Pound rises on employment data, but will it go higher?

Wednesday 16th September 2015
Today we saw the Pound/Euro rate rise on positive jobs data from the UK. Average earnings and the claimant count were both much better than expected, and you can see from the chart below that this strengthened the Pound, pushing the GBP/EUR rate from €1.36 to €1.3750 before dropping back away. We also had worse than expected inflation numbers from the EU, which helped push the rate higher as the Euro weakened and became a little cheaper to buy. 

Will the Pound continue to go up against the Euro? 

This is the question I’m asked daily by my clients looking for the best exchange rates to buy Euros. It is of course impossible to predict what will happen, but I don’t think the rate will get higher in the short to medium term. Indeed the current strength of the Pound is a problem for the Bank of England as it makes our exports more expensive, so if the rate does continue to climb, then I would expect the BoE to make noises about an interest rate being a long way off, in order to weaken the Pound to stop it hindering the economic recovery. 

Yes, the rate has fallen from the 8 year highs of €1.40+ we were enjoying last month. Those that need to buy Euros however should consider that the rate is still significantly better than when it was at €1.25 at the start of this year, so in the grand scheme of things it’s still a good time to buy Euros. 

It’s important to remember the only reason rates were so high before was 1) due to weakness in the Euro due to the Greek debt crisis that has now been resolved and 2) speculation interest rates were going to rise in the UK, which is no longer the expectation. For these 2 reasons I don’t think the rate will get back to €1.40 until into 2016, so if you need to buy Euros then consider fixing a rate sooner rather than later. (Click here to get a quote on your exchange and see how much you could save using my currency exchange services). 

All eyes on the FED 

Tomorrow’s decision by the Federal Reserve on US interest rates is the most anticipated for a very long time. The consensus is still that rates will be left on hold however there is a small chance they will increase rates. If they do, expect GBP/USD rates to drop sharply. 

Do you need to convert currency? 

I don’t just provide commentary on the currency markets, I am also the Foreign Exchange Manager at one of the UK’s leading currency exchange companies. I can help you achieve exchange rates much better than bank and existing brokers may offer you. If you need to buy or sell any international currency then get in touch with me today for a free quotation on what I can offer you. 

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Will the FED raise interest rates this week?

Tuesday 15th September 2015
On Thursday, the US Federal Reserve will announce their decision on interest rates, and for the first time in many years, there is actually the chance of a change. It’s widely expected that the USA will be the first major western economy to start pushing interest rates up from the record lows they have been at for many years. 

It’s likely that they will keep them at their record low of 0.25% for another month, however there is a 20% chance that they will raise the benchmark rate to 0.5%. 

What would be the effect on exchange rates if they raise interest rates? 

A hike in interest rates would make the US Dollar an attractive option for investors, due to the higher return they would get on their funds. Therefore, if the FED do indeed raise interest rates I would expect the US Dollar to gain strength and become more expensive to buy, and this would push GBP/USD exchange rates lower. The small chance of a hike will already be priced into the market, so if they leave rates on hold, then GBP/USD may rise slightly. 

Looking further ahead, they are likely to raise rates at some point in the next few months, so I would not expect the GBP/USD rate to remain above the $1.50 mark for long. Most forecasts I’m reading at the moment suggest that the rate to buy Dollars will fall considerably in the medium term. Therefore if you have a requirement to buy US Dollars, click here to get in touch to discuss the ways I can help protect you against the rate moving against you. 

Do you want the best exhcange rates?

If you have a currency transaction to perform there are a number of ways I can be of help. Firstly, I can source rates of exchange that are very close to the published market level, and up to 5% better than banks or other currency brokers can offer. Secondly, with over 15 years’ experience in the FX Markets, I have a very good knowledge of what can affect exchange rates, and can help you to make an informed decision on when to lock in a rate of exchange. 

 I would welcome the opportunity to speak to anyone that needs to get a quote on their exchange and explain how I can help you. Click here to send me your details and I will get in touch personally to discuss your requirements today.

Send me an enquiry today by clicking here. 

Which way could Pound/Euro rates go September 2015?

Tuesday 1st September 2015 
Good morning and welcome back to my regular currency updates after the Bank Holiday weekend. While here in the UK it was dismal weather, heavy traffic and only the lack of a James Bond movie to complete the typical August Bank holiday hat-trick, over in Europe it was business as usual and markets were open. 

