Pound falls against Euro after poor economic data

Monday 14th October 2013 
Good afternoon all. Well what a difference a week can make! The change in the weather in the UK has been mirrored by a change in the fortunes of the Pound. In Britain we seem to have very quickly entered autumn, and as the leaves started falling, so did the Pound, after a raft of poor economic data. 

This has pulled exchange rates lower and away from the all year highs seen just recently. In today’s report I’ll look at what has happened to cause the fall, and what else may happen with exchange rates in the coming weeks and months: 

• UK Retail Sales drop 
• Industrial and Manufacturing production fall 
• Trade balance in the UK widens. 
• IMF warn world could enter recession again 

Poor economic figures cause the Pound to fall 

It’s only been a little over a week since my last post, and at that time the GBP/EUR rate and the GBP/USD rate were both around the highest we’ve seen all year. Things can change very quickly in the currency markets however, and that’s exactly what we’ve seen. 

In the last week we have seen some poor UK economic numbers. Industrial and Manufacturing production was worse than expected, coupled with lower than forecast Retail Sales. More worrying was the fact the UK’s trade deficit has widened, meaning we’re importing more and exporting less. All of this had the effect of weakening the Pound and bringing exchange rates into the €1.17’s against the Euro, and back to the $1.60 mark against the US Dollar. 



In recent posts I have pointed out that the market seemed to have peaked, and indeed that now seems to have held true. Those that booked their currency on a Forward contract will be pleased at buying at the peak and will have been protected against the drop we have seen. 

If you are buying or selling currency, the market is very volatile at the moment. Simply hoping the rate will move in your direction is no more than a gamble, and could end up costing you dearly. The best strategy is to get in touch and discuss all the options we can offer you. In this way you can have a detailed chat with me regarding what might move the exchange rate, and make an informed decision on what to do. 

Click here to send me a free no obligation enquiry now. 

Is the world about to be plunged back into recession? 

The head of the International Monetary Fund, Christine Lagarde, has warned that a US default could tip the world into recession, saying that a default would result in "massive disruption the world over". 

So what’s happening in the states? The US Treasury will start to run short of funds on Thursday if no agreement is reached for it to raise its debt limit. The president of the World Bank, Jim Yong Kim, has also expressed his concern over the situation. 

He warned that the United States is just "days away from a very dangerous moment" because of the government's borrowing crisis. 

He warned this could be a "disastrous event" for the world. To explain what has been happening, the US government has been in partial shutdown since Congress missed a 1 October deadline to pass a budget, with politicians being unable to agree funding for current spending. 

This has resulted in hundreds of thousands of federal employees being sent home and government offices closing. Republicans refused to approve the new budget unless President Obama agreed to delay or eliminate the funding of the healthcare reform law of 2010. 

On Saturday, Jamie Dimon, boss of the American bank JP Morgan said the possible repercussions did not bear thinking about. "You don't want to know what would happen," he said. "It would ripple through the world economy in a way that you couldn't possibly understand." 

What might this all mean for exchange rates? 

So we’re at a crossroads in terms of the global economic recovery at the moment, and this may well have serious implications for exchange rates. The value of one countries currency against another is usually finely balanced, and uncertainty in the global markets could seriously affect exchange rates. 

If you need to covert one currency to another, perhaps to buy property abroad or maybe you buy or sell goods in a foreign currency, exchange rates can have a big impact on your costs. 

How can you get the best rates and protect against adverse currency movements? 

The first step is to get in touch with me to discuss your options. As a specialist foreign exchange broker, the rates that I can achieve are significantly better than banks can offer, by as much as 5%. So if you need to convert funds then the savings can be considerable. In addition to our great rates, we also have expert market knowledge that can help you decide when to fix your rate. 

This combined with the various range of FX contracts we offer mean that you could save thousands of pounds on your exchange. 

Click here to send me a free enquiry now and find out more.

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. 

Do you need to buy Euros? Send an enquiry and find out your options.

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. 

When you contact us, quote the reference 'AJABLOG'

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.  

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Pound/Euro, Pound/Dollar, Pound/Aussie forecasts

Wednesday 3rd October 2012

Good afternoon everybody. I'm taking a few minutes to give an update on what has been happening so far this week int he currency markets. The Pound has not fared very well so far this week, and exchange rates to buy US Dollars have dropped to a 3 week low, while against the single currency, GBP/EUR rates have dropped to the lowest in 2 weeks. 

Why has the Pound fallen against the Euro?

The reason for the decline is mainly due to UK data, rather than events in the Eurozone. Poor economic data releases this week have dented confidence in the recovery in the UK economy, and Sterling has weakened as a result.

