Volatile weeks ahead for foreign exchange rates

Wednesday 6th May 2015
After a tumultuous end to last week for the Sterling/Euro pair, yesterday we saw rates remain within a 1 cent range between 1.3550 and 1.3650. This still represents a large cost difference when buying a large amount of currency, however relative to the huge drop we saw last week, it actually seems quite stable! Regular readers of my blog and those keeping an eye on the currency markets in general will know that the coming few days will be incredibly important for exchange rates. 

In addition to the usual economic data releases that may cause rates to change we have, of course, the UK parliamentary election on Thursday. It is a significant event to determine the appropriate stance of monetary policy and assesses the risks to long term goals of price stability and sustainable economic growth in the UK, and as such, it’s highly likely to affect the Pound. 

In the last week alone, a purchase of €250,000.00 has differed in cost by more than £6,500.00. Similar cost differences over the next week will not be a surprise. Therefore if you need to convert one currency to another this week, you should have a clear plan in place with regards to what you want to achieve, and how you’re going to achieve it. 

Simply sitting back and hoping the exchange rate will move in your direction is not a wise approach, and in today’s report we will have a look at how you can protect yourself against market volatility the election may cause, and look at ways you can protect yourself. 

Click here to get a quote and discuss your currency requirement

UK General Election likely to cause significant market volatility 

Let’s put things in context. Elections always cause uncertainty, and as I’ve mentioned several times in our analysis over the last few weeks, this election result is highly unpredictable. 

At the moment it looks likely a hung parliament will be the result, so not only will the market face volatility this week, the biggest price movements may actually be in the following few weeks while deals are made and the main parties attempt to form a coalition government. 

Financial markets look for stability in order to spur investment and confidence, and the currency markets are no different. Without intending to sound political, and looking at this from a purely analytical point of view, one example would be the prospect of a Labour/SNP deal. In my view the financial markets would not react favourably to that given the effect it may have on business investment and the economy as a whole and so could send the Pound lower. At the moment there is no way to know what government we will have a few weeks from now, so let’s take a sensible look at ways you can protect yourself against market volatility to ensure your currency does not cost more than necessary. 

How to protect yourself against exchange rates moving the wrong way 

The below is a brief outline of the main contract types I can offer. For a full outline of the options you can consider, the first step should be a free consultation, so that you can make an informed decision on what to do. 

Some options you can consider are outline below. They’re not too complicated and these smart ways to trade offer a host of clever advantages depending on your individual situation. For a more detailed look at the options you can consider and to get a quote for your exchange, contact me today. 

Spot contract - The quickest, easiest and most popular way to buy and sell currency – you simply exchange one currency for another, whenever you need it. You have two days to send us the funds and, as soon as your funds clear, we’ll forward the currency to the account of your choice. 

Forward contract - A forward contract can help protect against market volatility, useful for managing your budget. You can set the price now for a transaction that will take place up to two years in the future, allowing you to fix the exact value of the currency to be paid, regardless of market fluctuations. You secure the forward contract with a margin of 10% of the total value of your transaction (you’ll need to pay this within two working days of agreeing the contract) and then pay the balance before the contract expires. Once secured, the agreed exchange rate will apply for the duration of the contract. This is very popular at the moment. 

Limit order - With a limit order you specify the exchange rate you are hoping to achieve – which may not currently be available. Your currency will automatically be purchased if the market exceeds this rate, meaning you get the price you want. This type of contract is particularly useful when the markets are moving in a positive direction for you. 

Stop loss order - A stop loss order instructs your broker to buy if the exchange rate goes down to a pre-determined level. When combined with a limit order, you can hold out for a better rate while protecting yourself from a sudden fall in the market. 

To have your free consultation and have a detailed chat specific to your currency requirements and timescales, contact us today. 

