Pound/Euro rates continue to fall

Monday 17th December 2012

Good morning. As always for a Monday, today I'll take a look back at last weeks movements, and what may happen to exchange rates in the run up to Christmas. The Pound/Euro rate fell steadily last week, to it's lowest rate in nearly 7 months.

In this week’s Report: 

• UK’s AAA Credit Rating under threat 
• Pound/Euro rates continue to fall 
• Sterling Dollar remains near 2 month high 
• Round up of the week’s other data that may affect rates  

Sterling vs. Euro; 

Last week we saw sterling euro rates steadily decline on the back of several positive data releases from the Eurozone, coupled with negative data from the UK. In this week’s euro report we’ll look at what those releases mean and how they have affected the single currency and sterling. 

The main driving force behind the movements was due to a newly agreed plan to make the European Central Bank (ECB) the Chief Regulator of European banks. This in turn paves the way for direct recapitalisation of struggling Eurozone banks using funds from the €500 billion European Stability Mechanism (ESM). 

The news that the ECB will regulating struggling European banks coupled with the possibility that the UK could have its credit rating downgraded from its prestigious AAA all helped the single currency gain ground on a now floundering pound , making the 4 and a half year highs of 1.2860 seen only a few months back seem a distant memory. 

Rates are now at their lowest in quite some time, and give or take a point, you have to go back to May to see rates significantly lower. This is great news for anybody looking to sell Euros, however anyone with a requirement to buy Euros should consider their options now to protect themselves against further falls in the rate. 

The Christmas period is expected to be just as volatile as we expect more news from the EU summit that took place last week along with the typically reduced trading that happens at this time which makes the market more sensitive to any data releases. 

If you are buying/selling Euros what should you do?

If you have a euro purchase in the near future a forward contract enables you to fix a rate of exchange today for anything up too two years into the future and remove and risk from the market, protecting you from any volatility and giving you one less worry over Christmas. Alternatively if you think rates will recover, consider a Stop Loss order.  

A stop loss enables you to place a trigger at a pre-agreed level in the market to give you a ‘worse case’ scenario. In this way you can still hope rates recover, but have a 'safety net' should they fall. 

This is also perfect for any euro sellers at the moment, who may well be riding the rates in the right direction, however should the UK not find its credit rating downgraded we can expect to see it regain some of the ground it has lost to the single currency over recent weeks. 

Either way you look at the market it is a difficult time to gauge any future movements, reinforcing the importance if having a good currency broker on your side. 

Why not contact me for a free consultation? In this way we can discuss all the options available to you, so you can make an informed decision on when to fix your rate and what type of contract to take. 

Click here to send me a free enquiry now.

Weekly Economic Data that may affect exchange rates 

Monday – The only UK data of note today are the latest House Prices from Rightmove. IN the Eurozone, we have Trade Balance figures. In the USA there is a speech from the FED. 

Tuesday – Lots from the UK today including Consumer Price Index, Producer Price Index, Retail Price Index and a Bank of England Quarterly Bulletin. There is nothing of note from the Eurozone or USA today. 

Wednesday – Today we see the Bank of England minutes to the latest interest rate and QE decision. This could indicate future policy so will be closely watched by the markets. In the Eurozone we see Business Climate assessment from Germany, Industrial Orders from Italy, and EU wide construction output. In the States there are housing and Building numbers, and New Zealand releases its latest GDP numbers. 

Thursday – Retail Sales numbers from the UK today are a good barometer of overall economic activity. In the EU we have German inflation data, Italian Retail Sales and Trade Balance numbers. Over in the states we see GDP numbers, Inflation data, Home Sales and the latest manufacturing figures. 

 Friday – We end the week with a host of UK data: Consumer Confidence, GDP numbers, Public Sector borrowing and business investment figures. In the EU we will see German confidence and Import Prices, Italian Consumer Confidence, and a French Business Climate assessment. In the USA we have inflation data, Personal income numbers, 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

Pound/Euro exchange rate forecast Outlook

Monday 10th December 2012

Good morning. Sterling Euro rates hit a 5 week low last week, before staging a slight recovery on Thursday and Friday. As always for a Monday, today I will take a look at what has moved the rates in the last week, and take a view on what the forecast for Pound/Euro exchange rates moving forwards. 

In today's report:

• Pound/Euro hits 5 week low before recovering on Friday
• Effect of budget statement on exchange rates
• Weakness after ECB speech pulls the rate higher again
• Round up of the week’s other data that may affect rates

Sterling vs. Euro; 

With last week’s Autumn Statement and data releases you would have expected substantial movement on both sides of the channel, and some significant movement for the GBP/EUR cross. Unsurprisingly with the ever so unpredictable currency markets the pair remained range bound with a 1 week movement within 0.65%. This week’s report will look at what has affected the rates and why Sterling seems to have put a stop to the recent decline in rates and strengthening Euro. 

