Will Pound go up or down for rest of 2014?

Tuesday 23rd September 2014 
As I write today’s post Ed Miliband is giving a party conference speech. I’m choosing this time to write my report as I don’t think his words will have any effect on exchange rates whatsoever, and the currency markets will also be taking little interest in his comments. It is likely however that with the Scottish referendum now out of the way, political uncertainty ahead of next year’s General Election will start to affect the Pound. In today's post I'll give my views on what could move exchange rates for the rest of the year.

The currency markets don’t like uncertainty, and I think that is keeping the Pound in check from going any higher. Following last week’s spike in the Pound, exchange rates now seem settled at around €1.27 vs the Euro and $1.6350 against the US Dollar. 

One example of the uncertainty relating to the UK economy, is possible constitutional changes in the United Kingdom following the Scottish referendum. This could affect investment into the UK and so weaken the Pound off slightly. This combined with the upcoming election is likely to keep the Pound from gaining significantly. 

What could affect exchange rates this week?

The only thing I can see this week that could affect the Pound is a speech by the Bank of England (BoE) governor Mark Carney on Thursday. He hasn’t exactly been consistent in his comments on when interest rates will go up in the UK, so the markets will be watching for any comments he may make. Any hint of a rate rise then the Pound could strengthen, if he is dovish however and hints rates are set to remain on hold for some time, we could well see Sterling exchange rates drop away. 

All in all, I think those that need to convert Pounds to another currency should consider taking the rate while it’s close to a multi-year high. Even if you don’t need your currency for some time, you can fix today’s rates for up to 2 years by lodging 10% of the total you need to convert. 

What if I'm converting Euros back to Pounds?

One thing that could affect things if you are converting Euros to Pounds however, is the chance of further stimulus by Europe. If the European Central Bank decide on further drastic measures to try and boost the economy, the Euro could weaken pushing Pound/Euro rates up. 

Below I will list the other things I think could change exchange rates this week. Remember that if you need to convert currency, perhaps for a property abroad for example, you can get in touch with me for a quote by clicking here. I can source excellent exchange rates very close to the ‘mid-market’ level and you could save thousands of Pounds by getting a slightly better rate. 

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This week’s remaining economic data that could affect exchange rates 

Wednesday 24th September – Quite today in terms of economic data releases. We have some Business Climate and sentiment measures from Germany that could affect Pound/Euro. In the states we have information on mortgage approvals and home sales that could affect Pound/US Dollar. 

Thursday 25th September – The only real UK data of note today is a speech by Bank of England (BoE) governor Mark Carney. He hasn’t exactly been consistent in his comments on when interest rates will go up in the UK, so the markets will be watching for any comments he may make. Any hint of a rate rise then the Pound could strengthen, if he is dovish however and hints rates are set to remain on hold for some time, we could well see Sterling exchange rates drop away. 

Friday 25th September – Another quiet day with the only thing likely to move Pound/Euro rates being a consumer confidence survey from Germany. All other data is from the USA – GDP figures, consumption and expenditure, and a consumer sentiment index. All of this could affect GBP/USD rates. 

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Pound remains at €1.19 vs Euro, near 8 month high

Tuesday 17th September 2013 
Good afternoon. Sterling remains strong, however has failed to rise significantly above the €1.19 level against the Euro. GBP/EUR rates remain around the best since January. The Pound has however hit an 8 month high against the US Dollar after Lawrence Summers, perceived by the market as more likely to favour a quick scaling back of monetary stimulus, pulled out from the race to be the next Fed chief. So in today’s report: 

• UK inflation drops weakening Pound 
• Pound/Euro remains close to best it’s been since January 
• US Fed member drops out of race to be FED chief, weakening US Dollar 
• German Economic figures better than expected, weakening Euro. 
• UK Retail Sales and BoE Minutes this week expected to affect Pound 
• How to get the best exchange rates 

UK inflation drops weakening Pound 
 

Figures this morning showed a slight fall in inflation, which has pulled the Pound lower. Inflation measured by the consumer prices index (CPI) fell to 2.7% in the year to August, from 2.8% in July. 

CPI is important because it is the measure targeted by the Bank of England's interest rate-setters, while the RPI is used for annual adjustments in some benefits and rail fares. The Bank targets CPI inflation of 2%, but is currently holding off raising interest rates to control inflation because the unemployment rate is too high. 

A high figure usually strengthens the Pound, and because the number was slightly lower than expected the Pound weakened slightly, pulling down exchange rates. 

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German Economic figures better than expected, weakening Euro. 

 Also pulling GBP/EUR rates down was better than expected numbers from Germany. Economic sentiment is better than analysts had been predicting, and so this gave the Euro strength, making it more expensive. As a result we have seen GBP/EUR rates fall slightly. 

Pound/Euro remains at a good level 

As you can see from the chart, the Pound/Euro rate remains close to the best it’s been since January. It’s been at this level for a week or two now, and for a few days it rose above the €1.19 level, however the figures mentioned above have pulled it back to €1.19 again. 

 
This is a very good buying level, but seems to have levelled off and we haven’t seen any significant gains. The main thing that I think will move the rates next will be tomorrow’s minutes from the Bank of England, and UK Retail Sales on Thursday. 

Tomorrow the BoE will release its minutes, showing how the members voted at their recent decision to keep interest rates and QE on hold. They will be interesting because it will show what was discussed, and could indicate future decisions on QE and interest rates. If there are any indications any of the members wanted more QE, we may see the Pound fall. 

Retail Sales on Thursday are important as they are a good barometer of overall economic activity. I expect the figures to show a month on month gain of 0.5%. If the actual figure is higher than this, then expect exchange rates to rise. If the number is lower, then we will probably see the Pound fall in value. 

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US Fed member drops out of race to be FED chief, weakening US Dollar 

The Pound rose to an 8 month high against the US Dollar earlier this week, after Lawrence Summers, perceived by the market as more likely to favour a quick scaling back of monetary stimulus, pulled out from the race to be the next Fed chief. The dollar fell broadly as it means it will probably be Janet Yellen that takes over the next chair of the Federal Reserve - she is expected to rapidly reduce U.S. bond-buying. This meant the US Dollar weakened, became cheaper to purchase, and GBP/USD rates rose. 

Due to the poor inflation numbers today however, we’ve seen the rate drop back away. 

Are you looking for the best exchange rates? 

I update this blog to keep my existing and potential clients abreast of what is happening with exchange rates. If you need to convert Pounds into another currency, or indeed move a foreign currency back into Sterling, I can help you achieve the best possible exchange rates. 

The rates I can achieve are up to 5% better than banks can offer, so if you are buying or selling property abroad, need to top up your Euro account, or need to pay for goods or services in a foreign currency, why not find out what rates I can offer. 

• You can send me a free enquiry now by clicking here. 
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