Sterling falls on poor UK inflation figures

Tuesday 13th October 2015 
Volatility has returned to the markets, and since my last post on Friday we have seen the Pound/Euro rate drop a further 2 cents, dipping into the €1.33’s this morning, and is currently settled at around €1.34 as you can see from the chart below: 

Poor UK Inflation figures weaken Sterling 

The reason for the drop of over 1 cent this morning was due to poor UK inflation figures. This morning the Consumer Price Index (CPI) fell into negative territory at -0.1%. This is worse than expected, and pours cold water on any hope the Bank of England will be raising interest rates. As the pressure is off the BoE, investors are not going to be buying Sterling in a hurry, and as such the Pound has weakened. The effect on the exchange rate is that levels have dropped off across the board. 

Do you have Euros to convert to Pounds? 

While the market movements today are bad news for those buying a foreign currency with Sterling, those that have Euros to convert back to Pounds will be rejoicing! The current EUR/GBP rate is the best it’s been since January. If you will have Euros or indeed any other currency to convert to Sterling, then it’s worth serious consideration to locking a rate in now. Even if you don’t have your funds available now, you can still use my services to guarantee today’s rate for up to 2 years in to the future, using a ‘Forward contract’. (Click here to send me an enquiry to find out more). 

Need the best exchange rates? 

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I will get in touch with you personally, and often better rates available at banks or other currency brokers by as much as 3%, so it's certainly worth getting in touch to see what I can do for you. 

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Sterling/Euro falls into €1.24’s – will it go back up?

Tuesday 18th November 2014 
The Pound has continued to fall against the Euro, and today has dipped into the €1.24’s. A week ago rates were €1.28+ so this is a big drop in a short period of time. The rate started to drop when the UK inflation numbers came in very low, which I touched on in a post last week. This means that the Bank of England are likely to keep rates on hold for quite a while. 

The reason for today’s drop was twofold. Firstly we had further UK inflation numbers that were slightly lower than expected, compounding the view the economy isn’t ready for a rate hike, and the Pound dropped a little. Soon after, we had some sentiment data from Germany, Europe’s largest economy. This showed that sentiment rose in November for the first time in almost a year, surpassing expectations and raising hopes of an improvement in their economy after it dodged recession in the third quarter. 

This data gave some strength to the single currency, and made it more expensive to purchase. 

What will happen with Sterling/Euro next? 

It is very hard to call. On the one hand you can look at the trend over the last 3 months. If you look at the chart above, you can see that rates have dropped to these levels quite a few times, only to then bounce back up. This could well happen again, especially as the EU may well pursue a Quantitative Easing programme which could weaken the Euro. However this is not a given; past performance is not necessarily an indicator of future performance. 

Tomorrow we have the minutes from the recent Bank of England interest rate decision. Last time 7 of the 9 members voted to hold rates, and 2 voted to raise them. In the light of the recent inflation numbers, if less than 2 voted to raise rates this time, expect the Pound to fall further. 

When should you buy or sell Euros? 

Given there is no way to predict the market, the best course of action is to use tools to make sure you don’t get a lower rate than necessary. In this climate if I had Euros to buy or indeed convert back to Pounds, I would use a ‘Stop Loss’ order. 

This allows you to instruct me to convert your sums if the exchange rate drops below a pre-agreed level. If the rate gets better for you, great you can take advantage of a swing in your favour without leaving yourself at risk of a further drop in rates. 

This is just one example of the tools I offer to help you get the most out of your currency, in addition to very sharp exchange rates that are close to the mid-market level. If you have an upcoming currency requirement, why not get in touch with me by completing an enquiry form here. I can discuss your particular needs, run over your options, provide you a quote and see if we can save you money over your bank or existing broker. It’s free to make an enquiry and does not obligate you in any way. 

The exchange rates I achieve for my clients can be as much as 5% better than banks offer, and when converting large sums the savings often run into thousands of pounds. 

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Inflation figures brings the Pound crashing down.