Numbers released yesterday and again this morning from Europe were better than expected, with both Strong German Retail Sales and a better than expected EU inflation numbers giving the Euro a boost. This has pushed exchange rates lower. This morning we saw the Euro gain further strength due to better than forecast EU jobs numbers. 

The Euro has been getting stronger and stronger recently, as those with an eye on the GBP/EUR rate will have noticed. In the last month the rate has plummeted by over 8 cents, seriously affecting those trying to budget for a Euro purchase. As I outlined in a recent post, the reason for the decline is two-fold. Firstly we have the Pound weakening off due to the expectation of a UK interest rate hike being pushed back. The second reason is a stronger Euro due to a resolution of the Greek debt crisis and a resurgent EU economy that now seems to be growing at a steady pace, with the help from the ECB Stimulus seemingly having the desired effect. 

I do think that rates will eventually recover to €1.40 again, but this is now a medium to long term forecast. In the coming weeks and months, if we continue to see strong economic figures from Europe then the single currency could continue to become more expensive. 

Below I’ve listed what I think could affect exchange rates for the coming months. If you have a currency transaction to perform and would like to discuss what rates I can offer you, then click here to send a free enquiry today. 

What could affect exchange rates in the first week of September? 

There are various things that change exchange rates, for example: Economic data, Political Uncertainty, Natural Disasters and acts of war. The first of these is the only one that is forecast in advance, and below are the main scheduled releases for the week ahead that I think could affect exchange rates. 

If you would like to have a more detailed chat about how the exchange rate you’re interested in could change in the coming weeks or months, then click here to send me a message and I will be happy to answer any questions you may have about timing your currency purchase. 

Monday 31st August 2015 – Yesterday we saw a raft of positive data from Europe, including strong German Retail Sales and higher than expected inflation data. This has pushed GBP/EUR exchange rates lower as the single currency gained in strength. 

Tuesday 1st September 2015 – More positive data was released from Europe this morning showing that German and Italian unemployment was better than expected. This pulled GBP/EUR down from €1.37 to €1.3560. UK data this morning included mortgage approvals that were better than expected, and credit and PMI numbers that were worse. Later today we will see Canadian GDP figures that could affect GBP/CAD rates, and US Manufacturing and Construction data that might change GBP/USD exchange rates. 

Wednesday 2nd September 2015 – We start the day with Australian GDP figure. Later in the morning we see UK Construction figures, and EU wide inflation numbers. Recent EU data has been good and if this continues to be the case, expect GBP/EUR to drop further. In the afternoon, US Employment data, Non-Farm Productivity and Factory orders could all affect cable. 

Thursday 3rd September 2015 – Lots from Europe today that could change GBP/EUR exchange rates, including Inflation data, and the latest ECB interest rate decision. While no change is expected, the press conference afterwards often contains hints about future policy and so could well affect the Euro. Later in the day, US manufacturing and Services PMI could affect GBP/USD. 

Friday 4th September 2015 – the G20 meeting starts today and so any surprises here could affect various currency pairs. Scheduled releases on the calendar other than this include EU GDP figures which I expect to show a monthly growth of 0.3%. In the USA it’s jobs day and the important Non-Farm Payroll numbers. Regular readers will know that this release is very difficult to forecast. The current expectation is for 220,000 new jobs to have been created. Any more than this, then expect GBP/USD to drop, and vice versa.

Want to talk about which way exchange rates may go, and get a quote for your currency exchange?

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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. 

Do you need the best exchange rates? 

The currency markets are incredibly fickle and notoriously difficult to second guess, but with a sound knowledge of the options available to you and an understanding of what is moving exchange rates, you can make an informed decision on when to fix our rate. 

If you would like a quote on the rates I provide, a chat about the service I offer or simply want to talk about what is happening in the market, contact me for free by using the link below. 

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Pound/Euro rates fall to €1.36 on ECB comments

Wednesday 3rd June 2015 
Not good news for those looking to convert Sterling to Euros I’m afraid. The decline in the GBP/EUR rate has continued today, as you can see from today’s chart: 

The reason for the continued fall today was further strength in the Euro. This was caused by the European Central Bank (ECB) saying that Eurozone’s recovery is set to "broaden and strengthen", as it raised its inflation projections for 2015. ECB president Mario Draghi's comments came in a press conference earlier today. 