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Please note I will be overseas for the next 10 days, so will be back in action on Friday the 15th May, with a full analysis on happened to exchange rates after the election 

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Pound/Euro exchange rate forecast outlook 2013

Wednesday 19th June 2013 
Good afternoon. Sterling exchange rates have fallen back away from recent highs, after high UK inflation numbers and a strengthening Euro. In today’s post I’ll have a look at recent market movements in more detail, and also look at how Quantitative Easing (QE) in the UK and abroad is still driving exchange rate movements. In this weeks report: 

• Bank of England still split on QE
• UK Inflation higher than expected 
• Euro gathers strength after Mario Draghi comments 
• FED to make QE announcement this evening. 
• Data for rest of the week that might affect rates 
• How to get the best exchange rates 

Bank of England still split on Quantitative Easing

Earlier today the Bank of England (BoE) released its latest minutes on its decision to keep the QE programme and interest rates on hold. It showed that for the fifth month in a row, the monetary policy committee (MPC) voted 6-3 in June against increasing the programme of quantitative easing (QE). Sir Mervyn, along with Paul Fisher and David Miles, voted to increase QE by £25bn, as they have done in recent months. 

Sir Mervyn steps down from his role as BoE governor next month, to be replaced by the former governor of the Canadian central bank, Mark Carney, as I outlined in a recent post. While recent surveys of the economy had indicated an improvement in conditions, they said the outlook was no stronger than projections in the Bank's latest inflation report. They also said that the risks from the Eurozone remained "substantial". 

As you can see from the graph of today's movements, initially Sterling fell as a result, however it recovered all of it’s losses and just after lunchtime, rates were back where they started, with the Euro at €1.1690 and the US Dollar at $1.5660. 

As outlined in detail in my last post, there are concerns the new Governor will push for more aggressive QE and this is what is holding the Pound back at the moment. 

Looking for the best exchange rates?

UK Inflation 

Yesterday we saw some surprising inflation numbers for the UK. The rate of consumer price index (CPI) inflation increased to 2.7% in May, up from 2.4% in April, the Office for National Statistics (ONS) said. The Bank of England has said it expects inflation to exceed 3% this year. May's rise in inflation was higher than analysts predicted. 

Usually high inflation would strengthen a currency, as it means that interest rates could rise to combat the rise in inflation. However with interest rates expected to remain at their record lows for some time to come, this isn’t an option. My view is it really means that investors are very nervous about the BoE's ability to keep inflation in check, and that’s why the Pound dropped immediately after the release.

Euro gains strength, pushing GBP/EUR rates lower.

Just a week or two ago GBP/EUR rates were in the €1.18’s. We have now seen rates drop by a few points, and part of this is due to a strengthening Euro. The reason it has risen in value and become more expensive to purchase was due to comments by the European Central Bank (ECB) President Mario Draghi. In a speech he said that the ECB have numerous standard interest rate policy and other non-standard measures that they can use if necessary.

What these measures are he didn’t expand on, but many think that he will do whatever it takes to protect the Euro, and this could mean negative interest rates. Markets responded positively to the news and the Euro gained strength, pushing GBP/EUR rates lower.

Looking to convert Pounds to Euros, or Euros to Pounds? Click here to send me a free no obligation enquiry and find out more about the rates I can provide. 

US FED decision on interest rates and QE

At 7pm this evening it’s the turn of the US Federal Reserve to announce its latest decision on interest rates and Quantitative Easing. I don’t expect any movement in interest rates. There has been speculation that the FED would be reducing its QE programme, so should this be the case I would expect the USD to gather strength and pull GBP/USD rates back down.

Only a few weeks ago rates were close to $1.50, but after the biggest 1 day gain in 4 years the rate shot up, and currently sits in the mid $1.56’s. Most forecasts are still suggesting that rates will fall back below $1.50, mainly due to an improving US economy and the threat of further QE in the UK.

If you need the best USD rates, click here. 

So, will Pound/Euro exchange rates rise or fall?

I’m asked this question many times each day, and the truth of the matter is I don’t know, nobody knows, and it’s impossible to predict. If anyone could then they would become very rich very quickly! What I can do is explain what is driving the market to help you make an informed decision on what to do.

On the one hand, better UK data and continued problems in the Eurozone suggest Pound/Euro rates will rise. Indeed a forecast I read this morning from Barclays suggested just that, and they are predicting that rates will soar above €1.20 this year.

On the other hand, you have robust policy from the ECB that is keeping the Euro strong, and the risk of a devaluing Pound through Quantitative Easing as outlined in my last post. So rates continue to be pulled in both directions, with no indication as to which way it will go in the medium term.

Want to discuss market movements? Send me a free enquiry. 

