Pound falls away from recent highs

Tuesday 8th July 2014 
The Pound has fallen from its recent highs this morning, after figures showed Industrial and manufacturing production in the UK was much less than expected. 

Manufacturing output in the UK recorded a surprise fall of 1.3% in May, the biggest decline since January 2013. The figure from the Office for National Statistics (ONS) was much weaker than economists' forecasts of an increase of 0.4%, and as a result the Pound fell by around 0.5% against other currencies including the Euro. You can see the drop in the chart below when the figures were released at 09:30am; however rates have recovered back to €1.26 against the Euro, and $1.7120 vs the US Dollar. 

So why exactly did the Pound fall? 

Regular readers will know that it is speculation on UK interest rates that has been driving the Pound upwards recently. Today’s figures are a bit of a reality check for the UK after a few months of very positive data. The markets see today’s figures meaning there is now less chance of an interest rate rise before the end of the year. 

The rumour of higher interest rates has been driving investment towards the Pound due to the higher potential return. Today’s figures mean it’s less likely, and so the Pound has fallen slightly. 

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I update this blog to keep my existing and potential clients up to speed with what is happening with exchange rates. I am a senior currency broker for one of the UK’s leading foreign exchange companies, and I can help you achieve exchange rates that are up to 5% better than banks or other brokers can offer. 

It’s a good time to look at exchanging currency given the current rates are at multi-year highs. 

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Alastair Archbold

Pound gains on strong data, but spike is shortlived

Thursday 10th April 2014 
Good afternoon. It’s been a busy week since my last post on Monday, and we’ve seen a raft of impressive UK data that caused Sterling exchange rates to rise nicely. We saw the GBP/EUR rate hit around €1.2150 and the GBP/USD rate as high as $1.6820; however in trading today we have already seen rates start to slide back away. 

In today’s post I will explain in detail why the figures caused Sterling to rise, and ways in which you can take advantage of spikes like this, which are often very short lived and hard to catch! 

UK manufacturing figures cause Sterling to rise 

On Tuesday we saw the latest UK manufacturing figures released. Analysts were expecting the figure to show output growing by 0.3%, but in fact output grew by 1%! As the figure was much better than expected, and as you can see in the chart above the Pound spiked hitting as high as €1.2150. 

Output now stands at its highest level in more than 2.5 years, and is a sign the UK economic revival is quote strong. 

UK Growth forecasts also good for the Pound 

Also this week we saw the International Monetary Fund (IMF) says the UK economy will be the fastest-growing in the G7 this year. It said that the UK will grow by nearly 3% this year. So this is quite an upbeat forecast for the UK and helped Sterling gain against other currencies. Only 12 months ago, the IMF forecast 1.5% growth for this year, illustrating how good things are at the moment. 

Pound’s gains are short-lived 

As is often the case in the currency markets, a sudden rise in the exchange rate can often be very short-lived, and indeed the chart above shows how things have now tailed off, with Pound/Euro back just below €1.21. This is partly due to profit taking, as so many worldwide investors flock to take advantage of the gains, the flurry of buying pulls the rate lower again. 

The rate has been getting to these sorts of levels many times this year, only to drop back away again. I expect this trend to continue. In order to take advantage of spikes in the market without watching the rate 24/7, you need to have a good currency broker on your side. If you need to convert one currency to another and targeting a specific rate, then I can monitor the market for you and let you know if your target rate becomes available. Click to here to find about more about the kind of services I offer. 

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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.

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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.

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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?
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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.

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Have a great weekend.

Sterling falls (again) after poor Manufacturing Output

Tuesday 12th March 2013 

Good afternoon. I’m afraid to say the Pound has fallen further against both the Euro and US Dollar since my post last week. In today’s column I’ll look at the reasons why rates have fallen further, in addition to what data is being released in the coming days that could further impact the rate. So to summarise what we'll look at today:

• Pound falls after poor Manufacturing Data
• Sterling/Dollar falls after better US jobs data
• What might affect the rate in the coming days
• How to acheive the best possible exchange rates

Sterling falls (again!) after poor Manufacturing Output 

The pound has fallen against the dollar and the euro this morning, after official figures showed UK manufacturing output fell by 1.5% in January from the month before. The drop came after a slight rise in December. This latest news increases the chance of the UK heading into a triple dip recession, and that is why the Pound has fallen further. 

Immediately after the news Pound/Euro rates fell to 1.1370, and Pound/Dollar fell to 1.4840. We have since seen a slight recovery this afternoon, but not by much. 

Meanwhile, the National Institute of Economic and Social Research have said UK economic output contracted between December and February by 0.1%. They have also revised their estimate for the three months to January from flat to a contraction of 0.2%. 

The UK economy contracted in the final three months of 2012, and the UK will be back in recession if economic activity shrinks this quarter. Economists said the manufacturing figures increased the chances of the UK falling back into recession. 

In turn this would mean further Quantitative Easing for the UK, and it’s also likely other rating agencies would downgrade the UK which would push the Pound lower still.

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Pound also now well below $1.50 vs. the US Dollar 

Late last week we had the latest non-farm payrolls data from the USA, which looks at the total jobs created excluding the agricultural sector (due to its seasonal nature). The numbers showed 236,000 were created, and the forecast was only 161,000. As the number was so much better than expected, the US Dollar gained strength and became more expensive to purchase, pushing rates lower. 

This combined with the shaky UK and EU economies really do cement the dollar as the safe investment of choice, and so further strength could be likely.

Need the best GBP/USD rates? Contact me now.

What data is out in the next few days that might shift the rate? 

Economic data is released every day, and if it’s better or worse than forecast, it can affect exchange rates quickly and without warning. For more information on how these releases could affect the exchange rate you’re interested in, get in touch with me today. 

So what data is coming in the next 48 hours? Well on Wednesday, we have some inflation data from the EU and also the latest EU Industrial Production figures. Over in the United States we have Trade Balance numbers, and also Retail Sales which are a good overall barometer of economic activity. 

On Thursday we have the Bank of England monthly bulletin, which provides regular commentary on market developments and UK monetary policy operations. Often comments from the BoE can affect the value of the Pound. 

We also have the European Central Bank giving a report that contains a detailed analysis of the prevailing economic situation and the risks to price stability.  

Contact me to find out how this data could affect you.

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