This is good news for the EU economy, and strengthened the single currency causing it to become more expensive to buy. The next thing that could affect the rate will be whether Greece makes it's first debt payment on Friday. If they do, then expect the rate to fall further. If they don't then it may recover slightly, but I can't see it getting back to €1.40 any time soon.

What effect did this have on Pound/Euro exchange rates?

The effect on the GBP/EUR rate was for it to drop from €1.3775 to €1.36. This is a far cry from the levels of €1.41 we saw just a week ago, and really demonstrates how quickly exchange rates can change. To put this into real terms, a client purchasing €250,000.00 today has to pay £6500.00 more for the same amount of currency compared to a week ago. 

Fluctuations in the exchange rate can make a big difference to the cost of buying currency, which is why it’s wise to use a specialist broker like myself rather than the bank. I can not only help you to achieve much better rates of exchange, but also help with tools such as ‘Stop Loss’ orders that limits any negative effect of the exchange rate dropping. 

If you need to buy or sell Euros or indeed any international currency, then get in touch with me for a free quote and more information about the services I can provide. I will get back to you personally within 24 hours to discuss your requirements and give you a free consultation on the different options you can consider. I look forward to hearing from you.

Alastair Archbold 

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Will the GBP/EUR rate rise or fall in the coming weeks?

Monday 20th April 2015 
Good morning. Before we look at what has been happening with exchange rates this week, I would like to take a moment to thank both regular and new visitors to my site for their support. Today my blog logged its 1 millionth unique visitor! Readers that chose to send an enquiry to find out more about the services I offer have now converted over £35m, at rates up to 3% better than banks can offer meaning I have saved my clients over £1 million pounds to date, which is something I am very proud of. If you would like to see how I can help with your exchange, you can send me a free enquiry by clicking here. 

What has been happening with the Pound/Euro rate? 

After quite a bit of volatility this year that have seen GBP/EUR rates between a range of €1.25 and €1.42, the last week has been relatively stable. The exchange rate has remained within a 1 cent range between €1.3850 and €1.3950: 

Will Pound/Euro rates drop as the election approaches? 

Well that’s what many analysts have been saying for several weeks, and I agreed that it was likely the rate would drop. This was based on what happened as the Scottish referendum last year created similar uncertainty. However I’m starting to think it’s not a given the same thing will happen. The Scottish vote seemed to catch the markets by surprise, but this time most investors have put plans in place well in advance of the election, which means we may not see the Sterling sell off that would cause the Pound to fall. That would explain why rates have remained supported around the 1.39 mark despite a hung parliament looking very likely.

Indeed with the UK economic recovery being praised by the IMF chief we could well see the Pound hang on to it’s relative strength. Also, the Euro remains very week indeed especially with the ECB President Mario Draghi making clear last week that quantitative easing would last until September 2016, then there is every chance we may actually see rates remain around these levels and possibly even rise higher. 

What should you do if you need to buy or sell Euros?

Of course there is no way to predict which way the rate will go, so what you should do is contact me to discuss the various options you could consider. For example if you need to buy Euros, then you can place a ‘Stop Loss’ order to fix a rate should it drop below a pre-agreed level, for example €1.35. In this way you’re not exposed to a huge fall in the rate should the election cause Sterling to plummet, but you're still able to take advantage of higher rates if we see things get back to the €1.40 level. 

This is just one example of the type of thing I can offer, but of course every particular currency requirement is different. You may need to convert Euros to Sterling following a property sale for example. 

Whatever currency you need to buy or sell, why not get in touch to discuss the options available to you, and get a quote to compare with your bank or existing broker. You can do this for free without any obligation by sending me an enquiry here. 

I look forward to assisting anyone that needs to convert £5k+ on a bank to bank transfer basis. I’m afraid I can’t help with cash or holiday money. 

Alastair Archbold

Pound/Euro breaks through €1.39 - will it last?

Friday 6th March 2015
In the last few days the GBP/EUR exchange rate has climbed further, today briefly going through the €1.39 level before dropping back away. As we’ll see in a moment there are 2 reasons for the gains; weakness in the Euro caused by the European Central Bank (ECB) Quantitative Easing programme, and better than expected US Jobs data driving investment from the Euro, and into the US Dollar. Here’s how the GBP/EUR rate has moved this week: 

ECB Quantitative Easing 

This week the European Central Bank (ECB) confirmed it will start its €1.1 trillion Quantitative Easing programme, following the UK and USA that did the same a number of years ago. The aim is to spur an economic recovery by printing money and buying government backed assets. They have done this despite raising their growth forecasts. They stated yesterday that they would continue QE even if the economy showed signs of recovery. 