How to protect against rates moving against you

Despite the uncertain direction of rates, there are various ways you can protect against adverse rate movements and get the best possible rate.

You could place a Stop Loss order which give you a worst case scenario while still allowing you to aim for a higher rate.

A limit order is the opposite; you place an order to buy at a higher level than the market is currently at, and should rates rise even briefly, your currency is automatically bought.

You could fix today’s rates on a Forward contract for up to 2 years, and only lodge 10 % of the total, thus guaranteeing your rate, protecting against a decline and allowing you to budget.

To discuss your particular requirements, send me a free enquiry by clicking here. I can discuss your needs, run over your options and when you decide to convert your funds, the rates we can source on your behalf are exceptional – up to 5% better than the banks. You could be surprised on how much you can save.

Have a free consultation and find out about the rates I can provide. 

Economic Data

Tomorrow we have UK Retail Sales in addition to a speech by one of the Bank of England’s monetary policy committee. This could be interesting should include anything to do with Quantitative Easing and the markets will be listening closely to what he has to say.

On Friday we have some minor Public Sector Borrowing figures, but they could still affect the value of the Pound. 

BoE upgrade UK growth forecasts / Currency Forecast

Thursday 16th May 2013 
Good afternoon. Sterling Exchange rates remain fairly stable, with GBP/EUR sat just above €1.18 and GBP/USD around $1.5250 at the time of writing. The Pound is being supported by robust UK data, including the upgraded economic growth forecasts for the UK. This is what I’ll be looking at in today’s report, along with an outline of the types of contract I can offer to help you get the best exchange rates. 

If you are looking for the best exchange rates, or are trying to work out whether the Pound will go up or down against the Euro or any other currency, then read on below. You can also have a free consultation on your particular requirements by clicking here.

Bank of England upgrades growth forecasts 

The Bank of England yesterday upgraded its economic growth forecast, with the Governor Mervyn King saying that "a recovery is in sight". He also said that the projections are for growth to be a little stronger and inflation a little weaker than they expected three months ago. "That's the first time I've been able to say that since before the financial crisis.” 

This was good news for the Pound, and as a result exchange rates remain at relatively decent levels compared to earlier in the year. Economic growth this year is now expected to be greater than 1%, up from the Bank's previous estimate of 0.9%. As you can see from today's chart, optimism has pushed the Pound up nicely against the Euro.

The underlining picture remained subdued however. Sir Mervyn said: "This hasn't been a typical recession and it won't be a typical recovery. Nevertheless, a recovery is in sight." So, while the outlook was slightly more rosy than it was three months ago, we are not quite out of the woods yet, with the BoE saying that the recovery will remain weak by historical standards". 

Looking for the best Exchange rates? Click here for a free quote.

Problems in Eurozone could hurt the Pound. 

While the UK is doing better than it had been, the same can’t be said for the Eurozone. Figures released yesterday showed that France fell back into recession, and the Eurozone economy as a whole contracted for the sixth quarter in a row. 

Many of my clients thought that the problems in Europe would weaken the Euro and push rates higher. Of course this may be the case, but it’s important to remember that the poor Eurozone data means that UK exporters will face obstacles in the coming months. 

The UK is trying to bounce back on an export led recovery, and a weak Eurozone means there will be less demand for UK products. Touching on this yesterday, the BoE said that the "main risks to the recovery continue to emanate from abroad". So with the Eurozone economy remaining weak, this could hurt the pound. 

As I mentioned in my previous report, this means that we may see the Bank of England try to devalue the Pound to make our exports more attractive. This is what we saw earlier in the year when the GBP/EUR rate fell from 1.2350 to 1.13 in just a few months. 

You can read an interesting article here from Reuters, where they are forecasting the new Governor will opt for aggressive easing, which would really weaken the Pound and potentially send exchange rates tumbling.

If you need to buy or sell currency at the best rates, send me an enquiry. 

Types of Contract I offer 

As a Senior FX broker for one of the UK’s leading foreign exchange brokerages, I can help you get exchange rates significantly better than the banks, by as much as 4%. 

