Pound/Euro forecast and Best Exchange Rates

Thursday 11th October 2012
Good morning everybody. In today’s post I’m going to have a look at how exchange rates have fared so far this week against the Euro and the US Dollar, in addition to the types of contract that are available to help you make the most of your currency if you are looking for the best exchange rates.   

Sterling falls against Euro, before making modest recovery

During the first part of this week, the Pound/Euro rate steadily slipped away, at one point dropping to the low €1.23’s. The main reason for the drop was a very IMF forecast that predicted the UK economy would remain in recession for the rest of the year. This caused investors to shun the Pound and this caused it to steadily weaken, pulling exchange rates down.

The decline halted on Wednesday however, and rates started to recover and climbed back into the low €1.24’s. There was no specific data that caused the gains; it was simply the fact that after several days of losses, investors started to buy back into Sterling, causing a modest gain in the exchange rate.

So what’s the forecast, will rates recover or start to drop again?

As always this is impossible to answer, however the recent gains are not likely to last in my opinion, die to the weak UK economy and the prospect of more Quantitative Easing next month from the Bank of England. The poor numbers coming out of the UK at the moment really put pressure on the Bank of England to print more cash under its quantitative easing programme, and I expect this to happen in November. There is also talk that they may move the Interest down to new record lows, and if these things happen then it will undermine the pound in the near term and may cause a drop in rates.

Economists' forecasts for the UK have worsened steadily this year and the third quarter is expected to show only very modest growth. The weak data will increase concerns that the government will fail to deliver on its plans for cutting the deficit. This would raise the risk of the UK losing its prized AAA credit rating which could also weigh heavily on Sterling.

In a speech on Tuesday, BoE Governor Mervyn King talked about the pros and cons of inflation targeting, suggested policymakers were focusing on QE as the main policy tool for providing further easing. To me this suggests he is setting the scene for more stimulus. We will see.

So that’s that then, rates are going to fall?

They may do if we only look at UK data, however other events globally are also moving the exchange rates. Focus is back on Greece as rioters tried to disrupt Angela Merkels recent visits.

The debt crisis there is far from over, and if investors globally become uncertain over what will happen with regards to further bailouts, then the Euro could weaken and rates could start to rise again. So it’s still the case that rates are being pulled in 2 directions, and there is no way to know which way the trend will go.

If you need to buy or sell foreign currency, what should you do?

There are various options you can look at, but what you shouldn’t do is leave things to chance and just hope rates will move your way.

There are many options which you can use to protect yourself against rates moving against you, for example Forward contracts, Stop Loss and Limit orders.

Forward Contracts

A ‘Forward Contract’ allows you to eliminate the risk of fluctuating exchange rates by locking in an exchange rate today for a transaction that will take place up to 2 years in the future. Forwards are very popular when buying overseas, as it allows you to fix a rate on the balance due at the same time as securing your deposit, thus protecting you from unfavourable movements in the market. A 10% deposit is required to secure the contract.

Stop Loss and Limit Orders

For those less risk averse that are happy to gamble on the rate moving up in their given time frame, 2 other contracts are available: Stop Loss and Limit orders. A Stop Loss order will protect you against adverse exchange rate movements and secure your currency if it falls below a pre-agreed level, giving you a worst case scenario while still allowing you to take advantage of any gains in the rate should the market move in your favour.

A Limit order is the opposite; it is placed 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. If you have a target rate you are aiming for, you can place a Limit order to buy should it get there, while having a Stop Loss order in place to protect against adverse movements.

Get in touch today


Regardless of whether you are buying or selling currency, you should take the opportunity to have a free consultation on the options available.

Click below to send me a free enquiry now, and I can get in touch to discuss your requirements, run through your options, and explain how we can help you get the best possible exchanger rates I look forward to hearing from you.


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Pound/Euro forecast August/September 2012

Monday 20th August 2012
Good morning. So as usual for Monday mornings, here's my outline of what has been happening to the Pound/Euro rate in the last week, with a full analysis of what is causing the movements. In addition I will look at where rates may head in the coming weeks, and also list a run down of the weeks economic data that could affect rates.

In this week’s Report:

• Pound climbs to 2 week high against US Dollar
• Events in Eurozone continue to drive rates
• Thin trade in holiday season creating peaks and troughs
• Round up of the week’s other data that may affect rates

(For currencies other than GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

After the excitement of the previous week and the comments made by Mario Draghi’ s and Mervin King - last week failed to produce any real excitement. The Pound broadly maintained its strength against the single currency, trading in a very narrow range throughout the duration of the week despite a number of important data releases made on both sides of the channel.