Wednesday 12th November 2014 
Good morning. Earlier this week I warned that today would be key for Pound/Euro rates, and that if the Bank of England inflation report forecasted low inflation, then Sterling could drop off. This is exactly what has happened, and despite an initial rise in rates following good UK employment figures, we soon was the rate drop by over 1 cent as you can see from the chart below: 

UK Employment gives the Pound a (temporary!) boost 

The day actually started well for the Pound, as figures showed that UK unemployment fell for the 18th consecutive month, beating expectations. The numbers also showed that one measure of average earnings growth beat inflation for the first time in five years. As the numbers were better than the markets were expecting, the Pound rose to above €1.28, getting near 6 year highs as you can see from the graph above. But the gains were short lived, as we will see in a moment…. 

Bank of England inflation report brings Sterling crashing back down. 

Within an hour of the spike to €1.28, GBP/EUR figure plummeted by cent to €1.27. The reason for this was inflation expectations. 

At 10:30am the Bank of England gave its inflation report. Inflation is key to when interest rates in the UK will rise. Higher inflation lends itself to higher interest rates, and the expectation of this has been driving the Pound up this year. 

However today the BoE governor Mark Carney stated that inflation could fall below 1% in the next six months, due to sluggish growth in the European economy, and other downward pressures. Governor Mark Carney also said he did not expect inflation to reach the targeted rate of 2% for three years. The Bank also cut its prediction for UK economic growth in 2015 to 2.9%.

All of this means that an interest rate hike in the UK is a long way off, and the Pound weakened accordingly. 

Is a weak Pound what the BoE wants? 

In recent posts I have suggested that the strong Pound is not favoured by the Bank of England. It affects our exports and could harm our recover. For this reason I have warned recently that the BoE could take the opportunity to weaken the Pound if they can, and today that’s exactly what we’ve seen. Just a few comments from the BoE governor and the Pound has fallen again, repeating it’s trend of climbing to around €1.28 before dropping back down. 

Getting the best exchange rates 

As you can see from my market report today, there are lots of risks to Sterling, and many different things that are pulling the rate up and down. Getting the best rates is partly getting your timing right, and also having a good currency broker to inform you what is happening in the market, and to help source you a better rate of exchange than the banks. 

This is how I can help you with your currency exchange, so if you need to convert once currency to another, then get in touch with me for a chat about how I can assist you and the rates I can achieve. Even if you already have a broker, it can do no harm to compare our rates as even a small difference in your exchange rate can represent a saving of thousands of Pounds when converting a large sum. 

Click here to send me a free no obligation enquiry today.

What could affect Sterling/Euro rates this week?

Monday 10th November 2014 
Good afternoon. It’s been a very quiet start to the week with no economic data releases of note. The Pound/Euro rate remains in the mid €1.27’s, and Pound/Dollar rates have dipped into the $1.58’s. 

As usual for a Monday, below I’ve listed the weeks data releases that I think will affect exchange rates. It’s a very quiet week all in all, with the most interesting release being on Wednesday when we see the latest UK unemployment numbers, along with the Bank of England (BoE) inflation report. This is important as inflation forecasts will have an effect on when the UK may raise interest rates. If inflation is forecast to remain low, expect the Pound to weaken. If inflation looks like it is on the rise again, the Pound could well strengthen. 

I personally think GBP/EUR will remain in its recent range of 1.26 to 1.28 in the coming weeks. Those buying Euros should consider locking a rate in now while it’s close to the best in 6 years. I can’t see anything on the horizon that will push the rate higher. 

If you need to perform a currency transaction, converting Euros to Pound, Sterling to Euros, or indeed need to get the best exchange rates when converting any international currency, then why not get in touch to see what rate I can offer. I can source rates up to 5% better than banks of other financial institutions can offer, and this can represent a significant saving if you need to convert a large sum. 

Click here to make a free, no obligation enquiry. 

This week’s economic data releases that could affect exchange rates. 

Tuesday – Another very quiet day, with the only data of note a speech by the Reserve Bank of New Zealand governor, along with a report from them about financial stability, so we could see some volatility in GBP/NZD rates. 