In addition to better rates, there are various contract types I offer that can help protect you against rates moving the wrong way. Let’s take a look at the main types: 

SPOT CONTRACT 

The Spot Contract is the most basic and popular foreign exchange product. It is an agreement to buy or sell one currency in exchange for another. You have 2 days to settle the contract, at a price based on the prevailing "spot exchange rate" the current value of one currency compared to another. 

Although the spot market lets you buy or sell currency as you need it, spot exchange rate movements are highly unpredictable, even during a single trading day. Upon receipt of cleared funds currency is available for onward transmission. 

FORWARD CONTRACT 

A Forward Contract lets you buy or sell one currency against another, for settlement no later than on the day the contract expires. Unlike spot contracts, a forward contract eliminates the risk of fluctuating exchange rates by locking in a price today for a transaction that will take place in the future (up to a maximum of 2 years). You also have the flexibility to take delivery of your currency in an agreed time period before the expiry date. 

A 10% deposit is required to secure the contract and is payable within two working days with settlement due on the day the contract expires. 

LIMIT ORDER 

A Limit Order is an order to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you. This is one of the two most common types of orders, the other being a Stop Loss Order. 

STOP LOSS ORDER 

A Stop Loss Order is used when the market is moving in a negative direction for your currency. An order is placed on file with your broker to help ease the stress of adverse market movements. A stop loss order instructs your broker to buy when the currency hits a certain point. The purpose of the stop loss is obvious – you want to prevent any further movement before the currency falls any further. 

Make a free enquiry with me now 

If you need the best exchange rates, or would like to discuss my service in more detail, click here to send me a free enquiry today. I can provide a free consultation on the options available to you, to help you decide when to fix your rate and on what type of contract. 


There is no cost or obligation involved, and you may be surprised how much you can save in using me to secure currency at the best exchange rates. 

I look forward to hearing from you.

Alastair Archbold.

Decent UK data keep Sterling supported

Friday 10th May 2013
Good morning. Sterling remains supported at relatively high levels against the Euro, close to the best in around 3 months. Against the Dollar however, the Pound has fallen due to a strengthening of the US currency.

All in all, the UK economy has posted some decent figures this week, which has helped the Pound remain buoyant against other currencies, and has also influenced the decision this week by the Bank of England to keep interest rate and QE on hold. So what do I have in store for you today?

• UK industrial and manufacturing figures better than expected
• Bank of England leaves interest rates and QE on hold
• US Dollar gains strength, pushing GBP/USD rates lower.
• How Stop Loss orders can help you achieve the best exchange rates

UK economic figures better than expected, boosting Sterling

We had several UK released this week that impressed the markets, and this has helped the Pound stay relatively strong against the Euro and other currencies. We had UK industrial and manufacturing production numbers released mid-week, and these were stronger than forecast in March, as they were boosted by manufacturing and a recovery in oil and gas output. Manufacturing output, a sub-sector of industrial production, rose 1.1%, boosted by electronics, metals and machinery.

These numbers were higher than the markets were expecting, and as a result the Pound has remained supported against the Euro and other currencies. This follows a decent run for UK data in the last few weeks, and this recent improved news on the UK economy has boosted hopes that activity is gaining a firmer footing. This is one of the reasons the Bank of England held off any further stimulus this week, which I’ll look at in a moment.

This morning however we had Trade Balance numbers from the UK that were slightly worse than expected. This has taken the steam out of the Pounds run, and pulled rates slightly lower.

Looking for the best exchange rates? Send me a free enquiry.

Bank of England refrains from changing interest rates or QE levels.

The Bank of England has kept its stimulus programme of quantitative easing (QE) unchanged and also held interest rates at 0.5%. The decision had been widely expected, and certainly I did not expect any change in policy.

I think this will remain the case until the new Bank governor, Mark Carney, takes over the helm in July. This was the existing governor’s penultimate meeting, with his last one in June. It will be interesting to what kind of approach Carney takes when he takes over, and if he follows the same route of trying to weaken the Pound as King had done. Time will tell.

In the last few months, 3 of the members had voted for an increase in QE. The better numbers coming from the UK however, including the 0.3% growth in the first 3 months, seems to have had an impact on the chance of further stimulus.

In 2 weeks’ time, we’ll be privy to how the 9 members voted, and this will give a clearer indication of where the Pound may move in the future. If for example only 1 of the members voted for QE, I would expect the Pound to make gains.

