Sterling gains on BoE MPC minutes

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

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

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

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

View live currency graphs here

Today’s Data 

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

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

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

Bank of England Split on interest rates 

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

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

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

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

Sterling /US Dollar 

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

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

Other data this week that might affect exchange rates. 

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

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

What does this mean for your currency requirement? 

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

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

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

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Pound/Euro 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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