currency pairs. If you need to buy or sell any major international currency, I can source exchange rates up to 4% better than banks can offer. Contact me today to find out how I can help.

Sterling/Euro 

Pound/Euro rates seem to have been sliding lower over the last few months, and currently stuck between €1.25 and €1.26 which is several cents below the 6 year high of €1.29 we saw in the summer. It’s about the Bank of England and interest rates. In the summer analysts expected a rate hike before the end of the year, and this had caused the Pound to rise in value. It now looks like a rate hike is now some way off, and this has caused the Pound to drop off. 

Today we saw inflation fall even lower, down to a 12 year low caused by lower fuel prices. This could also slow the UK's economy which may cause Sterling to fall further in the short term. The Bank of England, which targets an inflation rate of 2%, warned last month that the rate could drop below 1% in the next six months, and this poor outlook means that the Bank is unlikely to raise interest rates from the historic low of 0.5% for some time. 

If you need to buy or sell Euros, click here to get a free quote or discuss the GBPEUR forecast. 

Sterling/US Dollar & Canadian Dollar 

In the last 6 months GBP/USD has dropped from $1.72 down to around $1.56/$1.57. Part of this is due to the weakening of the Pound, but also the US Dollar has been gaining strength recently as their economy continues to impress. It’s likely the US central bank will raise interest rates before the UK, and that’s likely to keep the rate in check. 

Another reason is the low oil prices. The US imports lots of oil so when the price drops, the USD generally gets stronger and more expensive to buy. The opposite is true of the Canadian Dollar – GBPCAD rates have gone up by 4% in the last month, as the Canadian Dollar has weakened due to the low oil prices. They export lots of oil so their currency has weakened. 

If you need to buy or sell USD or CAD, click here for a quote or simply to have a chat about what’s moving the exchange rate. 

Sterling/Australian Dollar 

We are currently seeing very good rates to buy the AUD. The current rate is the highest it’s been all year. This is down to a very weak Aussie Dollar. Australia’s main export is Iron ore, which is at a very low price. China buys most of it, and their factory and manufacturing sectors are slowing, meaning less demand for these raw materials. This has caused the AUD to weaken and become cheaper to buy. Due to the slowdown in the Australian economy, they may have to cut interest rates next year and that is also pushing the GBP/AUD rate higher. 

If you need to buy Australian Dollars, click here for a quote or simply to have a chat about what’s moving the exchange rate. 

Russian Rouble 

We don’t trade the Russian Rouble, but it’s certainly worth a mention. The Rouble has lost about half of its value this year, and today alone has fallen another 10%. Russia’s central bank last month raised interest rates by 1% to 10.5%. Last night, they hiked the rate to 17% in an effort to stave off the fall in value of the currency. While we don’t trade this currency, I’m mentioning it as it demonstrates how central banks try to use interest rates to alter the value of a currency. On this occasion it hasn’t worked, and fears of fresh sanctions could drag the rouble lower, although it’s mainly due to oil prices. 50% of their GDP comes from oil, so the 5 year low in prices is reflected in their currency. 

Getting the best exchange rates 

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What could affect exchange rates this week?

Monday 1st December 2014 
Good afternoon and welcome to a new month. The currency markets have been relatively stable over the last week, with GBP/EUR remaining around the €1.26 mark, and GBP/USD in the $1.57’s. 

In today’s post I will list the economic data releases for the coming week that I think could affect exchange rates. 

This week’s economic data releases 

Tuesday 2nd December – Today is quite light for UK data, with Construction PMI the only release of note. We’re expecting the number to be 61.2 so anything above this could give the Pound some strength. In Europe, Spanish employment numbers are released. Australia has its latest building numbers, along with an Interest Rate statement from the RBA. Over in the United States there are 2 speeches by FED members, and also the chair Janet Yellen, so GBP/USD could be affected. 

Wednesday 3rd December – This could be an important one for Sterling, as we have Services PMI and the Autumn forecast Statement. GBP/EUR could also be affected by today’s EU Retail Sales figures and some EU inflation numbers. Most data is from the states today though; Manufacturing, Employment and speeches by FED members. 

Thursday 4th December – We have the latest interest rate decisions from the UK and EU today. While I expect no movement in the actual rate, speeches by the Banks governors afterwards could well affect Sterling/Euro exchange rates. We also have further US employment numbers this afternoon 

Friday 5th December – We end the week with a host of US data including Trade Balance numbers and Non-Farm Payrolls. These 2 releases often cause volatility in the exchange rate for GBP/USD. 

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Pound/Euro rises after ECB press conference

Thursday 6th November 2014 
The Sterling/Euro exchange rate has rocketed today, following comments by the European Central Bank (ECB) president Mario Draghi, as I predicted could well happen in my post earlier this week.

Central Bank Decisions and the Pound/Euro exchange rate 

Both the UK and EU central bank announced their latest decisions on interest rates today. There were no surprises, with both keeping their benchmark rates on hold. However after the EU decision, the president of the European Central Bank (ECB), Mario Draghi, said in a press conference that the bank stands ready to give the Eurozone further economic stimulus "should it become necessary". Mr Draghi said: "Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council is unanimous in its commitment to using additional unconventional instruments within its mandate." 