US Dollar gains strength, pushing GBP/USD rates lower.

Despite better UK numbers, the Pound/Dollar rate has actually fallen in the last couple of days. Part of this was due to comments yesterday evening by one of the FED members, in which they hinted they may look to reduce the Fed's on-going monetary stimulus.

Currently they buy $85bn of bonds every month in open ended Quantitative Easing. The news strengthened the US Dollar, and the GBP/USD rate has fallen a point overnight to 1.5390.

Buying or selling US Dollars? Click here to compare my rates.

How ‘Stop Loss’ Orders can help you get the best exchange rates

Most of you reading this blog are doing so because you want to achieve the best possible exchange rates, and convert your funds at the best time. Of course it’s impossible to predict where rates will go, however there are tools that you can use to help you make the most of your currency. One of these is the ‘Stop Loss’ order.

These work by placing a lower limit in the market, a ‘worst case scenario’ and should the rate drop below this, we purchase your currency automatically.

For example let’s say you need to buy Euros, and the current GBP/EUR trading rate is 1.18. You will be hoping the rate goes higher, but of course you don’t want to lose out should the market drop. So in this example, you could place a Stop Loss order to buy your currency should the rate drop below 1.17. If the market goes up, you can take advantage of any gains. If however the rate starts to drop, you know the lowest rate that you will achieve; 1.17.

Stop Losses are very useful tools when the market is rising, as you can raise your Stop Level at any time as the market rises. They are very popular for those buying property or need Euros, as it allows effective budgeting.

• Want to know more about Stop Loss Orders?
• Need the very best Exchange Rates to buy or sell currency?
• Would you like to discuss what’s happening in the market to help you time your purchase?
• Sick of getting poor rates and service from your bank?

If you have answered yes to any of the above questions, then you would benefit from a free consultation with me about you requirements. I can discuss what you need to do, and explain the options you can consider within your time frame. The rates of exchange I source for my clients are commercial levels that are up to 5% better than available at banks or other financial institutions.

Click here to send me a free enquiry today.

Have a great weekend.

Will the Pound/Euro rate keep dropping?

Friday 18th January 2013

Good morning. The UK is in a cold snap, and snow is falling across the country. The UK economy and Sterling has also been getting a pretty frosty reception from investors recently. This week was another torrid one for the Pound/Euro cross I'm afraid, with exchange rates continuing to fall and dropping below the €1.20 level. In today’s report we will take a look at why Sterling has fallen & what the forecast and predictions are for the coming months. We will also look at what tools we can provide to help protect you against adverse exchange rate movements to help you make the most of your currency. 

In this week’s Report: 

• Pound/Euro tumbles below €1.20
• GDP figures this week could confirm negative growth
• Pound/USD drops below the $1.60 level. 
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; Why have the rates fallen so much? 

The pound has now fallen 3% so far this year. Last week continued poor data pulled rates below the €1.20 level. It looks increasingly likely that 2013 could be a very disappointing year for sterling.

There are three main areas of concern for the pound: firstly, a raft of poor data shows the UK economy is struggling and that we could be headed back in to recession. Secondly we have the potential loss of the UK's AAA credit rating which is becoming increasingly likely. On Tuesday, the Fitch ratings agency warned that the UK's top-notch sovereign credit rating could be cut if the Chancellor of the Exchequer's March budget shows debt levels continuing to rise. 

Thirdly, Britain's unclear position in the EU is also weakening the Pound. We only have to look back a few months to see that currencies react badly to uncertainty. The longer this debate drags on, the harder sterling will fall. 

What could happen to rates this week?

So part of the reason for the drop is uncertainty over the UK economy. Next week will give some important clues on which way things are headed. On Wednesday we have the Bank of England (BoE) minutes, which will show how they voted on the recent decision to hold off changing interest rates or pursuing more Quantitative Easing. This may indicate further QE is on the cards and so could pull the Pound down further. 

Of even more importance will be Friday’s GDP figures. A recent estimate indicated the economy shrank by 0.3% in the last 3 months of 2012. If these figures are confirmed, it would mean the economy didn’t grow at all last year, and increases the chances of the UK heading back into recession for a 3rd time. 

