UK growth figures push GBP/EUR above €1.38

We’ve seen a spike in GBP/EUR rates during trading today, pushing up nearly 2 cents from 1.3650 to 1.3830 as the chart below shows: 

UK Growth revised up 

The reason for the steady gain for the Pound was this morning’s figures that showed UK's economy grew at a faster pace than initially estimated last year. You can read a full outline of the improved growth figures here on the BBC website.

I’m still of the view that Sterling will struggle to gain given the upcoming election uncertainty that’s likely to last until the end of May. Still, those with Sterling to convert to Euros should consider taking advantage of this spike in the markets. 

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Sterling steady ahead of GDP figures.

Tuesday 23rd July 2013 
Good afternoon. It’s very quiet in the currency markets at the moment, with the media hype currently focusing on the Royal baby and a lack of any significant economic data releases. The Royal baby news had the same impact on the markets as the announcement that Peter Andre and partner are expecting – none whatsoever! 

So in today’s report I will have a look at the most recent UK news that has helped Sterling, and a look at what other releases we have this week that might affect the currency markets. In today’s post: 

• UK Recovery set to gather pace in 2014 
• Government borrowing falls helping the Pound 
• UK Growth figures released this Thursday 
• How to get the best exchange rates 

UK Recovery set to gather pace in 2014 

The UK's recovery will gather pace into next year, as exports and business investment help to boost the economy, Ernst & Young's Item Club has predicted. The forecasting group predicted that UK economic growth would be 1.1% this year, rising to 2.2% next year and levelling out at about 2.5% thereafter. 

These are fairly positive numbers and will do no harm to the Pound, however they also acknowledged that growth currently remains reliant on consumer spending and the housing recovery. Spending all relies on confidence, and the good economic news of late has bolstered this, and the good weather has also boosted retail sales recently, all of which has given the Pound a push. 

 "With consumer confidence returning and the government's initiatives to stimulate the housing market bearing fruit, consumers are switching their attention back from saving to spending," the report noted. 

Elsewhere in America there is the risk of possible market reaction to the end of the Federal Reserve's monetary stimulus programme. This could strengthen the US Dollar and push rates down below the $1.50 mark again. Also, in China there is the risk of an abrupt slowdown in its economy. This would weaken the antipodean currencies such as the Australian Dollar, which could give GBP/AUD rates a lift. 

The other impact of a slowdown in China could be a strengthening of the Pound. This is because a successful re-balancing in China is expected to help the UK reduce its trade deficit in two ways - through more Chinese demand for UK exports of consumer goods, and less Chinese competition for the UK's imports of raw materials used in the construction industry. 

All in all the Pound has risen nicely since last week, however in the last few days has been very flat indeed. There have been no significant releases of note, so for the time being Pound/Euro remains range bound between 1.16 and 1.1650. 

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Government borrowing falls helping the Pound 

Figures released this week shows that government borrowing fell in 2012-13. Public sector net borrowing was revised down to £116.5bn. It means that total borrowing actually fell, by £2.1bn, from the year before, contrary to a previous estimate in May. 

The Office for Budget Responsibility (OBR) has forecast that total borrowing in the current fiscal year, excluding the effect of financial interventions and the deal with the Bank of England, will be about £120bn, or 7.5% of GDP. The lower figures also lent some support to the Pound. 

UK Growth figures released this Thursday 

The main data release this week will be Thursdays GDP numbers. The Gross Domestic Product released by the National Statistics is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity. 

I expect the Quarterly figure to show growth of 0.6%, and the year on year figure to show growth of 1.4%. These forecasts will already have been priced in to where exchange rates stand, so if the actual number is higher than this, expect Sterling to make gains. If the number is lower, expect a drop in exchange rates. 

Other than some EU inflation numbers tomorrow, the GDP numbers are the most important release of the week in terms of what will affect exchange rates. 

How to get the best exchange rates 

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In addition to better rates, we have various contract types such as Stop Loss and Limit orders, and Forward contracts. These types of contracts can protect you against exchange rates moving against you, and help you achieve the best possible rate within your time frame. 

To find out more about my services, including how the above contracts work, send me a free enquiry today. It costs nothing and carries no obligation, and simply means you can have a free consultation on your particular currency requirement. In this way you can make an informed choice about what type of contract to take and when to fix your rate. This, coupled with our commercial exchange rates could save you thousands of pounds. 