 

So what happened with rates last week?

Markets opened at €1.2331 last Monday with a raft of data from the Euro zone, UK and States; Sterling was seen as the best performer as with a Purchasing Managers Index (PMI) of 49.1 (predicted 48.0). Across the Chanel, the Euro zone scored 46.2 with Greece coming bottom of the pile at 41.8. Albeit positive news for the UK sentiment it didn’t actually affect the rates much as the GBP/EUR cross seemed to be awaiting the Autumn Statement from George Osborne on Wednesday with Interest rate and GDP figures out on Thursday. 

What effect did the Autumn statement have?

The Autumn Statement was announced Wednesday with changes in Income Tax, Tax Relief, Capital Spending and Welfare; with the most worrying aspect being that debt reduction targets were behind schedule. This lack of progress could indicate towards a future downgrade of Britain’s AAA rating which would hinder the UK’s ability to borrow at current levels reducing the value of the pound. This could also mean further Quantitative Easing for the UK, putting Sterling at risk somewhat. 

Euro weakness pushes the rate higher again

There was however some good news for the Pound/Euro rate on Thursday as President Mario Draghi said “economic weakness will persist next year”. The European Central Bank (ECB) cut its growth forecasts and the Euro weakened as the mid-market moved up 0.5% within the space of an hour; further weakness continued through Friday as the Bundesbank slashed the 2013 German Growth Forecast from 1.6% to 0.4%. The Frankfurt based central bank did say it would recover to 1.9% in 2014. 

So from the 5 week low for the GBP/EUR cross, rates could come back up due to the weakness in the Euro zone. Alternatively, we could also see further Quantitative Easing (QE) out of the UK as debt reduction targets are behind schedule, and more stimulus might be required to help and bolster growth in the UK, potentially weakening Sterling. So the tug of war between Sterling and Euro continues, with no clear consensus on which direction things will go in the coming weeks and months. 

So what does this mean if you are looking to fix a rate or make the most out of your funds? 

If you are looking to purchase Euro’s at the moment, yes the rates have come down from the August High of €1.2878, but we're still looking pretty good at the €1.24 level. If you need to buy Euros, it's important to remember that at the end of last year you would have seen the mid-market nearer to €1.13. 

A typical purchase of €200,000 would now cost you over £15,000 less! Certainly if I needed Euros, I'd be happy to trade above €1.24 and would not want to risk losing out more should the UK have it's credit rating downgraded.

If you are looking to sell Euro’s and you are wary of the problems in the Euro zone or you are in the process of signing for a property a Forward Contract is a great tool for securing your price ready for completion. 

A Forward Contract takes the volatility out of the market and means you know exactly where you stand once you have completed either selling or buying a property abroad. 

Another option for Euro sellers is a Stop Loss order. This allows you to continue taking any gains, but should the market move against you, you can place an order to trade at a certain level, limiting any potential loss should the market go against you. 

To find out how Forward contracts operate, along with all the market contracts available to you hy not send me a free enquiry now. I can provide a free consultation on all the options available to you. 

Click here to send a free enquiry now.

Weekly Economic Data that may affect exchange rates 

Monday – There is no UK data of note today. There is however a raft of data from the Eurozone including German Trade Balance and wholesale prices, Italian Industrial Output and GDP figures, Greek inflation data and Industrial production, in addition to an EU wide investor confidence Survey. 

Tuesday – Today we have UK House Price Balance from RICS. There is also a bond auction in the UK. In the Eurozone we have the German & EU wide ZEW survey on economic sentiment. Over in the United States we see Trade Balance numbers and wholesale inventories. Further afield, Australia has a consumer confidence survey. 

Wednesday – It’s all about unemployment in the UK today, as we will see the claimant count, unemployment levels and average earnings data. Later in the morning we have a speech by one of the BoE’s MPC members, so this could cause volatility for Sterling. In the Eurozone inflation is the order of the day, with the latest numbers from Germany and France. Over in the USA we will see Imports and Exports, an interest rate decision from the FED, the latest FOMC economic predictions and a budget statement. 

Thursday – Unusually quiet in the UK for a Thursday, with only a CBI industrial trends survey. In the Eurozone we will see inflation data for Spain and Italy, and also Greek unemployment and the ECB monthly report. There is also a European Council meeting which will discuss the debt crisis. In the states we have inflation, Retail Sales & Business inventories. 

Friday – We end the week with Services & Manufacturing PMI from Germany France and the whole EU. Over in the US we have a raft of inflation data in addition to Industrial production. There is nothing of note from the UK.  

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