The decline in the rate is not all down to the UK however, it’s also partly due to a strengthening Euro. In recent weeks we have had the ECB giving a very robust outlook for the Eurozone, and the markets now see the EU debt crisis being tackled. This has given confidence back to the single currency, and it has gained strength as a result.

So what are the forecasts for the rest of the year? 

The UK economy is still very soft and that adds up to testing times for sterling," said Daragh Maher, foreign exchange strategist at HSBC. He has forecast the Sterling/Euro rate to drop to 1.1250 by the end of the year. "There's going to be an erosion of the view that sterling was the best of a bad bunch," he said. In stark contrast, Barclays Capital still have their 12 month forecast at 1.28! This shows how uncertain things are for Sterling/Euro rates and that nobody knows which way it is going. 

In truth, nobody can accurately predict which way exchange rates will move. There are however ways you can protect yourself against adverse exchange rate movements, and make sure your currency doesn’t cost more than necessary.

How to protect against the rate getting even worse. 

Regardless whether you are buying or selling Euros, one option is fixing your rate now for up to 2 years with a Forward contract. You only have to lodge 10% of the total you want to convert, and you are then protected against the rate moving against you, and this allows you to budget effectively. 

If you think the rate will get better for you, then another option you can look at is a Stop Loss order. This allows you to set a rate below the current level, and if it drops below this your currency is automatically purchased. Using this tool allows you to take advantage of any gains in the rate, but should the market drop then you have a worst case scenario allowing you to budget. 

Make an enquiry today for free

Given there is so much uncertainty surrounding the exchange rate at the moment, with very different forecasts from major banks, now is the time to take stock of your requirements for the year. The first step should be a free consultation. In this way I can discuss your requirements and look at all the options available to you, allowing you to make an informed choice on when to fix your rate. 

Don’t simply leave things to chance and hope the rate will get better. Hope is not a reliable economy tool. Contact us today and take the first step to making the most of your currency.

Weekly Economic Data that may affect exchange rates 

Monday – Fairly quiet today as it’s a market holiday for Martin Luther King day. We do have some House Price data for the UK, and some inflation numbers from Germany, the EU’s largest economy. 

Tuesday – In the UK today we will see the latest Public Sector borrowing numbers, in addition to an industrial trends survey. In the Eurozone we have the EcoFin meeting and an economic sentiment survey. In the United States we will see the latest Home Sales and manufacturing numbers. 

Wednesday – An important day for the Pound: First we have the Bank of England minutes, showing how the vote went for the most recent QE and interest rate decision. This is followed by a raft of unemployment numbers. The only EU data of note are Trade Balance numbers from Italy. In Canada we see the latest interest rate decision. 

Thursday – UK Mortgage applications is the only data of note for Britain today. In the EU however we have Inflation data from France, Spain Germany, and the EU as a whole, which may dictate interest rate movements this year. Over in the states we have unemployment and jobless claims numbers. 

Friday – We end the week with the all-important UK GDP numbers. We could see confirmation the economy is in retraction again. Elsewhere there are some business climate assessment figures from Germany, and Home Sales data from the United States.  

Getting the best exchange rates 

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you. 

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.  

Click here to send me a free enquiry

Pound falls from highs after GDP figures

Thursday 25th July 2012
Good morning everybody. The Pound has dipped against the Euro. At the beginning of the week Sterling was riding high, and at the time I warned that it may not be the case rates will remain at those levels and we could be in for a drop. Indeed the pound fell quite sharply against the Euro and other currencies, after data showed the British economy contracted by more than three times the rate it was expected to in the second quarter, increasing the prospect of more monetary easing by the Bank of England.

UK recession worsens after 0.7% GDP fall

After the figures were released, most news websites and organisations took a very political slant to the news, either hailing the figures as ‘Conservatives Ruin Economy’ or ‘Labour ruined the economy and Conservatives try to fix it' depending on which newspaper you read and their political affiliation. I’m not going to bother with any of that here; all I aim to do is analyse what it means for exchange rates, and what direction they may take in the future. In this way you can hopefully make an informed decision on when to exchange your currency, and of course use us to get the very best exchange rates.

So why did GDP make the Pound drop?

The GDP figures yesterday were much worse than expected, and the Pound took a bit of a hammering as a result, as the graph shows. The reason it fell is that the poor growth figures show that we’re still mired in the worst double dip recession in 50 years, and so we now expect more action to try and combat this.