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Pound falls after growth forecasts revised

Wednesday 19th May 2013 
Good afternoon, and I hope everyone enjoyed the extended bank holiday break. The markets re-opened yesterday but it was pretty flat. Today has been busier and we have seen the Pound/Euro rate drop today after a cut to UK growth forecasts. In today’s post I will take a look at this, and also the increasing threat of more Quantitative Easing in the UK that could weaken the Pound further. 

In today’s report: 

•  OECD cuts UK economic growth forecasts
• Poor UK data increases chance of more QE 
• Central banks in currency war to devalue currencies 
• How to protect against adverse rate movements 

OECD cuts UK economic growth forecasts 

Today we have seen Sterling drop sharply against the Euro, after a leading economic think tank has forecast that Britain's economy will grow at a much slower pace than expected. The reasons were given as spending cuts and a lack of consumer and business confidence restrict the recovery. 

In its 6 monthly forecast, the Organisation for Economic Co-operation and Development (OECD) warned that a long and bumpy recovery in the Eurozone would continue to hit exports. They have also said the the UK governments deficit reduction programme would act as a brake on growth. 

The OECD said the UK government's austerity plans had affected growth, but said the measures were "necessary" and warned that "further fiscal consolidation" was needed. I read this as further confirmation that the Bank of England will have to pursue more Quantitative Easing. 

I’ll get into more detail regarding this in a moment, but in a nutshell further QE would weaken the Pound and bring rates further down. 

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Poor UK data also increases chance of more QE; Pound/Euro on the way down? 

Last week we had some quite poor UK data, including Retail Sales that were much lower than expected, and inflation numbers that also disappointed. There is now growing expectation that when the new Bank of England Governor takes over in a month, he will be more aggressive in pursuing the asset purchasing programme. 

The more and more likely this is, the more the Pound will come under pressure so we could see rates continue to fall away throughout June. Of course it’s not a given that GBP/EUR rates will drop, as the currency pair is being pulled in both directions. 

On the one hand, the threat of QE and poor data is weakening the Pound. On the other hand, the Euro is also relatively weak due to it’s own sluggish growth, so the direction of GBP/EUR will probably come down to investor sentiment, and so could go either way. 

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Pound/US Dollar could fall in coming weeks

The muted and slow recovery in Britain contrasted with the forecast for the US, which is expected to reach almost 3% growth next year. This coupled with the fact the US Dollar is a safe haven currency will probably mean GBP/USD rates fall in the coming weeks. 

Good news from the states will strengthen the US Dollar, making it more expensive to buy. Don’t be surprised to see rates drop back below the $1.50 mark. 

Currency Wars 

As I mentioned above, the Bank of England may well pursue further Quantitative Easing. But they’re not the only ones doing this. The USA and Japan also have asset purchasing programmes. What they are actually doing, is attempting to manipulate the value of their respective currencies. 

Why? Well taking the UK as an example, the problems in the Eurozone are affecting our exports (50% of our exports go to the EU). So, buy flooding the market with Sterling through QE, they are diluting the pool and thus lowering the value of the Pound. In turn, this makes our products more attractive to buyers in the Eurozone, and so the idea is to help boost these exports in order to return the UK to steady growth. 

The truth is that it’s really an unproven tool . You can read an interesting article on the subject by the BBC economics editor Stephanie Flanders here

How to protect against adverse exchange rate movements 

The uncertainty and differing forecast for exchange rates over the coming weeks and months, means it is impossible to predict where exchange rates are headed. For those that need to buy or sell currency, this should be a worry, as when moving large sums, the difference can be huge. For example earlier this year, the cost of buying €150,000.00 increased by over £10,000 in just a few months. 

So, to protect against an unnecessary increase in the cost of the currency you need to buy, a popular solution is a ‘Forward Contract’. This allows you to fix today’s exchange rates for up to 2 years in to the future, and only lodge 10% of the total you want to convert. Then at any time in the next 2 years, you can settle the remaining funds on the contract, in part of in full, and take delivery of your currency. 

In this way you can give yourself a finite cost, protect against rates moving against you, and remove all your exposure to the volatile currency markets. 

To discuss this, and the other tools I can offer, click below to send me a free enquiry. In addition to various contracts and expert knowledge on the currency markets, I can offer you commercial rates of exchange that are up to 5% better than you can achieve at the banks. 

I look forward to hearing from you. 