Wednesday – I think today will be the most important of the week for the Pound. We have the latest Unemployment numbers, alond with the Bank of England inflation report. This is important as the jobs numbers are a reflection of the economy, and the inflation report could give some insight into the future movements for UK interest rates. 

Thursday – Nothing of note from the UK, but the European Central Bank issues its monthly report, so GBP/EUR could be affected. Over in the USA we have Jobless claims numbers, and from Canada we have a BoC review. 

Friday – Yet again nothing of interest from the UK. The EU releases it’s latest inflation numbers and Gross Domestic Product (GDP) numbers, so GBP/EUR will be driven by these releases today. Over in the USA we have Retail Sales numbers and a consumer sentiment survey, both of which could 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. 

Click here to send a free no obligation enquiry.

Pound falls further after poor inflation numbers

Tuesday 19th August 2014 
The Pound has fallen further today, as this morning’s UK inflation figures were worse than expected. Inflation is a key indicator of when interest rates may rise. If the level of inflation gets higher than 2%, then this increases the case for the Bank of England to raise interest rates. 

We were expecting the figure to come in at 1.8%, however it was actually slightly lower than this at 1.6%. The lower number eases the pressure on the Bank of England to consider near-term interest rate rises and pushes the balance more in favour of a delay into next year. 

So that is what has caused the Pound to fall today, as the charts below shows. We are now sat at a 4 month low for Pound/Dollar rates, and a 3 month low for Pound/Euro exchange rates: 

What next for Pound/Euro & Pound/Dollar rates? 

Tomorrow morning we will see the recent minutes to the Bank of England’s decision to hold interest rates. These will show if any of the 9 members voted for a rate hike and what was discussed. 

I think there is a good chance at least one of the members voted to raise rates. If this is the case, I would expect the Pound to gain. If none of the members voted for a rise, then we could see the Pound fall even further. 

Are looking to get the best possible exchange rates? 

In addition to writing this blog to keep clients up to date with exchange rate movements, I can source you exchange rates that are up to 5% better than banks can offer. So if you need to buy Euros, convert funds back to Pounds, or indeed convert any international currency to another, then get in touch to see how I can help you. 

It is free to make an enquiry and get a quote, and you could save thousands of Pounds.

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Sterling falls from 16 month high on BoE report

Wednesday 14th May 2014 
Sterling has fallen from a 16 month high against the Euro this morning, following the Bank of England inflation report. When the market opened this morning, GBP/EUR rates were sat at 1.2300, which is the highest we have seen since January 2013. 

Pound falls on BoE Inflation report 

We had various figures from the UK this morning at 09:30am, most of which were quite good; Unemployment has fallen to 6.8%, and the Bank of England raised its growth forecasts. The claimant count number was slightly worse than expected which started the slide in rates. 

At 10:30 am the Bank of England releases its quarterly inflation report, and this was then followed by a press conference by the governor Mark Carney, in which he said the economy had "edged closer" to the point when interest rates would need to "gradually rise". 

But he reiterated that increases would be "gradual" and that the rate "may stay at historically low levels for some time". The Bank also said there was still a significant amount of "slack" in the economy, meaning that it was not growing to its full potential because of underinvestment. 

As you can see in the chart above, the Pound has fallen on today's news. Sterling had been rising on expectations that the Bank would signal rates were likely to rise before the election, but it fell sharply against other currencies after the Governor's comments. 

Despite the more bullish forecasts, and a "modest narrowing" of the amount of spare capacity in the economy, Mr. Carney said "significant slack" remained in the economy, meaning it could afford to keep interest rates at their record low for longer. 

It is the fact that rates are now expected to remain low for some time that has taken the steam out of the Pound’s rise and caused exchange rates to dip back away. 

When should you fix your exchange rate? 

Timing is everything in the currency markets, and converting your funds at the right time can make a huge difference to what you can achieve. If you need to convert Pounds to another currency, or convert a currency back in to Sterling, then why not get in touch with me to discuss your options. 