For example, so far this week we have seen poor inflation numbers, figures confirming we are still in recession, lower than expected manufacturing data, and also today a showing Britain's service sector growth slowed in September and also other services providers shed jobs for the first time in 10 months.

In recent times it has been the EU debt crisis driving exchange rates, with fears over Spain and Portugal weakening the Euro. This trend now seems to be moving the other way, and GBP/EUR rates have now dropped below €1.25 as you can see from the chart below. 

If you're looking for the best exchange rates, send a free enquiry now. 

Central Bank meetings on Thursday

The next important event for the currency markets will be the central bank meetings for both the Bank of England (BoE) and European Central Bank (ECB). They will make announcements tomorrow with regards to interest rates, and also if the UK Quantitative Easing (QE) programme will be increased.

The UK will announce first at 12:00pm, and I don’t expect any change to rates or QE. Most in the market hold the same view, and we expect further QE in November. So if indeed there are no surprises, then there is not likely to be any impact on rates. If they do announce any QE, expect the Pound to fall.

At 12:45pm the ECB will make their announcement, and again I don’t expect any movement in their interest rate of 0.75%. Of more importance will be the press conference that follows at 13:30pm, as if the ECB president Mario Draghi makes any comments that the market perceives as positive or negative, then we could see movement in the GBP/EUR rate. In a recent meeting, he announced they will do ‘whatever it takes’ to save the Euro, and this simple comment caused the Pound/Euro rate to drop significantly in just a few seconds, highlighting how this press conference could affect rates.

Pound/Aussie Dollar rate climbs

There was a surprise cut to the Australian Interest rate earlier this week, and as a result the Aussie Dollar weakened and became cheaper to buy. Due to the lower return now on offer, investors sold the Aussie, and this has helped push rates up significantly, as the graph below shows. With more QE likely in November for the UK that could weaken the Pound, if you need to buy Australian Dollars it would be wise to consider your options now. 

 

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 falls against EUR after Swiss National Bank intervene

Wednesday 6th September 2011
Good morning. Sterling fell yesterday after George Osbourne gave a negative speech on UK growth. The Pound hit a 7 week low against the US Dollar, and also fell vs the Euro after the Swiss National Bank put set a floor on the EUR/CHF rate, causing the biggest one day swing in exchange rates I've ever seen. At 08:30am this morning, rates are as follows:

• GBP/EUR 1.1357
• GBP/USD 1.5984
• GBP/AUD 1.5076
• GBP/NZD 1.9304
• GBP/CHF 1.3702
• GBP/CAD 1.5785
• GBP/ZAR 11.346
• GBP/JPY 123.47
• GBP/DKK 8.4578
• GBP/NOK 8.5112
• EUR/USD 1.4067

Swiss National Bank intervene in exchange rate

The euro rose broadly after the SNB said yesterday it would set a minimum exchange rate target of 1.20 francs to the euro and would enforce it by buying foreign currency in unlimited quantities. Immediately after the announcement, Sterling shot up vs the Swiss Franc, as this chart illustrates:

The rate shot up from 1.28 to 1.38 in a matter of minutes, easily the biggest one day swing in exchange rates I have ever seen. Just a few weeks ago the rate was 1.17 so it has improved by a staggering 15%, of which yesterday accounted for nearly 8%.

The Euro gained on the announcement, pushing GBP/EUR rates lower, however the drop was limited by continued fears about EU debt. Against the US Dollar, the Pound also fell, as investors seek out a new safe haven now the CHF is no longer attractive.

UK Economic Outlook gloomy

Two things happened yesterday to cast doubt on the UK recovery. UK service sector data posted its biggest drop in a decade, in another sign the British economy is struggling, keeping the topic of more quantitative easing on the Bank of England's agenda.

Secondly the chancellor George Osbourne admitted the economic recovery hopes had been revised down, following a raft of recent poor UK data.

This compounded the poor retail sales, and has put Sterling on the back foot.

Summary

The Dollar is gaining strength now the Swiss Franc is not as attractive as a safe haven. This is to the detriment of perceived weaker currencies such as the Pound and the Euro. The Euro has also gained due to the intervention of the Swiss National Bank. The net result is lower GBP/EUR and lower GBP/USD rates, and unless we get further developments from the Eurozone regarding sovereign debt, we think these declines may well continue.

If you need to buy currency and want to discuss the options we have to protect you against any adverse exchange rates movements, send me an enquiry for free now, and have a consultation on how you can take control of your currency requirement.

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