Markets have taken this as a negative sign for the Eurozone, and the Euro weakened accordingly. As you can see form the chart below, there was a significant spike of around 1 cent, bringing the GBP/EUR rate to within a cent or so of the highest it’s been in 6 years. 

What next for Pound/Euro? 

To me the trend is just repeating itself. Many times over the last few months we have seen rates reach this level, before dipping back off again. Without anything on the horizon likely to strengthen the Pound, I think there is a good chance we could see the rate drop back again. If you need to buy Euros, I would consider locking in a rate now while it’s so good. You can fix the current rate for up to 2 years and only lodge 10% of what you want to convert. 

Euro sellers have a tougher decision. Longer term forecasts suggest the rate getting to €1.30, but short term you could see moves in your favour. If you need to buy or sell Euros, or indeed any international currency then click below to make a free enquiry on the rates I can source for you. I can help with bank to bank transfers from amounts from £5k to £5m. I’m afraid I cannot help with cash or holiday funds. 

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What could affect exchange rates this week?

Monday 3rd November 2014 
We have seen Pound/Euro rates reach €1.28 today, due to slightly better than expected manufacturing numbers that gave Sterling a boost. The other reason rates have climbed up from €1.27 is a weaker Euro following last week’s decision from the USA to end their QE programme. 

The end of QE in the states strengthened the US Dollar, pulling rates down below $1.60 where they remain today. 

Below I have listed this week’s economic numbers that I think could affect exchange rates. I personally think that Pound/Euro will slip back away again in the coming days, as has been the general trend in the last few weeks. The high GBP/EUR rate is not good for the UK economy as it makes our goods and services more expensive. 

In the last few weeks we’ve seen BoE members and even the Prime Minister stating their wish for interest rates to stay at record lows for a long time to come. This could well be an attempt to weaken the Pound to help our exports, and I believe this could hold the Pound back from making further gains.

If you need the best exchange rates, would like a quote, or to simply find our more about the foreign exchange services I can offer, click here to send me a free no obligation enquiry today. 

This week’s economic data releases 

Tuesday 4th November – There are various economic figures from Australia today, including an interest rate decision, Trade Balance figures, and the latest Retail Sales numbers, so GBP/AUD could face some volatility. In the UK the only data of note is construction numbers. Over in the USA we have Trade Balance numbers, and the Bank of Canada’s Governor gives a speech. New Zealand has its latest employment numbers which could affect GBP/NZD 

Wednesday 5th November – A very quiet day for economic data releases. The only UK release is Services PMI. The Eurozone releases Retail Sales numbers in the USA we have manufacturing figures. 

Thursday 6th November – Today could be interesting for the Pound. We have Industrial and Manufacturing numbers at 09:30am, followed at lunchtime by the BoE decision on Interest Rates. I expect no movement, but any accompanying statement could affect Sterling. The Eurozone also has its interest rate decision. Again rates will be left on hold in all likelihood, but any hint of stimulus in the accompanying statement could weaken the Euro, pushing up GBP/EUR. In the afternoon, a GDP estimate will also be closely watched as an indicator of how the UK economy is performing. 

Friday 7th November – Today’s main UK release is Trade Balance data. This is important as if exports are down, it could mean the BoE talking the Pound down to try to help this area. In the USA we have Unemployment and Non-Farm payrolls, which are very hard to forecast. As a result, the actual figures often surprise the markets and affect GBP/USD rates. 

For more information on how the above could affect your currency requirement, or to get an exchange rate quote to compare with your bank or existing broker, click below to send me a free enquiry now. 

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Pound rallies after no vote, but spike is short lived

Friday 19th September 2014 
Well that was certainly an interesting week in the currency markets. Not since the crash of 2008 have I seen such large volatility and huge amounts of my clients securing currency to protect against adverse exchange rate movements. Having been on the trading floor for over 24 hours in the last 2 days I'm about ready for the weekend!

So now we know, Scotland will remain part of the United Kingdom. I thought it was likely the No vote would win the day, and that is what we have seen. 

What effect did the No vote have on exchange rates? 

Over the last few weeks Sterling has dropped a little on fears that Scotland would vote Yes for independence. Last night when it became clear Scotland would vote against leaving the union, Sterling spiked to multi-year highs against the Euro, as the chart below shows: 

 

However the spike was short lived. I warned earlier in the week that in the event of a No vote, we would probably see a slightly spike in Sterling but it would then drop back off again, and as you can see from the chart above, that is exactly what has happened. 

Which way could exchange rates move now? 

It’s impossible to know, but I personally can’t see rates getting any higher. The levels we’re at right now are around a 2 year high vs the Euro, and not far from a 6 year high. I think focus will now return to fundamental economic data. 

On the one hand, Unemployment is down and interest rates are likely to rise next year. But I don’t think this will cause the Pound to go higher as any increases are going to be gradual. There is also the issue of the economic uncertainty that further devolved powers to Scotland will create, and of course in going down this road Wales and England may also wish to negotiate new terms. Currency markets hate uncertainty and this could cause the Pound to drop further. 

Its worth noting a few years ago when rates were at these levels, we quickly saw things drop so those holding out for further gains should be cautious 

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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.

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