I can discuss what is happening with the market, and explain the options you have available with regards to when to fix your rate, and which type of contract suits your requirements. We can also help you achieve exchange rates that are much better than banks and other financial institutions can offer. 

With the Pound trading very close to a 16 month high, it’s a good time to have a chat about your options. 

Click here to send me a free no obligation enquiry now. 

Alastair Archbold

Pound falls on low inflation numbers

Tuesday 18th February 2014
We have seen Sterling lose ground today after lower than expected inflation numbers were released this morning. As you can see from the chart below, GBP/EUR rates slipped around 0.5% but levels remain in the mid €1.21's.

So why exactly does lower inflation cause the exchange rate to drop?

The UK's inflation rate, as measured by the consumer prices index, fell to 1.9% in January. The rate fell below the Bank of England's 2% target for the first time in more than four years. While this is good for business's and individual consumers, it's not good news for Sterling, and this is to do with interest rates. 

The fall is likely to underline the Bank of England's message that there is no rush to raise interest rates, as they would usually only do this to combat high inflation. So as the number was lower than expected, analysts believe this has pushed a rate hike further into the future. It has been the speculation of higher interest rates that has been the main reason for the recent rise in rates, so as the data changes, as does the value of the Pound. The net result is Sterling having lower value and rates falling. 

Is this a temporary drop? Will rates go back up again?

Tomorrow is a very important day for the Pound, and will likely have a big impact on where exchange rates go in the coming weeks. 

At 09:30am tomorrow we will see the latest UK Unemployment figures. The number will probably be just above 7%, but if it's lower than this the Pound may regain some of today's losses. 

Also at 09:30am we see the Bank of England minutes, which show the vote and what was discussed a few weeks ago when they left rates and QE on hold. These will be of importance because if the votes and comments show they discussed raising rates, the Pound may rise. 

Of course if unemployment is 7.1% of higher, or of the BoE minutes show a consensus rates don't need to go up, then expect the Pound to lose more value and rates to drop further. 

Exchange rates at multi-year highs

In my recent post I outlined some major currency pairs and how good exchange rates are at the moment. It seems the recent trend of a spike in rates followed by a drop is continuing, so if you need the best exchange rates, why not get in touch to discuss your requirements.

I can explain what is moving the rate, provide you a quote to compare with your existing bank or broker, and you can make sure you are getting the best possible rate. 

It costs nothing to make an enquiry, carries no obligation, and the savings can be considerable. 

Click here to send me a free no obligation enquiry. 

I look forward to hearing from you.

Alastair Archbold

Inflation effect on exchange rates

Wednesday 15th January 2014 
It’s been a volatile week for exchange rates since my last post on Monday. Despite not much data other than some inflation numbers, we have seen Pound/Euro rise to 1.2070 before dropping back towards the 1.20 level. Against the Dollar, the Pound has fallen from $1.65 to $1.6350. 

In today’s post I’m going to analyse the reasons why the Pound has been fluctuating up and down, and where exchange rates may be headed in the short term. If you are looking to make a transfer from Sterling to a foreign currency, or convert a currency back into Sterling, then click here to find out about the rates and service that I can offer you. 

UK Inflation Figures cause volatility for the Pound 

Yesterday we saw UK Inflation figures released, and it’s this that has caused the GBP/EUR rate to fluctuate. The figures showed that inflation has dropped to 2% which is the government’s target. It’s the first time it’s been at that level for about 4 years. So what effect did this have on exchange rates? 

Before analysing the effect it had, let me explain how inflation figures can affect rates. Inflation is controlled by interest rates, so if inflation is high then interest rates would usually be raised to combat this, and vice versa. (Higher interest rates usually strengthen a currency as the higher return on offer attracts investors.) Several years ago this was usually the case, but since the financial crisis central banks have kept interest rates at record lows. Despite inflation running high of late, there was no expectation of a rate hike to combat it. 

Much of Sterling’s strength recently has been due to the improving economy, and the fact that economists think interest rates will soon rise in the UK due to falling unemployment. The low inflation number would however now indicate that there is less chance of an interest rate hike any time soon.