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Autumn statement effect on exchange rates

Wednesday 5th December 2012 

Good afternoon. The market has now stabilised after the Autumn statement by the chancellor. In this afternoons post I’m going to have a quick look at the effect of the statement, and also what is coming up in the next few days that could affect exchange rates. 

Effect of Autumn budget statement on exchange rates 

This is an easy one to sum up; there was little to no reaction at all! Sterling had been falling in the run up to the announcements anyway, and this morning was at a 1 month low against the Euro. As is often the case, the currency markets move more on rumour than actual fact, and the Pound was already vulnerable as investors braced for grim tidings from the UK's finance minister in his half-yearly budget statement. This is how GBP/EUR has moved today:

The market has already been anticipating a difficult Autumn Statement and this was for the most part already priced in to rates. Earlier this morning, the pound barely reacted to a survey showing Britain's service sector grew at its slowest pace in almost 2 years. The PMI number was below forecasts, but still just above the magic 50 level, which signals growth, which is probably the reason we saw hardly any movement. 

You can see in the chart above the market was already at its lowest before the speech, and the Pound/Euro rate actually recovered by around 0.3% just before Mr Osborne starting speaking. During the speech we saw basically no movement at all, as there were no surprise announcements. 

You can read a quick guide here as to what the statement contained from the BBC. The only real thing of interest was the scrapping of a planned 3p rise in fuel duty. Also of interest to the currency markets were the growth forecasts which are now predicted to be -0.1% in 2012, down from 0.8% predicted in the Budget. Forecasts for next few years are: 1.2% in 2013, 2% in 2014, 2.3% 2015, 2.7% in 2016 and 2.8% in 2017.

Quantitative Easing announcement tomorrow

Lowered growth forecasts could open the way to more quantitative easing by the Bank of England QE is generally perceived as negative for a currency. But if the fiscal austerity programme is relaxed too much that could also be negative as it would bring the UK's triple-A rating into question. 

The next announcement on QE is tomorrow lunchtime, when the Bank of England will announce whether or not they will increase the measures. We will also see the Bank of England and European Central Bank announce their latest decisions on interest rates. 

I don’t’ expect any surprises on either QE or interest rates. In the run up to Christmas it’s highly unlikely that there will be any changes, but depending on how economic figures are in the next few weeks, we may see more QE in the early part of next year.

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Weekly Sterling/Euro FX rate forecast

Monday 12th October
Good morning everybody. As always for Monday mornings, today I'm going to take a detailed look at Pound/Euro rates, where they have moved and what the forecast is for the coming weeks. In a nutshell, rates have been falling and are expected to continue to do so.

In this week’s Report:

• Sterling weakens on chance of more QE
• Pound/Euro falls to new lows in the €1.23’s
• Pound/Dollar remains in the $1.60’s
• Round up of the week’s other data that may affect rates

Sterling vs. Euro;

In an interesting week for the GBP/EUR cross the Pound broadly lost ground against the Euro as the frailties of the UK economy once again made headline news. Euro purchasers were on the back foot right from that start of the week as Sterling breached 3 week lows against the Euro following further expectation for more quantitative easing. This was triggered by the UK Chancellor George Osborne during his speech at the conservative party conference when he said that the bulk of savings in his budget would be through cutting government spending. This in turn would add pressure on the Bank of England to ease monetary policy perhaps as early as next month.












The week remained tough for the Pound following Christine Lagarde’s speech when she said that it was the IMF’s view that Britain's economy would contract 0.4% this year, before growing by just 1.1% in 2013. This is some way off previous predictions in July, when it suggested 0.2%t growth in 2012 and 1.4% growth the year after. This continued to put pressure on the Pound and also adds more fuel to the argument that the UK could lose its prized AAA credit rating.

Although the implications for the UK economy were ominous, the effect on the GBPEUR cross were somewhat limited as she discussed the on-going pressures on the rest of the Eurozone, and also looked at revised growth forecasts in the context of the rest of the world. In particular she warned that that austerity measure place on Greece need to be eased and they should be given an extra 2 years to repay their debts in the light of the fact that they very nearly defaulted recently.

World leaders warning over UK growth


There is an increasing call from financial leaders such as Legarde to restore growth to pull the world out of recession and not let Austerity curb this. This was touched on by the outgoing head of the FSA ‘Lord Turner’ in his speech on Thursday night at Mansion house when he commented that QE may not be working as well as perhaps it did when the program was first started and that there may need to be radical changes within the banking and finance system for these problems to be overcome.