On Tuesday Sterling gained marginally over the Euro as UK inflation surprisingly rose for the month of July, whilst at the same time figures released showed that the Eurozone economy shrank in the second quarter of 2012. Although positive news for the UK economy the market didn’t react too much as the general view was that the Bank of England’s stance on monetary policy is unlikely to change any time soon, and therefore the results to a certain extent remain irrelevant for now.

The week continued in a similar fashion as the market showed indifference when, as expected on Wednesday, the Bank of England produced the minutes from the Interest rate setting meeting from the beginning of the month. This reported a 9-0 vote to keep interest rates on hold and no further Quantitative easing.

As surmised in previous reports, with UK rates firmly on hold and further QE off the table in the near term, Sterling is unlikely to play a dominant part in driving the cross for the time being. The focus is firmly set on the performance of the Eurozone. This was evident on Friday when the Pound began to lose some ground against the Euro following comments from the ECB and Angela Merkel of decisive action expected to reduce the borrowing costs for Spain and Italy.


So if the ECB take action could this lower GBP/EUR rates?

Any action by the ECB early next month to lower borrowing costs for Spain and Italy could well give the euro a lift against the Pound. But equally, now that they have outlaid an expectation, any lack of any bold action especially at a time when worries about Greece are resurfacing could send the euro lower across the board.

The status quo is likely to remain for the time being as markets remain quiet in part due to the holiday season. However there also seems to be somewhat of an undercurrent of disquiet as the problem in the Eurozone seems once again to be coming to the surface.

On the face of things the key members of the Eurozone are all singing from the same hymn sheet and claiming that they will do ‘whatever it takes for the euro to survive’ and thus far have managed to keep the markets subdued. However, cracks in the armour seem to be getting larger after Finland’s outspoken Foreign Minister last week claimed that the country was preparing for a ‘full blown currency crisis’ and the possibility of the Euro breaking up.

So it certainly looks like the EU debt crisis will continue to drive the Pound/Euro rate for the short to medium term. In uncertain times such as these, it's important to know your options and not just hope rates will go in your direction. Make sure you make the most of your currency, and use all the tools at your disposal to ensure that you maximise your position within the currency markets.

Contact me now for a free consultation.

Weekly Economic Data that may affect exchange rates

Below we list the main economic data releases of the week. It should be noted that as August is the holiday season in much of the world and Europe in particular, we are very quiet indeed on the data front. This does not necessarily mean there won’t be movements in rates however. Often when trade is thin in quiet periods we see larger swings in exchange rates than usual so if you have an imminent exchange to make, contact us today to have a free consultation.

Monday – There is little data of note today. The only scheduled releases are Construction data from Europe and a report from the FED in the states about Economic Activity.

Tuesday – On the whole another very quiet day for data. The UK releases its latest Public Sector Borrowing data at 09:30am. In New Zealand we see the latest inflation report from the Reserve Bank of New Zealand. Australia publishes its most recent Bank minutes. In the USA the FED gives a speech.

Wednesday –The only thing to watch out for is the FOMC minutes from the states that might affect GBP/USD rates.

Thursday – The markets have been saving all the data for today. UK: Mortgage Approvals & a CBI Trades Survey. EU: German GDP, German Imports & Exports, German, French & EU wide Inflation Data, EU wide investor confidence. US: Housing Prices, Homes Sales. New Zealand: Imports Exports & Trade Balance.

Friday – A little busier today with GDP figures from the UK in addition to a measure of business investment. In Europe the Greek and French leaders meet, which could mean an announcement about the Greek bailout. Over in the States we have durable goods orders.

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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Why is Pound still high despite UK Recession?

Friday 27th April 2012
Good morning. It's been a very busy week in the currency markets. In today's post I will look at the Pound/Euro forecast and predictions for exchange rates in a week that saw the UK heading back into recession. Read my analysis of the effect EU political instability could have on exchange rates, and why the Pound is still strong despite gloomy growth figures showing we are in recession. If you need the best exchange rates, send me a free enquiry for a detailed consultation on the options available to you.

UK back in recession

The UK economy has returned to recession, after shrinking by 0.2% in the first three months of 2012. The technical definition of a recession is defined as two consecutive quarters of contraction. The economy shrank by 0.3% in the fourth quarter of 2011 so the latest figures confirm we are back in recession – just!

The numbers were a surprise to analysts including myself, as most of us expected slight growth of around 0.3%. When the actual figures were released earlier this week, the Pound tumbled across the board, however the fall in rates was very short lived, and have since rebounded.

So despite the fact the figures were slightly worse than many expected, and the fact that the UK is now technically back in recession should not detract from the underlying reality, which is very much as predicted; The UK economy has been bumping along the bottom for more than a year and is still struggling to gain momentum.

So why is the Pound still strong?

