Sterling to Euro predictions Feb March 2013

Monday 25th February 2013

Good morning. I hope you all had a nice weekend. As usual for a Monday morning, today I will have a look back at last weeks movements, look at what might be in store for exchange rates this week, and also look at what I think are the most important economic data releases that might affect currency. 

In this week’s Report: 

• Bank of England weakens Sterling, again. 
• More Quantitative Easing on the horizon 
• UK loses AAA Credit Rating 
• Round up of the week’s other data that may affect rates 

Sterling vs. Euro; 

Well, what a week for the Pound, especially against the Euro, with the pair starting and finishing the week trading at mid-market levels over 1.16, but a low on Wednesday of 1.14. Sterling fell also during the weekend during trading in Asia as financial markets reacted to the loss of Britain's top AAA credit rating. The pound fell to a 31-month low against the dollar and a 16-month low against the euro.

So, let's have a little look back at what happened last week

The week started off slowly due to Presidents Day in the USA so the markets were quiet and Sterling vs. Euro remained close to 1.16 all day. This however turned out to be the only calm day for the currency pair as Tuesday kicked off with surprisingly good economic sentiment figures from Germany and the Eurozone as a whole which forced the rate down 1 cent, and this slide was exacerbated by the impending Bank of England meeting minutes which were due the following morning. 

Bank of England minutes push Sterling lower 

The 9:30 am release then fuelled a further sell-off in Sterling over the course of the day, helping the Pound to retain its title of the worst performing major currency of 2013 so far. The minutes showed that since the last time the MPC sat down to discuss the UK interest rate (currently at an all-time low of 0.5%) and asset purchase programme (currently standing at £375billion) 2 more members have started to vote for more Quantitative Easing.

The current 6-3 vote to hold QE where it is means we only need to see another 2 members join the other “Doves” to give a majority, and the fact that one of the new voters is the BoE Governor, Mervyn King, means that kind of majority could even be reached at the next meeting. 

Thursday’s data helped to show just how finely balanced both the GBP/EUR cross is, and also both economies as it started to climb off the back of weaker than expected Eurozone manufacturing data and figures which showed that UK public sector borrowing fell by more than forecast. The Pound recovered most of Wednesday’s loss against the Euro and the rate ended the week pretty much back where it had started. 

What might affect the rate this week?

This week’s data releases are looked at in more detail in the market data section but the key release will be the 2nd estimate for UK GDP for the fourth quarter 2012. The last reading showed a -0.3% fall and any revision either way could be huge for Sterling. We have bodies such as the CBI & NIESR suggesting that we may narrowly avoid recession, but we will not actually see the initial reading for the current quarter until the end of April, so we expect the Pound to remain on a knife-edge as this reading will be a huge influence on how the Pound will perform over the rest of the year. 

Any further news from the Eurozone will also be closely watched, and we are sure to hear more on a potential currency war (discussed in detail in one of last weeks posts) where the ECB & BOE will try to devalue their currency to help keep exports attractive and therefore encourage economic growth. 

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Weekly Economic Data that may affect exchange rates 

Monday – Today’s UK data comprises of House Prices and Mortgage approvals, reflecting the health of this sector. Elsewhere we have Trade Balance data from Germany and Italy. Over in the USA we have a speech by a FED member, manufacturing numbers. Also of note is a speech by the Bank of Canada Governor Mark Carney, the soon to be governor of the Bank of England. 

Tuesday – Today we see a speech by BoE member Mr Bean; watch out for any negative comments that could de-value Sterling. Not much from Europe today other than German retail sales. We have a raft of data from the United States: House Prices, Consumer Confidence, Manufacturing figures, Homes Sales and a speech by the FED. Further afield, New Zealand has Trade Balance figures. 

Wednesday – An important day for Sterling, as we have the latest GDP figures, in addition to business investment numbers. In the Eurozone we have various measures of confidence: Industrial Confidence, Economic sentiment and consumer confidence. Over in the states we see further Home Sales numbers, another Speech from the FED, and durable goods orders. 

Thursday – Nothing of note from Britain today other than a measure of consumer confidence. Eurozone data includes Spanish GDP, German unemployment, French inflation numbers, and EU wide inflation figures. In the USA we have GDP numbers & Jobless Claims. 