What shape will this action take? It’s probably going to either be Quantitative Easing shaped, or take the form of an Interest Rate cut in the UK. Both of these would weaken the Pound further due to the lower return Sterling will give investors.

Analysts confirmed these fears yesterday when they said that sterling could be vulnerable to more falls as the market starts to price in the prospect of further quantitative easing or even a cut in interest rates by the BoE.

Paul Robson, currency strategist at RBS, said the GBP/EUR rate could drop even lower if the market starts to price in an increasing probability of a cut in interest rates from their current record low 0.5% in the coming months.

So that’s it then, rates are going to keep falling?

Probably not by too much. Despite all the doom and gloom, I do not expect sterling to stray too far from its recent high against the euro. As fears grow about whether Spain will need a full bailout and whether Greece will leave the euro, I expect that Sterling will still be a very attractive option for investors seeking alternatives to euro zone assets.

Having said that, things are so uncertain we may not test the highs again.

How to avoid getting caught out by market movements.

Clients that read my reports knew that continued gains were not a given. In a recent post I suggested 2 options – a Forward contract to fix rates while they were high, or a ‘Stop Loss’ order where your currency is bought if it drops below a pre-agreed level.

Those that pursued either of these options will have saved a significant sum given the recent market movement. If you had fixed forward, the drop would have had no impact on you as your rate is already fixed. If you had a Stop Loss in place, then you had a worst case scenario and your currency will not have cost you any more than you had budgeted for.

Both of these options still hold true as a sensible strategy to ensure you have some control over the market. Those selling Euros should consider taking advantage of the spike to the downside. Those buying really should have some protection in place as outlined above.

Don’t just sit there and hope rates will go back up. Of course they might well do, but a Stop Loss means that if they do keep dropping you won’t be kicking yourself of what 'could have been'.

Sounds great. How do I get involved?

Make a free enquiry with me now. It doesn't cost or obligate you, and it give you access to excellent market knowledge, great rates of exchange, various market contracts and a direct line to me on the trading floor. I trade millions of Pounds in the FX markets on behalf of my clients every week, and it is this volume that allows me to source commercial rates that are significantly better than you can get elsewhere. Find out how good my rates and service is by contacting me now.

Click here to send me a free enquiry

Why has Pound/Euro surged above €1.22.

Thursday 19th April 2012
Good morning. Well what a day we saw in the currency markets yesterday! The Pound surged higher against all major currencies, breaking €1.22 against the Euro and $1.60 against the US Dollar. So why has the Pound gone up against the Euro? The reason was lower than expected unemployment data and general optimism surrounding the UK economy following the BoE minutes. In today's post I'll look at each event in detail and why it caused Sterling to gain.

UK unemployment much better than expected

UK unemployment has registered its first fall since last spring, according to official figures released yesterday. Unemployment fell by 35,000 to 2.65 million over the 3 months since December, and the Claimant Change was 3600 against a forecast of 7000 - so much much better than the markets had forecast.

The data was released by the Office of National Statistics and presents the number of unemployment people in the UK. There is a tendency to influence the GBP volatility. Generally speaking, a rise in this indicator has negative implications for consumer spending which discourage economic growth, so because it was much lower than had been anticipated, we saw Sterling make significant gains when the actual figures were released. It was the start of a good rally for the Pound, which was compounded when the latest BoE minutes were released...

Bank of England Minutes

Signs more stimulus from the Bank of England is now off the cards. Yesterday morning, minutes from the bank's last policy meeting showed it voted 8-1 against further Quantitative Easing, with one policymaker who had voted for QE several times seemingly changing his stance and not voting for it this time, and another now seeing the decision as "finely balanced".

The results were a big surprise to the currency markets. Most analysts, myself included, expected quite a bit of negativity surrounding the minutes. The fact that they were very positive caused Sterling to push much higher against other currencies.

Pound vs Euro

Sterling pushed through the €1.22 level against the Euro after yesterday mornings news.

When the trading floor opened rates were sat at around €1.2130, but at 09:30am when the data was released, we sat rates shoot upwards, peaking at 1.2231 before settling back at around the €1.22 level.