This weakened the Euro further, pushing the GBP/EUR rate above €1.38 in trading on Thursday. Effectively the ECB’s president Mario Draghi has got what he wanted – a much weaker Euro which makes EU goods and services cheaper. The Euro is now at a near 8 year low against the Pound, and a 12 year low against the US Dollar. 

However if QE has the desired effect, which it has seemed to do in Britain and America, it could start lending some support back to the single currency. 

US jobs data causes GBP/USD to drop, and GBP/EUR to rise 

Figures today showed that the US economy added 295,000 jobs in February, which is much higher than had been expected. It’s also the 12th month in a row the economy added more than 200,000 jobs, the longest such run since 1994. 

The stronger-than-expected jobs figure strengthened the US Dollar and caused GBP/EUR rates to drop by almost 2 cents:

 

The flow of investment into the Dollar also hurt the Euro, which weakened further and briefly pushed GBP/EUR rates above €1.39. 

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

If you have a currency transaction to perform, would like a quote, or to simply discuss the market or anything I’ve covered above, contact me for a free no obligation consultation by clicking below. 

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Sterling/Euro exchange rate forecast

Tuesday 17th February 2015 
In today’s report I’ll take a look at the Sterling/Euro exchange rate forecast, and also what data releases the rest of the week has in store and how they could affect exchange rates. Today the Pound has fallen against other currencies due to the lowest inflation figures on record.

Sterling/Euro 

The Pound/Euro rate has been repeating its recent trend of rising above the €1.35 mark, only to drop back away within days. This has happened again this morning, with the rate falling from €1.3550 to €1.3450 over the course of this morning. What’s been going on? 

Continued uncertainty over what is happening in Greece has continued to weaken the Euro, and that’s what keeps pushing the rate higher However with very low UK inflation numbers this morning, the Pound has fallen back away which is why GBP/EUR exchange rates have dropped. To be honest I think sooner or later, the Greeks will reach an agreement with the EU regarding its debts, and when this uncertainty is removed, the Euro could gain back some of its losses and bring GBP/EUR even lower. I personally don’t expect rates to stay at the €1.35 level for long. 

Supporting that view was this morning’s UK inflation figures. The rate of UK Consumer Prices Index inflation fell to 0.3% in January, its lowest level since records began in 1989. 

On the one hand, this does provide a respite for consumers in the UK and increase spending power so it’s good news. On the other hand however, it means interest rates in the UK aren’t going anywhere, and so the Pound has weakened off. 

(Low interest rates usually weaken a currency and it’s this fact that’s keeping the Pound in check.)

If you need the best GBP/EUR rates, or indeed need to convert any international currency, click here to make a free enquiry on the commercial exchange rates I can offer you.

 

What else could move exchange rates this week? 

Tuesday 17th February 2015  

This morning we had the latest inflation figures, and they were slightly worse than expected. This means it’s getting less and less likely that interest rates will be going up any time soon in the UK, and the Pound has fallen today by over a cent against the Euro. 

Wednesday 18th February 2015 

Today is an important one for Sterling, as at 09:30am we will see the latest unemployment figures, and the Bank of minutes. I expect the unemployment number to remain at 2.6%, but if it’s higher than this expect the Pound to fall and vice versa. The BoE minutes will be important as it will show if any of the Banks Monetary Policy committee voted to hike interest rates at their last meeting. I would expect this to show all members voting to keep rates on hold in light of the recent inflation numbers. 

Thursday 19th February 2015 

Nothing of note from the UK today, however the Eurozone has a monetary policy meeting and a consumer confidence release, that could affect GBP/EUR rates. The USA also has some important jobs and manufacturing numbers today, so we could also see changes in the Pound/Dollar rate. 

Friday 20th February 2015 

Today is another important one for Sterling as we have the latest UK Retail Sales numbers. I expect these to be around the 5.9% mark, and any deviation from this figure could cause the Pound to move against other currencies. Retail Sales figures are important as they are a good overall barometer of economic activity. 

