BoE upgrade UK growth forecasts / Currency Forecast

Thursday 16th May 2013 
Good afternoon. Sterling Exchange rates remain fairly stable, with GBP/EUR sat just above €1.18 and GBP/USD around $1.5250 at the time of writing. The Pound is being supported by robust UK data, including the upgraded economic growth forecasts for the UK. This is what I’ll be looking at in today’s report, along with an outline of the types of contract I can offer to help you get the best exchange rates. 

If you are looking for the best exchange rates, or are trying to work out whether the Pound will go up or down against the Euro or any other currency, then read on below. You can also have a free consultation on your particular requirements by clicking here.

Bank of England upgrades growth forecasts 

The Bank of England yesterday upgraded its economic growth forecast, with the Governor Mervyn King saying that "a recovery is in sight". He also said that the projections are for growth to be a little stronger and inflation a little weaker than they expected three months ago. "That's the first time I've been able to say that since before the financial crisis.” 

This was good news for the Pound, and as a result exchange rates remain at relatively decent levels compared to earlier in the year. Economic growth this year is now expected to be greater than 1%, up from the Bank's previous estimate of 0.9%. As you can see from today's chart, optimism has pushed the Pound up nicely against the Euro.

The underlining picture remained subdued however. Sir Mervyn said: "This hasn't been a typical recession and it won't be a typical recovery. Nevertheless, a recovery is in sight." So, while the outlook was slightly more rosy than it was three months ago, we are not quite out of the woods yet, with the BoE saying that the recovery will remain weak by historical standards". 

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Problems in Eurozone could hurt the Pound. 

While the UK is doing better than it had been, the same can’t be said for the Eurozone. Figures released yesterday showed that France fell back into recession, and the Eurozone economy as a whole contracted for the sixth quarter in a row. 

Many of my clients thought that the problems in Europe would weaken the Euro and push rates higher. Of course this may be the case, but it’s important to remember that the poor Eurozone data means that UK exporters will face obstacles in the coming months. 

The UK is trying to bounce back on an export led recovery, and a weak Eurozone means there will be less demand for UK products. Touching on this yesterday, the BoE said that the "main risks to the recovery continue to emanate from abroad". So with the Eurozone economy remaining weak, this could hurt the pound. 

As I mentioned in my previous report, this means that we may see the Bank of England try to devalue the Pound to make our exports more attractive. This is what we saw earlier in the year when the GBP/EUR rate fell from 1.2350 to 1.13 in just a few months. 

You can read an interesting article here from Reuters, where they are forecasting the new Governor will opt for aggressive easing, which would really weaken the Pound and potentially send exchange rates tumbling.

If you need to buy or sell currency at the best rates, send me an enquiry. 

Types of Contract I offer 

As a Senior FX broker for one of the UK’s leading foreign exchange brokerages, I can help you get exchange rates significantly better than the banks, by as much as 4%. 

In addition to better rates, there are various contract types I offer that can help protect you against rates moving the wrong way. Let’s take a look at the main types: 

SPOT CONTRACT 

The Spot Contract is the most basic and popular foreign exchange product. It is an agreement to buy or sell one currency in exchange for another. You have 2 days to settle the contract, at a price based on the prevailing "spot exchange rate" the current value of one currency compared to another. 

Although the spot market lets you buy or sell currency as you need it, spot exchange rate movements are highly unpredictable, even during a single trading day. Upon receipt of cleared funds currency is available for onward transmission. 

FORWARD CONTRACT 

A Forward Contract lets you buy or sell one currency against another, for settlement no later than on the day the contract expires. Unlike spot contracts, a forward contract eliminates the risk of fluctuating exchange rates by locking in a price today for a transaction that will take place in the future (up to a maximum of 2 years). You also have the flexibility to take delivery of your currency in an agreed time period before the expiry date. 

A 10% deposit is required to secure the contract and is payable within two working days with settlement due on the day the contract expires. 

LIMIT ORDER 

A Limit Order is an order 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. This is one of the two most common types of orders, the other being a Stop Loss Order. 

STOP LOSS ORDER 

A Stop Loss Order is used when the market is moving in a negative direction for your currency. An order is placed on file with your broker to help ease the stress of adverse market movements. A stop loss order instructs your broker to buy when the currency hits a certain point. The purpose of the stop loss is obvious – you want to prevent any further movement before the currency falls any further. 

Make a free enquiry with me now 

If you need the best exchange rates, or would like to discuss my service in more detail, click here to send me a free enquiry today. I can provide a free consultation on the options available to you, to help you decide when to fix your rate and on what type of contract. 


There is no cost or obligation involved, and you may be surprised how much you can save in using me to secure currency at the best exchange rates. 

I look forward to hearing from you.

Alastair Archbold.

Decent UK data keep Sterling supported

Friday 10th May 2013
Good morning. Sterling remains supported at relatively high levels against the Euro, close to the best in around 3 months. Against the Dollar however, the Pound has fallen due to a strengthening of the US currency.