Friday – UK data today includes inflation numbers, Credit/Money Supply & Mortgage approvals. In the EU we have another host of inflation figures from a number of countries, in addition to EU wide unemployment figures. We end the week with US Inflation, Manufacturing, construction spending and a measure of consumer sentiment.  

Getting the best exchange rates 

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Exchange rates fall after BoE Inflation report

Wednesday 13th February 2013 

Good afternoon. In my last post I outlined the fact that Sterling had made a recovery against the Euro. However I’m afraid the recovery was short lived, and the Pound has continued to lose value and rates have fallen. In today’s post I’m going to explain why this has happened, and look at the Pound/Euro trend for the coming months. 

So let's get straight on to why rates have fallen again...

Bank of England weakens the Pound pushing exchange rates lower. 

This morning at 10:30am, the Bank of England (BoE) released it’s latest inflation report, delivered by outgoing governor Mervyn King. A link to the full report is here. This afternoon I will simply run over the effects on exchange rates rather than analyse the full report in detail. 

Recent figures have shown that the economy shrank by 0.3% in the last three months of 2012, fuelling fears that the UK could re-enter recession, defined as two consecutive quarters of contraction. In todays report, Sir Mervyn said: ‘The UK economy is set for a recovery. That is not to say that the road ahead will be smooth. This hasn't been a normal recession and it won't be a normal recovery.’ 

A more recent GDP estimate indicates that there may not be a contraction in the first 3 months of this year. Indeed, the BoE does not expect a triple-dip recession but said GDP was likely to continue at below pre-financial crisis levels for around another two years. 

"Growth is likely to be weak in the near term but further out a continued easing in domestic credit conditions, supported by the Bank's asset purchase programme and the Funding for Lending Scheme, together with the stronger global backdrop, underpin a slow but steady recovery in output," the governor said. 

So why did his comments weaken the Pound? 

The key to why the Pound fell is that the markets see his comments as Sterling negative. Sir Mervyn King said “there are limits to what can be achieved via general monetary stimulus” as he urged the Government to “find ways of boosting overseas demand for our products” and push through “supply reforms” – often associated with tax cuts and deregulation. 

Reading between the lines, what he means by this is we need a weaker Pound in order to make our exports more attractive. There is now the increased chance of further Quantitative Easing. The BoE actually want the Pound to weaken further and their policy moving forwards will likely reflect this. That is the reason the Pound fell so sharply when the report was delivered. 

Also of concern is the fact that the Bank’s update on the state of the economy came as the head of the Government’s Debt Management Office claimed that markets expect the UK to lose its prized AAA sovereign credit rating – this is also weighing on the Pound and knocking exchange rates lower. 

 Sir Mervyn was delivering his penultimate Inflation Report. His last Report will be in May, before he is replaced by Mark Carney as governor in the summer. It will be interesting to see if Mr Carney also pursues the policy of trying to weaken the Pound to encourage an export led recovery. We shall see. There are some interesting charts on the telegraph website which you may find of interest here. 

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So will the Pound keep dropping or recover? 

Nobody can predict which way the markets will move. My personal view is that we could well see more weakness, especially if we do lose our AAA credit rating and/or see more Quantitative Easing from the BoE. So for those needing to buy Euros, you should consider your options now to protect against adverse exchange rate movements. 

Rates for those converting back to Sterling are close to an 18 month high, so if I needed to convert Euros back to Sterling I would be keen to take advantage of the rate while it is favourable. 

In the EU, there is talk of the European Central Bank also trying to weaken the Euro in the same way as our central bank is weakening the Pound. This could cause rates to climb back but there is no way of knowing if this will happen. We are entering the dangerous arena now of a currency war, where central banks race to try and devalue their currencies to make investment into their country more attractive. This makes predicting where exchange rates may move impossible and also makes swings in the rate extremely volatile, such as we have seen over the last few weeks. 

As you can read here, G7 nations have recently agreed not to engage in so called currency wars, however what is said and what actually happens are often very different things.

What to do if you need the best exchange rates. 

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We can discuss your requirements, explain what is happening with the market and run over the different options you can consider. In this way you will be able to make an informed decision on when to fix your rate, and you may be surprised how much you can save by taking advantage of the best commercial exchange rates available.