To discuss your currency requirement and obtain a quote to compare with your bank or existing broker, click here.

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 

If you have a currency transaction to perform, would like to discuss which way the market is moving, or get a quote to compare with your bank or existing currency broker, click here to send me a free no obligation enquiry.

Protect your currency requirement against Scottish Referendum

Tuesday 16th September 2014 
Good afternoon. Significant volatility remains in the currency markets, with the Pound/Euro rate continuing to fluctuate in value due to uncertainty over the Scottish referendum. 

Pound/Euro over the last week 

As the chart below shows, the last week has been very choppy for Sterling Euro. We have seen a low of €1.24, a high of €1.26, and in just the last 24 hours it’s moved up and down by nearly a cent. 

These movements are being driven by investor sentiment as the Pound is bought and sold on speculation on what may happen with this week’s Scottish referendum vote. 

What would happen to the Pound if the vote is Yes? 

It is of course impossible to predict which way exchange rate moves, if it were possible I would not be writing these market updates from the trading floor, I would be relaxing on my super yacht in the Mediterranean! What we can do is take a view on what may happen with exchange rates, and explain the tools available to protect against the rate moving the wrong way. This is a much better strategy than simply hoping the rate won't fall. 

My view is that should Scotland vote Yes, then the uncertainty this would create in the financial markets means that Sterling would face a huge sell-off. As investors dump the Pound many more would join the bandwagon and we could see exchange rates fall by up to 5%. 

What would happen to the Pound if the vote is No? 

This is harder to predict. Some think that the Pound is being held back by the possibility of independence, and that if the vote is No Sterling will rebound. I’m not so sure. In the event of a no vote there will still be much uncertainty surrounding the future economic realities of further devolution, and the currency markets hate uncertainty. So I think at best we might see a temporary spike in the Pound, but if so it will be short lived. 

What you should do to protect your exchange rate 

You can get in touch with me here for a free consultation on your options. I can explain the different paths you can take so you can take an informed decision on when to fix a rate. For example those buying Euros may wish to use a Forward contract to lock the rate in advance of the result, protecting against the market dropping. 

Those converting Euros to Sterling could look to place a ‘Stop Loss’ order to hedge against the rate moving the wrong way, while still being able to take advantage of any Sterling weakness. 

Whatever your currency requirement, I can help you with various contract types, over 10 years’ experience in the Foreign Exchange markets, and rates of exchange that are incredibly competitive, and up to 5% better than banks can offer. 

Click here to send me a free enquiry now.

Pound falls as interest rates set to remain low for rest of the year

Wednesday 13th August 2014 
As you can see from today's Pound/Euro graph below, Sterling has plummeted today by around 1% against other currencies on comments made by the Bank of England governor Mark Carney, effectively signalling that interest rates are to remain low for the rest of this year. In my post yesterday I warned that if he was dovish about the UK economy then exchange rates could fall, and this is exactly what we have seen happen today. Let’s take a closer look at what he said and why the Pound has fallen against the Euro. 

What did Mark Carney say in his speech? 

 
The Bank of England has halved its forecast for average wage growth, and the Bank's latest quarterly economic forecast also indicated that it believed the level of spare capacity in the UK economy has narrowed to around 1% of GDP. 

Mr Carney said there were still "a lot of uncertainties to contend with" given record participation in the jobs market, "remarkably weak" wage rises and a rising number of threats to the global economy.   

He said that whenever interest rates did increase, they would still do so gradually. Chris Williamson, chief economist at economic data firm Markit said it is was likely that "calls to raise interest rates would start to gather strength in coming months," but that an interest rate rise still looked some way off.

Read a full outline of his comments here.

What does this mean? 

Effectively he is saying that as wages aren’t growing fast enough, there isn’t enough spare capacity in the economy to allow a raising of interest rates. This means that it is likely interest rates won’t be going up anytime soon, and when they do they will only rise very gradually.

Why has this caused the Pound to fall? 

Sterling has been strong recently on speculation interest rates will be going up, as this drives investment into the currency due to the potential higher return on offer. Today’s comments indicate that rates will remain at their record low of 0.5% for some time to come. This means that investors have sold the Pound for currencies that offer a higher return, and the sell-off has caused the Pound to weaken and exchange rates to move down. 

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. 

Click here to make an enquiry today and see how much you could save.

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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