All in all, the UK economy has posted some decent figures this week, which has helped the Pound remain buoyant against other currencies, and has also influenced the decision this week by the Bank of England to keep interest rate and QE on hold. So what do I have in store for you today?

• UK industrial and manufacturing figures better than expected
• Bank of England leaves interest rates and QE on hold
• US Dollar gains strength, pushing GBP/USD rates lower.
• How Stop Loss orders can help you achieve the best exchange rates

UK economic figures better than expected, boosting Sterling

We had several UK released this week that impressed the markets, and this has helped the Pound stay relatively strong against the Euro and other currencies. We had UK industrial and manufacturing production numbers released mid-week, and these were stronger than forecast in March, as they were boosted by manufacturing and a recovery in oil and gas output. Manufacturing output, a sub-sector of industrial production, rose 1.1%, boosted by electronics, metals and machinery.

These numbers were higher than the markets were expecting, and as a result the Pound has remained supported against the Euro and other currencies. This follows a decent run for UK data in the last few weeks, and this recent improved news on the UK economy has boosted hopes that activity is gaining a firmer footing. This is one of the reasons the Bank of England held off any further stimulus this week, which I’ll look at in a moment.

This morning however we had Trade Balance numbers from the UK that were slightly worse than expected. This has taken the steam out of the Pounds run, and pulled rates slightly lower.

Looking for the best exchange rates? Send me a free enquiry.

Bank of England refrains from changing interest rates or QE levels.

The Bank of England has kept its stimulus programme of quantitative easing (QE) unchanged and also held interest rates at 0.5%. The decision had been widely expected, and certainly I did not expect any change in policy.

I think this will remain the case until the new Bank governor, Mark Carney, takes over the helm in July. This was the existing governor’s penultimate meeting, with his last one in June. It will be interesting to what kind of approach Carney takes when he takes over, and if he follows the same route of trying to weaken the Pound as King had done. Time will tell.

In the last few months, 3 of the members had voted for an increase in QE. The better numbers coming from the UK however, including the 0.3% growth in the first 3 months, seems to have had an impact on the chance of further stimulus.

In 2 weeks’ time, we’ll be privy to how the 9 members voted, and this will give a clearer indication of where the Pound may move in the future. If for example only 1 of the members voted for QE, I would expect the Pound to make gains.

US Dollar gains strength, pushing GBP/USD rates lower.

Despite better UK numbers, the Pound/Dollar rate has actually fallen in the last couple of days. Part of this was due to comments yesterday evening by one of the FED members, in which they hinted they may look to reduce the Fed's on-going monetary stimulus.

Currently they buy $85bn of bonds every month in open ended Quantitative Easing. The news strengthened the US Dollar, and the GBP/USD rate has fallen a point overnight to 1.5390.

Buying or selling US Dollars? Click here to compare my rates.

How ‘Stop Loss’ Orders can help you get the best exchange rates

Most of you reading this blog are doing so because you want to achieve the best possible exchange rates, and convert your funds at the best time. Of course it’s impossible to predict where rates will go, however there are tools that you can use to help you make the most of your currency. One of these is the ‘Stop Loss’ order.

These work by placing a lower limit in the market, a ‘worst case scenario’ and should the rate drop below this, we purchase your currency automatically.

For example let’s say you need to buy Euros, and the current GBP/EUR trading rate is 1.18. You will be hoping the rate goes higher, but of course you don’t want to lose out should the market drop. So in this example, you could place a Stop Loss order to buy your currency should the rate drop below 1.17. If the market goes up, you can take advantage of any gains. If however the rate starts to drop, you know the lowest rate that you will achieve; 1.17.

Stop Losses are very useful tools when the market is rising, as you can raise your Stop Level at any time as the market rises. They are very popular for those buying property or need Euros, as it allows effective budgeting.

• Want to know more about Stop Loss Orders?
• Need the very best Exchange Rates to buy or sell currency?
• Would you like to discuss what’s happening in the market to help you time your purchase?
• Sick of getting poor rates and service from your bank?

If you have answered yes to any of the above questions, then you would benefit from a free consultation with me about you requirements. I can discuss what you need to do, and explain the options you can consider within your time frame. The rates of exchange I source for my clients are commercial levels that are up to 5% better than available at banks or other financial institutions.

Click here to send me a free enquiry today.

Have a great weekend.

2012 forecast: Pound/Euro recovers to 22 month high

Thursday 3rd May 2012
Good morning. A fairly volatile week so far! The Pound fell earlier in the week when economic data was quite poor, signalling all is not rosy with the UK economy. However during trading yesterday, Sterling recovered well to hit a 22 month high against the Euro, and a 32 month high against a basket of major currencies.

In today’s post I’ll have a look at the latest data in detail, how it has affected exchange rates, and how the coming days data could have an effect on the cost of your currency conversion.


Pound falls earlier in the week

As stated above, the Pound fell back from the record highs we had seen recently, after some quite poor data was released. We had a manufacturing survey that highlighted the fragility of the UK economy, and also the risk that the strong Pound may dent exports also had an effect on the Pounds value.