This week’s GDP figure is only an early estimate, and is subject to at least two further revisions in the coming months. This is part of the reason why it didn’t have much of an impact. The numbers are compiled using 40% of the data gathered for later revisions, and as it’s only fractions of a percent, the markets haven’t reacted too much to it. This has surprised me.

Another reason the Pound is still strong is the fact all other general economic figures of late have been quite good. This was also underlined this week when UK consumer confidence hit a 9 month high last month. 26% of respondents asked by the Nationwide Building society said now would be a good time to make major purchases, which was the highest level for 10 months. Consumer confidence is a good barometer of overall economic optimism.

Finally, EU political instability has kept the Euro weak and rates supported…

EU political uncertainty keeps GBP/EUR rates above €1.22

One of the main drivers of exchange rates is economic information, of which we have lots to choose from in the last few years! Often overlooked is political instability, but it can have an equal or greater effect. This week we have seen Dutch Prime Minister Mark Rutte tender his government's resignation, paving the way for early elections.

His cabinet was plunged into crisis when Geert Wilders' Freedom Party (PVV) quit talks aimed at slicing 16bn euros (£13.1bn) from the budget. Mr Wilders refused to accept austerity demands to bring the budget deficit in line with EU rules. His party was not part of the coalition but supported the minority government. The crisis has also fuelled fears that the Netherlands might lose its triple A credit-rating.

We have also seen some surprise events unfold in the French elections. It was thought that Sarkozy would easily win a majority, but results in the first round of voting suggest otherwise.

So why does political instability in Holland and France affect exchange rates? It’s all to do with investor confidence. A new government in Holland or France may not be as sympathetic to austerity measures as the current ones. Indeed this is likely to be quite a vote winner amongst very low popularity of cuts needed. So with uncertainty surrounding the political future of some major EU economies, it casts doubt on the whole EU bailout plan.

Thus, the instability has weakened the Euro, and kept rates around the €1.22 level despite the UK falling back into recession.

Pound hits 7 month high vs. US Dollar

Sterling rose to its highest level in over 7 months against the US Dollar yesterday, keeping rates well above the $1.60 level, and briefly touching $1.62. It’s quite a surprise to see rates remaining strongly supported, despite the fact the UK is back in recession. So what caused rates to continue to climb? GBP/USD rates have been pushed up by weakness in the US Dollar, as policymakers in the states kept the door open for more monetary easing.

Federal Reserve Chairman Ben Bernanke said earlier this week that U.S. monetary policy was "more or less in the right place" even though the central bank would not hesitate to launch another round of bond purchases if the economy were to weaken. So despite the Pound being in Limbo due to the latest growth figures, weakness in the US Dollar caused by the fact more QE is possible, has made it cheaper to purchase.

Moving forwards, the forecast for GBP/USD rates will depend on events in the Eurozone. With debt problems and political instability giving continued uncertainty to the global economy, and further surprises could cause the Dollar to gain strength due to its safe haven status. When there is uncertainty, investors flock to safe haven currencies like the US Dollar, which can in turn make it more expensive to purchase. Failing any safe haven buying, I think GBP/USD rates will now remain above $1.60

Getting the best exchange rates.

If you need to buy or sell foreign currency at the best exchange rate, then take advantage of a free consultation with an expert. It's free to make an enquiry, and we can let you know all your options to help you make an informed decision on when to convert your funds, and what type of contract is best for you.

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.

Have a great weekend. On Monday morning I'll do my usual weekly retrospective and forecasts.

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Pound Euro rates hit €1.21 and close to 20 month high

Thursday 5th April 2012
Good morning. Why have Pound/Euro rates gone up April 2012? As is often the case, a day can make a big difference in the currency markets, and yesterday was no exception. In my most recent post I pointed out rates had dipped below €1.20, however throughout the day yesterday the GBP/EUR rate surged and touched €1.21 - this is nigh on the best rates we have seen to buy Euros for 20 months. Today I will look at the reasons why.

Pound/Euro rate forecast - surges to €1.21

The Pound gained well throughout trading yesterday, as the chart shows. Much better than forecast UK services sector survey eased UK recession fears, and they also highlighted a contrast with a struggling euro zone economy. As a result we saw Pound/Euro rates push up by 1% - a huge gain for one days trading.

A disappointing auction of Spanish government bonds also weighed on the Euro, as worries grew about Spain's high debt levels and weak economy. Europe's economic prospects look very poor indeed, and debt problems in Spain and Italy mean that the European Central bank will have to do even more to support banks and its weaker economies. This has caused significant Euro weakness and made the Euro cheaper to buy.

ECB leaves interest rates on hold, but press conference dovish

As I forecast yesterday, there was indeed no change to EU interest rates in yesterdays meeting, and also no further quantitative Easing for the UK. As these decisions were as expected it made little to no difference to exchange rates.