Lord Turner’s speech was particularly scrutinised as he is widely expected to be named as the next Governor of the Bank of England when Mervin King steps down next year, and therefore anything he says now is analysed for clues on how he may approach the new role should he get the position. He called for "a willingness to employ more innovative and unconventional policies" and although he didn’t expand on this point it is understood that he believes the  Bank of England should considers telling the Treasury that it doesn’t have to repay the £375 Billion that it achieved through QE.

This type of policy is loosely termed as the creation of ‘helicopter’ money due to the imagery of just throwing money on everyone out of a helicopter. The idea being that the cash injection stimulates the economy without burdening it with painful austerity repayments.  As one of the leading candidates, his speech or ‘preliminary interview’ for the role caused a stir but also showed that he is open to perhaps more radical solutions for how to guide the British economy out of the lingering financial crisis.

All of this doesn’t bode well for the Pound, as more QE and further measures would likely weaken Sterling, while the Euro continues to pull the other way due to its well published problems.


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Weekly Economic Data that may affect exchange rates

Monday – The only UK data the markets will react to today is yesterday evenings RIghtmove House Prices. There are no EU releases either. In the USA we have Retail Sales, Manufacturing data and a speech by the FED. In New Zealand we have inflation numbers that could dictate interest rates. 

Tuesday – We get going with UK data today including Inflation data, Housing prices and Retail Sales. In the Eurozone we have inflation numbers and Trade balance figures at 10am. Also in Europe Germane releases an economic sentiment survey, of importance as Germany is the largest EU economy. Over in the USA we have more inflation numbers and industrial production figures.

Wednesday – An important day for the UK, as we have the latest Bank of England minutes, showing the vote and discussion of the recent MPC decision. In addition, UK Earnings and unemployment numbers are released. Some minor EU construction numbers are released, in addition to US Mortgage applications and building permits.

Thursday – An EU Extraordinary meeting starts today, which will see EU leaders meet and discuss the current problems in the Eurozone. This could throw up some surprises so expect Euro volatility today. In the UK the only data of note is retail sales, a good barometer of overall economic activity. Stateside we have jobless claims and the Philly Fed Survey.

Friday – The EU Extraordinary summit continues today. Staying in Europe we have inflation number and industrial production figures. In the UK we have the latest Public Sector borrowing numbers. We then end the week with Home Sales from the United States.

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Pound falls on revised UK growth figures

Thursday 29th March 2012
Good morning. It was a glorious day with unbroken sunshine across the UK yesterday, however the sun was not shining on the Pound, which took a drop against other currencies. So why did Sterling fall during trading yesterday? It dropped to a 2 week low against the Euro and also dropping from it's recent highs against the US Dollar. This was due to data unexpectedly showed the UK economy contracted more than previously thought in the fourth quarter of last year. In today's post we'll look at this and how it affects the Euro Rate forecast going forwards.

Sterling falls on growth figures

Figures released yesterday morning showed that UK gross domestic product contracted by 0.3 % in the last 3 months of 2011, which was worse than the forecast for an unrevised 0.2% fall on the quarter.














What does this mean for exchange rates?

It means there is a small risk of the UK going back into recession, and this has weakened the Pound. We've now had one quarter of negative growth of -0.3%. If figures next month show the first 3 months of 2012 also had a contraction, then it's the technical definition of a recession.

While this is unlikely as forecasts suggest growth so far in 2012, it did hurt the Pound, especially as it comes days after Bank of England Governor Mervyn King warned the challenges facing the UK economy, and saying that Britain faces a long road back to economic growth.

As you can see in the charts showing yesterdays GBP/EUR and GBP/USD movements, the figures pushed Sterling lower and pulled exchange rates down.

My view is that this is probably a temporary dip. With focus on the Eurozone debt crisis, this blip for the UK will be largely overshadowed, however it may mean that any decent recovery for the Pound will now be limited. Rates for Euros dropped into the low €1.19's yesterday, but remained within my predicted 1.19 to 1.20 range for GBP/EUR rates. The Euro debt crisis will likely keep Pound/Euro supported, but I don't expect it to get significantly above €1.20.

Indeed as I outlined in yesterdays post, historically over the last few years rates of €1.20 have been short lived, and are often following by a significant fall in Pound/Euro buying levels. If I had Euros to buy, I would probably look to secure rates while they are close to 18 month highs, especially given the global financial volatility at the moment.