This is a fresh 19 month high, and if you look at weekly averages over the last few years, we're pretty much at the best exchange rates to buy Euros since the end of 2008 when the financial crisis hit.

General Outlook for Sterling/Euro

With rates so good, many clients will want to fix the exchange rate now while it is favourable. Others may want to wait hoping it will go further up. So what is my view? I think sterling could well strengthen further due to the fact further QE is no longer on the cards. However, this is not a given.

The UK's labour market is at best sluggish, domestic demand patchy and an economic recovery uneven. So while the signs of a slight recovery lessen the need for further stimulus, a rapid deterioration in the euro zone crisis could worsen the UK's outlook and drive the BOE towards easing thus pushing the Pound back down.

What you should do if you need to buy Euros

You could fix a rate now while it's so good. Even if you don't need your funds for some time, for a small deposit you can lock in the current rate for up to 2 years. If you want to gamble on rates continuing to rise, then you could place a 'Stop Loss' order. This is where you place an order to buy your currency should it fall below a pre-agreed level, for example 1.20. In this way you can still take advantage of any gains, but have a safety net and worst case scenario should we see rates start to drop.

If it were me I would want to fix the rate now while it is good, but then I am quite risk averse and not much of a gambler!

Of course each clients situation, needs and attitude to risk will be different, so to discuss the best option for you click here to send me an enquiry, and take advantage of a free consultation where I can run through all your options. Simply leaving it to chance is not a good strategy; chance is not a reliable economic tool.

Today's Data

Unusually for a Thursday there are no UK releases today. In the EU there are consumer confidence measures which in the absence of any other EU or UK data could have a bigger impact than normal. In the USA we have Home Sales data and the Philadelphia Manufacturing Survey.


Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

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Getting the best exchange rates for Euros, Pounds, Dollars

Thursday 28th July 2011
Good morning. Further poor data on Wednesday hurt the Pound, however exchange rates remained high due to Sterling being supported by the problems regarding the US debt ceiling. Today we'll look at the implications of this, and where rates may go moving forwards.

Sterling supported due to problems in US

Sterling dipped slightly on yesterday after disappointing UK factory data, but remained within sight of a 6 week high versus a weak USD and looked set to retain support in the absence of a deal to raise the U.S. debt ceiling. Against the Euro the Pound also rose, as investors bought it as an alternative to the USD, and this supported the Pound.

So what do the analysts say?

"Everyone is looking at the bigger picture of what is going on with the U.S. with the debt ceiling, so sensitivity to data has been somewhat diminished," said Charles Diebel, head of market strategy at Lloyds. This basically supports what happened yesterday, with the Pound rising despite poor UK economic data.

"This data is a little disappointing but to a degree most of the expectations for UK data have been skewed to the downside. When you get a weak number like today it's more an affirmation of people's thinking than a shock."

This following Tuesdays poor growth figures showing that UK economic recovery is sluggish.


What about Sterling to Euro rates for the coming weeks?

Despite the euro zone debt crisis and threat of a Greek debt default the single currency has remained strong against the pound as a result of favourable rate differentials.

The Bank of England is expected to keep interest rates on hold at a record low 0.5 percent until late next year because of concerns over the fragility of the UK economic recovery while the European Central Bank has already embarked on a tightening cycle.

It's hard to know which way things will go. If UK data continues to be poor and the EU continue raising interest rates, then it is likely GBP/EUR will fall. If however there are further debt problems in the EU, or economic data in the UK starts improving, rates could go up further.

So what are the options to protect against rates moving the wrong way?

If you need to buy or sell currency, then at the moment rates are volatile and there's no way to now which way rates will move. In uncertain times like this, simply hoping rates will move in your favour is not a reliable method, and you could end up with a significantly worse rate than necessary.

You can use Stop Loss and Limit Orders to your advantage. A stop loss is an order for us to buy your currency should the rate fall below a pre-agreed level. In this way you have a safety net and a worst case scenario. At the same time, a Limit order can be placed to buy should rates spike to a level not currently achievable. In this way you can aim for a higher rate, without leaving yourself open to a significant cost increase.

These orders are useful if you are buying or selling property abroad, and need the best exchange rates. They can also be useful if you are a business and need to pay or receive payments in a foreign currency.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.