What did make a difference however were comments by the ECB president Mario Draghi. He said the euro zone economic outlook is subject to downside risks relating to the debt crisis and commodity prices. This was another reason for GBP/EUR rates climbing as the single currency weakened.

Getting the best exchange rates for Euros

In my opinion it's an excellent time to consider fixing a rate for buying Euros, when you consider it's sitting just below the best rates in 20 months. With UK recession fears on the horizon, it wouldn't take much to knock rates back down, and indeed that's the trend we have seen the last few times rates have been at this level.

We can now offer €1.20+ as a trading level for trades of £20k+, and very close to that for amounts of £1k+. Even if you don't need your Euros now, you can still lock the rate in now with a Forward contract. You simply lodge 10% of the total you want to convert, and we'll guarantee the current rate for up to 2 years. Certainly worth considering if you need Euros in the next 6 to 12 months, as it will protect you against rates dropping back away.

If you want the best Euro exchange rate, click here to find our more about my service.

Pound/US Dollar rates drop away

In contrast to the Euro, the GBP/USD rate fell yesterday. This was due to the U.S. Federal Reserve's March meeting showing only two of the 10 policy-setting committee members saw the case for additional monetary stimulus in the light of an improving economy. This strengthened the US Dollar and made it more expensive to purchase. In turn, the flght towards the Dollar also compounded the Euros weakness.

Today's Data

Today is very important for the Pound, as we have a raft of UK data. Industrial Production, Manufacturing Production and an interest rate decision for the UK. Later in the day we have the NIESR GDP estimate. This is very important as it could signal the UK is heading back into recession. In the Eurozone there are also Industrial production figures from Germany.

Today's GDP figures from the UK could easily wipe out the recent gains in the GBP/EUR rate, so contact us by clicking below to find out more about how we can protect you against adverse exchange rate movements.

Take the first step to making the most of your currency now and click here.

We are now closed for the Easter break from 6pm today until 08:30am Tuesday morning. Live rates will continue in the sidebar. Enjoy your weekend.

If you need to buy or sell foreign currency, send me an enquiry by clicking below and I will call you to discuss your requirements on Tuesday.

GBP recovers despite possibility of UK recession

Friday 30th March 2012
Good morning. Well, what a difference a day makes. After seeing Sterling fall earlier in the week as outlined in my recent post the Pound regained ground against a beleaguered Euro yesterday, however the Pound did fall away from the recent highs against the Dollar. And all of this on the back of a host of poor economic data.

So to end the week, let's look first at the data we had yesterday, then I'll explain why the Pound actually gained against the Euro despite this!

Poor UK Data casts shadow over UK economy

Yesterday saw quite a bit of UK economic data that was worse than forecast. Firstly we saw that mortgage approvals fell last month, and money supply for February posted its biggest monthly fall on record. This was followed by figures showing poor growth in Britain's dominant services sector. We then learned that UK House Prices had their sharpest drop in over 2 years.

Then, to put the icing on the cake of doom the Organisation for Economic Co-operation and Development (OECD) has calculated that the UK economy shrank in the first three months of the year - if true this means we're back in recession that I also touched on yesterday. You can read more about the OECD figures here on the Telegraphs website. All of the above came just a day after data unexpectedly showed the UK economy had contracted more than previously thought in the fourth quarter of 2011.

So, with all the poor data why did the Pound gain against the Euro?

There was an interesting report on the Reuters website that British electricity supplier International Power had received a proposal from its majority shareholder, French utility GDF Suez, to buy shares it does not hold already.

This basically meant there could be a huge demand for Sterling, and this speculation caused the Pound to gain a little. As the chart shows we saw steady gains throughout the day yesterday.

It was mostly however due to the Euro weakening and becoming cheaper to buy. Italian and Spanish government bond yields rose while Italian credit default swaps also moved higher, reflecting investor worries that the EU debt crisis is ongoing and that Greece may need further funds.

The news weakened the Euro enough to brush of the poor UK data, and that's why the Pound rose against the Euro yesterday.

Sterling falls against US Dollar

Despite gains made against the single currency, the Pound fell from it's recent 4 month high against the US Dollar. With the poor UK data and also weakness in the Euro likely to drive investors towards the safe haven US Dollar, I don't expect rates to break $1.60. If anything I wouldn't be surprised to see rates fall for GBP/USD this year given the current climate.

Today's data that might have an effect on exchange rates

There are no UK releases today. To end the week we have German Retail Sales, EU Consumer Confidence. Stateside watch for Personal Consumption Expenditure figures, Inflation data, and a consumer sentiment 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.

Click here to send me a free enquiry