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Will the Pound keep falling against the Euro?

Monday 4th February 2013

Good morning. Well readers, I'm sorry to say I do not bear good news for anyone needing to purchase Euros in the near future. Rates last week continued their decline falling significantly. A month ago rates were at 1.23 - on Friday afternoon they were as low as 1.1475 - this was the biggest one day fall for the Pound since 2008.

Rates have recovered slightly this morning, back to €1.1550. Today I'll review why rates are falling, and what effect data this week could have on rates.

In this week’s Report:

• Pound/Euro continues to fall to 14 month low
• US GDP figures disappoint, but GBP/USD still low
• UK decision on QE and the latest GDP estimate this week
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

Sterling’s fortunes remained unchanged last week as it continued to fall against the single currency. Rates fell a further 2.0% over the course of the week, which now means we have seen a 7% decline since the turn of the year and at its lowest point the GBP/EUR cross hit 1.1470, the lowest we have seen the cross since October 2011. In this week’s euro report we will take a look at what caused the rates to fall and what is around the corner for the pound. 

Although there was some positive data releases out of the euro-zone last week the recent drop in rates is still mainly down to sterling weakness. In recent weeks the UK has been under the microscope and with a black cloud hanging over the UK economy it is difficult to see where any positive moves may come from. 

Ever since the Initial GDP estimate was released at the start of January sterling has been in free fall against the single currency. Even with poor French and German retail sales figures released last week, which came in much lower than forecast, the pound could not recover any of its recent losses. 

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Bank of England meet this week; more QE on the cards?

This week will see all eyes turn back to the Bank of England; policymakers will meet to discuss interest rates and quantitative easing for the first time since the official GDP figures (released on the 25th Jan) confirmed the UK economy contracted in the final quarter of 2012. 

In their last meeting policymakers voted 8-1 in favour of not adding to their existing QE programme but that could all change this week. If the BoE opt for another round of QE it leaves the door open for rates to fall even further. 

Further important figures for the UK this week

This week also sees the release of the GDP Estimate from the National Institute of Economic and Social Research (NIESR) which is an estimate of growth over the last three months (this will report will give us the first GDP estimate for Jan 2013), the report is seen as highly reliable and has the potential to influence the UK monetary policy. A negative reading could have severe consequences for the pound and will push us ever closer to the dreaded tripe dip recession. 

Let's put this in perspective

With no signs of improvement it is more important than ever to have a good currency broker on your side, and to know your options. To put this year’s move into perspective, Purchasing €250,000.00 now compared to a month ago will cost you a staggering £15,000.00 more - that's just due to the decline in Sterling's value this year. It also highlights how important timing is when it comes to move your money. 

With the seemingly perpetual decline in the GBP/EUR rate and no signs of it slowing down, now is the time to take stock of your currency requirements and consider your options. Get in touch with me today and take the time for a free consultation on what is available to you. 

Don’t simply watch the decline and hope things will move your way. Take control of your position now by sending me a free enquiry now. 

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Weekly Economic Data that may affect exchange rates 

Monday – The UK releases its latest House Price Data today. In the Eurozone we have Inflation data and a measure of investor confidence. The only other data of note are some Factory Order figures from the United States. 

Tuesday – Lots of measures of inflation are released today for the UK, Spain, Italy, France and Germany. Also in the Eurozone we see the latest Retail Sales figures, which are a good barometer of overall economic activity. Fairly quiet stateside today with Manufacturing PMI the only noteworthy release. 

Wednesday – Nothing of note for the UK today, and the Eurozone is also very quiet with German Factory Orders the only release of note. Other than that, we have employment data from New Zealand that could affect the GBP/NZD rate. 

Thursday – As usual today is the busiest day of the week. We’ll start in the UK: Bank of England decision on Interest Rates and Quantitative Easing, the latest GDP estimate, Trade Balance Numbers, Industrial Production and Manufacturing Production. Eurozone: European Council Meeting, French Trade Balance, German Industrial Production and some EU growth forecasts. We also see the ECB’s decision on interest rates. So much today that will affect GBP/EUR rates. 

Friday – After yesterday’s flurry of UK data, today is very quiet. Nothing from the UK, some inflation and Trade balance figures from Germany, and we round of the week with Trade Balance numbers 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