The pound's losses were quite short lived and limited though, as the currency is still seen as the best of a bad bunch. The Euro is having its own well publicised problems, the US has high unemployment and the chance of further monetary stimulus, and of course the recent numbers showing the UK is in recession may be revised up after last week's unexpected contraction – all of this has helped the Pound recover.


EU data disappoints, pushing GBP/EUR back up

This week we have seen unemployment in the Eurozone reach a record high. For all 17 nations in the Eurozone the jobless rate rose again to 10.9%, the highest since the euro was formed in 1999.

In some rare good news from the EU, Greece has had its government debt rating raised out of default by credit rating agency Standard & Poor's. The country goes to the polls for national elections on Sunday, and has been racked by continual street protests over its austerity cuts.

We also have the Dutch and French political uncertainty, which could mean we see new governments not as sympathetic to the austerity measures needed for EU bailout funds. This has caused concern among investors which has weakened the Euro pushing rates back up to a 22 month high.

Better UK data helps push up the Pound

We’ve had a run of decent data for the UK in the last few days. UK construction data exceeded expectations while the euro zone manufacturing sector contracted further and unemployment rose, highlighting the divergence between their economies. The markets seemed very pleased with the solid figures as a slump in construction output was one reason behind the economy's contraction in the first quarter.

The construction data soothed some concerns about the fragility of the UK economy after manufacturing data disappointed on Tuesday, and raised expectations of a decent PMI reading from the dominant services sector on Thursday.

Furthermore, UK mortgage approvals and consumer credit data also came in above forecasts.
So in summary, the data has helped fuel safe-haven demand for the pound, which has rallied strongly against the Euro in recent months as investors diverted portfolio flows from the indebted euro zone to triple-A rated UK government bonds.

Indeed, Sterling has performed well since April's Bank of England policy minutes dampened speculation of an increase in the bank's 325 billion pound asset purchase programme. With its high levels of debt and strong trade links to a troubled euro zone, however, the UK economy remains shaky and more monetary easing remains a possibility. Analysts, however, said a sister PMI survey on the more dominant services sector, due on Thursday, could have a bigger impact on sterling if it came in on the weak side.

Summary for Pound/Euro forecast 2012

So lots to digest with regards to the UK and EU economies and this is what has been driving exchange rates this week. In short, if we keep getting strong UK data then the Pound will likely remain supported against the Euro at the current highs. If poor data comes in though we could see it dip.

I think the main thing that will affect GBP/EUR rates in the coming days however is the political situation in the EU – continued uncertainty could weaken the Euro and the potential is there for it to weaken further.


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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Sterling at 2.5 month high vs Euro August 2011

Friday 19th August 2011

Good morning. Sterling rose well against the Euro yesterday, as investors perceived the Pound as the best of a bad bunch of currencies. As markets around the world plummeted on risk fears, Sterling gained and GBP/EUR rates are at a near 2.5 month high. At 08:30m this morning rates are as follows:



• GBP/EUR 1.1531

• GBP/USD 1.6500

• GBP/AUD 1.5916

• GBP/NZD 2.0061

• GBP/CHF 1.3028

• GBP/CAD 1.6325

• GBP/ZAR 11.881

• GBP/JPY 126.05

• GBP/DKK 8.5886

• GBP/NOK 9.0377

• EUR/USD 1.4304



Sterling gains significantly vs Euro



Yesterday markets across the world fell, with the biggest fall on the FTSE since the financial crisis began. We saw a flight from risk, where investors were jittery and moved their funds to perceived safe havens. Usually this means the US Dollar and Swiss Franc, however with problems in the US and the Swiss keeping their currency weak, Sterling benefited.



So Sterling is gaining support from the perception it is the best of a bad bunch of currencies. We have stable credit ratings, political calm and a deficit reduction plan in place. This meant GBP exchange rates gained, particularly against the weaker Euro, still reeling from failures of EU leaders to reach an agreement on sovereign debt.



So is Sterling going to remain strong?



Many are questioning the Pounds buoyancy at the moment, as the UK economy is far from healthy. Just this week we've had poor Retail Sales figures, higher than expected unemployment, and dovish minutes from the Bank of England. Due to this, many analysts think that these gains will be short lived.



The government's fiscal austerity programme is also expected to hamper demand in the economy, leaving sterling vulnerable to weakness in the medium term.



Best time to buy Euros?



Well it's certainly close to the best in well over 2 months, and given the uncertainty surrounding the world economy, those that need to buy Euros should consider fixing the rate while it's so good. Even if you don't need your funds for some time, a Forward contract allows you to fix today's rates for up to 2 years, and only lodge 10% of the total to be converted. Contact us today to discuss our exchange rates and how these contracts work.



Today's Data



We end the week with Public Sector borrowing from the UK, and further inflation figures from Germany.



If you need to buy or sell foreign currency and are looking for the best exchange rates to buy Euro / US Dollars, 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.