How did the lower figure affect Sterling?

Initially, the market reacted accordingly and the Pound fell slightly. This was probably due to the fact that economists said the fall would ease pressure on the Bank of England to raise interest rates following the recent recovery in the economy. 

However very quickly we saw this reverse, and the Pound actually rose back up again. So why did this happen? Well despite the figure being low and reducing the case for a rate hike, overall the news is actually good for the UK economy. As investors slowly realised this, the Pound became supported again and rates rose close to €1.21 against the Euro. 

As has been the case of late however, the rise in the rate was yet again short lived. Mark Carney faced MPs on the Treasury Select Committee today, and during the Q&A he has effectively poured cold water on a rate hike any time soon, so this has reversed the gains. At the time of writing, GBP/EUR is 1.2017 and GBP/USD is 1.6345. 

Where will the Pound head next in 2014? 

The next key data in my view will be on Friday, when we see the latest UK Retail Sales numbers. These are a good indicator of how the economy is performing as a whole, and I expect the figure to show a rise of 0.5%. If it’s higher than this, then expect Sterling exchange rates to rise. If it’s lower, we will probably see rates fall. 

Are you looking for the best exchange rates? 

I am a Senior Currency Broker for one of the UK’s leading foreign exchange brokerages, and update this blog to help people understand what moves rates. Did you know that I can also help you source exchange rates that are significantly better then banks and other brokers can usually offer?

In addition to helping you get better rates, you can also take advantage of the extensive knowledge I have of the currency markets. In this way you can make an informed choice on when to fix your exchange rate, and the best type of contract for you. 

I have helped thousands of clients get great rates of exchange for nearly 10 years. If you are keen on finding out more about what I can offer, send me a free enquiry by clicking here. 

I look forward to hearing from you. 

Alastair Archbold.

Will Pound/Euro drop further? 2013 Exchange Rate Forecast

Wednesday 16th January 2012 
Good afternoon. I thought I’d post up a mid-week update on what’s been happening with exchange rates, and Sterling in particular. In a nutshell the Pound is still struggling to make any headway, remaining between 1.20 and 1.21 against the Euro, and just below $1.60 against the US Dollar. In today’s post I’m going to have a look at recent UK economic data, and what effect this may have on exchange rates in the coming weeks, including the forecast and outlook for the best exchange rates in 2013. 

Euro strength means GBP/EUR is quite low 

The Euro has gained much strength in the last week, pushing GBP/EUR rates to their lowest in 9 months. A European Central Bank policymaker soothed investor concerns today however, that officials might take steps to undermine the currency's recent strength. 

ECB member Ewald Nowotny said the exchange rate was "not a matter of major concern", contrasting with comments from Eurogroup head Jean-Claude Juncker who on Tuesday prompted investors to sell the euro by saying it was "dangerously high". This is what caused the slight uplift in rates in the last 24 hours, but after the recent comments, the general downward trend has now continued. 

UK Inflation: Could there be more Quantitative Easing on the cards? 

UK consumer prices inflation held steady at 2.7% in December, official figures have shown this week. John Longworth, the director general of the British Chambers of Commerce, said however that he expected inflation to rise in the near term, as further rises in utility and food prices kicked in. Higher inflation is clearly a concern for the UK economy as it increases the squeeze on both businesses and consumers, further exacerbating an already weak economic environment. 

Now usually, the Bank of England would combat this with higher exchange rates, and this in turn would strengthen the Pound. At the moment though, rates are at a record low of 0.5%, and there is little prospect of them being raised to head off rising inflation. Instead, they would likely do more Quantitative Easing, which many are rumouring will happen again this year. If so, there is a risk to the downside for the Pound as QE would weaken Sterling. 

UK Credit Rating at Risk 

 

There is more risk to Sterling than just QE however. Part of the reason rates have plummeted in the last week is the fact that the UK continues to risk losing its top AAA credit rating if it does not reduce its debt, as a senior figure at Fitch Ratings agency recently said. Fitch has had the UK's AAA rating on "negative" outlook since March 2012, meaning that it is warning it may cut it. 