What do other analysts say?

"There is a degree of consolidation in sterling after the sell-off of the dollar," said Derek Halpenny, currency strategist at BTMU.However, he argued the fundamental outlook was not too negative for the pound.

"There are some positives for sterling relative to the euro (due to problems in Europe) and even relative to cyclical currencies like the Australian and New Zealand dollar from a valuation perspective."

Elswhere Peter Dixon at Commerzbank said "What does it mean? Probably not a lot. But it kind of makes the starting point for 2012 that little bit more difficult,". I agree with him comments.

Getting the best exchange rates

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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 at 4 month high vs US Dollar, flat vs Euro

Wednesday 28th March 2012
Good morning. The Pound/Euro rate has been pretty flat so far this week, remaining around the €1.19 to €1.20 range. Against the US Dollar rates briefly hit a 4 month high above $1.60, before retreating slightly. Today we will take a look at what is causing recent movements, and the forecast for GBP/EUR and GBP/USD for the coming weeks.

Sterling remains range-bound vs Euro

Let's start with the Pound/Euro exchange rate, which remains around the €1.20 level. It did briefly drop by half a point yesterday morning when the first round of economic figures were released, however the drop was not to last.

At 12:00pm yesterday the CBI Distributive Trades Survey was released by the Confederation of British Industry. This is an indicator of short-term trends in the UK retail and wholesale distribution sector, and tends to have an impact on the formulation of economic policy at the Bank of England and within Government, and so can often impact Sterling.

The figures were much better than analysts had forecasts, and the Pound steadily recovered throughout the day, pushing back towards the €1.20 level.

What is the Pound Euro Forecast for where rates may head?

We're getting mixed messages from analysts at the moment. On the one hand the EU debt crisis is not resolved and this is keeping the Euro weak. It's important to remember however that there is no fundamental strength in the Pound, it's simply the fact that we have our own central bank to print money, and a well established austerity plan that the markets like. This is keeping the Pound supported against other currencies... for the moment.

Supporting this view was Bank of England policymaker David Miles, who said earlier this week that economy had effectively stalled, with growth rates near zero over the last six months, keeping alive slim chances of another round of quantitative easing. A bulletin released by the BoE yesterday suggested that asset purchases by central banks have helped economies weather their crises, and so the sluggish UK growth is keeping alive the prospects of more QE.

My view is that while the threat of more QE is on the horizon, the Pound will not make any significant gains against the Euro. It will likely remain range-bound between €1.18 and €1.20, but any resolution to the EU debt crisis could pull rates back down. In fact for several years now, we have seen rates above €1.20 only to sharply drop back away within a month or two. If you need Euros at the best possible rates, then send me an enquiry now to find out how you can protect yourself against the rate dropping.

EU Debt crisis: OECD urges eurozone rescue fund boost

The OECD has said that the eurozone needs to double its bailout fund to €1 trillion, however German Chancellor Angela Merkel said she would favour only a temporary increase. The reason for the proposed increase is that some fear that the fund will not be able to cope with another bailout.

At the moment we've seen bailouts already for Greece, Ireland and Portugal. While this has given some stability to the markets and kept exchange rates stable, the chance is still there that other countries, namely Spain and Italy, could require some funding. This shows that the EU debt crisis is far from over, and is keeping rates supported around the €1.20 level.

Adding to the problems in the EU, Spain confirmed yesterday that they had fallen back into recession. It contracted again in Q1 this year, and in the last quarter of last year. 2 consecutive quarters of negative growth is a 'technical' recession.

Sterling hits 4 month high against US Dollar

Despite the stability in GBP/EUR rates, the Pound/Dollar rate actually gained quite well yesterday, and rose to its highest in more than 4 months. The dollar was hit by increasing chances of more U.S. monetary easing, which weakened it and made it cheaper to purchase.

Given rates are now quite favourable, those that need the best exchange rates for Dollars can look at a Forward contract - lock in the rate now for up to 2 years, and only lodge 10% of the funds now, the remainder due when you want the currency. If this is of interest to you contact us to discuss it further.

Today's Data to watch out for

We start in Germany again today, with inflation numbers at 7am. A few hours later the EU releases money supply data. US figures this afternoon include Durable Goods orders. There are no releases of note today 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.

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