If they do, it would mean the UK is a less attractive place to invest, and so this is weighing on the Pound and stopping any recovery in rates. 

Summary 

Pound/Euro Rates have been dropping for a while now, due to poor UK data and a stronger Euro. What will happen in the coming weeks depends on further UK data to come this month, and market reaction to the EU debt crisis. I do believe that longer term we will see rates recover as the UK economy picks up, however I think things may get worse before they get better. 

If you are buying Euros, then you can place a ‘Stop Loss’ order, which is where we can secure your currency if it drops below a pre-agreed level. This means if rates improve you can still take advantage, but have a worst case scenario should the market continue to fall. 

For those converting Euros back in to pounds, then if it were me I would probably take advantage of the 9 month high. It hasn’t got any better in the last day or two, and if we continue to get conflicting messages from the ECB, investors could sell off the Euro. 

Regardless which currency you need to buy or sell, send me a free enquiry today to see how we can help you achieve the best exchange rates possible. I look forward to hearing from you.  

Click here to send me a free enquiry

Pound vs Euro Forecast predictions July 2011

Wednesday 13th July 2011
Good morning. Sterling lost ground against all currencies yesterday, as inflation figures were much lower than expected, as were retail sales and trade balance figures. This shows the Pound is incredibly weak at the moment, despite the problems in the Eurozone. We'll look at this in a moment after the usual rate snapshot as at 08:30am:

• GBP/EUR 1.1360
• GBP/USD 1.5975
• GBP/AUD 1.4954
• GBP/NZD 1.9328
• GBP/CAD 1.5352
• GBP/ZAR 10.888
• GBP/JPY 126.72
• GBP/DKK 8.4705
• GBP/NOK 8.8642
• EUR/USD 1.4058

Sterling weakens on poor economic data

Inflation figures, Retail Sales, Trade Balance figures, Consumer Prices and House Prices - these are the data releases we had yesterday, and all of them were much worse than expected. This pushed Sterling lower against other currencies, and the spike vs the Euro was also short lived, with GBP/EUR losing over a point during trading yesterday.

The data goes to show that the UK economy is very fragile, and interest rates are unlikely to rise for at least a year, which will keep Sterling weak and limit any gains in exchange rates. Analysts said sterling would be pulled around by moves in the euro against the dollar and developments in the euro zone debt crisis.

So with all the problems in the EU, why aren't GBP/EUR rates higher?

There are significant problems in the Eurozone, with Italy and Spain having similar problems to Greece and Ireland. The debt crisis has weakened the Euro significantly. Many have been asking why this hasn't resulted in much higher GBP/EUR rates.

Firstly it's important to note that the Euro is at it's lowest vs the Swiss Franc and US Dollar in many years, however against Sterling it remains fairly strong. This is partly due to the fact interest rates are higher in the Eurozone, but also because the UK is a close trading partner, and of course part of the European Union, meaning we have also been involved in bailing out troubled countries.

Sterling is a risky currency, and so when there are times of economic uncertainty as there are now, investors move to safe haven currencies such as the US Dollar and Swiss Franc. This compounds Sterling's problems, and this is why rates remain low despite all the issues in the Eurozone.

So what should you do if you need to buy or sell Euros?

Will Pound EUro rates go up in July? Will GBP/EUR rates go down? The last few weeks have illustrated the swings we can see, with rates between €1.10 and €1.14 in the last week alone. The currencies are being pulled in different directions due to interest rates and EU debt problems.

We think rates will continue to fall, but there is so much uncertainty things could go either way. In times like these Stop Loss and Limit orders are very useful, as they allow you to aim for a higher rate but have a safety net should rates move the wrong way. To find out more about how these contracts work, send us an enquiry today.

Today's Data

Today we have EU Bank stress tests, which will determine how able they are to weather a financial storm. There are also EU Industrial production figures released today. From the UK we have various measures of unemployment. It’s also quite a busy day for US data, with Mortgage Approvals, Import prices and a budget statement all likely to affect cable.

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.