Pound/Euro forecast September 2014

Monday 1st September 2014 
Good morning and welcome to a new month. Pound/Euro rates have started quite strongly at €1.2650 due to a weakening Euro, but Pound/Dollar remains low at just above $1.66. In today’s report I will outline what has pushed GBP/EUR rates higher, the forecast for September, along with this week’s data releases that could affect exchange rates. 

Pound/Euro up to €1.2655 

After a few weeks of decline in the GBP/EUR rate, this morning we saw it recover back close to 2 year highs. This is partly due to the crisis in Ukraine and the risks this presents to the EU recovery. 

The main reason why the Pound has risen against the Euro is weakness in the single currency. Low inflation means that the pressure is on the European Central Bank to provide further stimulus which could take the form of Quantitative Easing. They will announce whether they will do so at a meeting on Thursday. If they do announce stimulus, expect the Euro to weaken and Pound/Euro rates to rise. 

However, Analysts at Barclays said it was too soon for the ECB to announce new policy measures, given that the two most powerful policies announced in June are not yet deployed. So there are mixed views on whether anything will be announced on Thursday. If so, exchange rates will probably go up. If they don’t say anything, then the rate will probably drop. 

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Pound/Dollar remains low at $1.66 

This again is partly due to the problems in Ukraine and the middle-east. When there is global uncertainty like there is at present, the Dollar gains strength and becomes more expensive to buy. 

 The US economy is also recovering well, and they have been winding up their stimulus programme. So like the UK, the USA is recovering and this is being reflected in the strength of the respective currencies. 

Summary 

The UK and US economies are doing well; the Dollar and Pound are strong as a result. The EU economy is doing badly, and they are likely to have to take measures to boost the economy. This is weakening the Euro. 

The geopolitical situation in Ukraine and the middle-east is also causing problems for the EU economy, and causing the safe haven US Dollar to gain in strength and become more expensive. All of the above means GBP/USD is low, GBP/EUR is at a 2 year high, and there are various economic releases (detailed below) this week that could keep the currency markets quite volatile. 

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 *** I'm on holiday from tomorrow so my blog will next be updated on the 10th September ***

This week’s economic data releases. 

Monday 1st September – Today has been very quiet due to a market holiday in the United States. We did have slightly worse than expected UK Mortgage Approval and inflation numbers this morning, pulling the Pound slightly lower. 

Tuesday 2nd September – Overnight Australia will have released its latest interest rate decision which I expect will stay at 2.5%. The only UK data of note today is PMI construction released at 09:30am. US Markets open again today with figures showing the latest Construction and Manufacturing. 

Wednesday 3rd September – Further UK inflation figures today could affect the Pound. GBP/EUR could also be affected by the latest UK Retail Sales figures. Elsewhere we will see Australian growth figures, an interest rate decision from Canada, and the latest US Factory Order numbers. 

Thursday 4th September – As always for the first Thursday in the month, the EU and UK release their latest decision on interest rates. They will probably leave them as they are, but there is a chance as I outlined above that the EU could announce stimulus measures. Expect exchange rates to rise if this is the case. Over in the USA we have the latest Jobless numbers and Trade Balance figures. 

Friday 5th September – The only UK data of note is a consumer inflation report. The EU releases its latest GDP figures. Canada has some unemployment numbers. Over in the states we have earnings and non-farm payroll figures. These are often very different to forecast to expect a choppy day for Pound/Dollar rates. 

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Pound falls slightly from recent highs due to Ukraine crisis

Monday 21st July 2014
The Pound fell a little towards the end of last week, as worries about the tensions between Russia and the West in Ukraine meant that investors sought out safe haven currencies. When there is global uncertainty, it often causes ‘safe-haven’ currencies like the US Dollar to strengthen as international investors move out of riskier currencies, like the Pound. This is the main reason for the slip from the recent highs we have recently seen. 

Sterling has surged over the past year as Britain's economy has shown signs of a strengthening recovery, fuelling expectations that the BoE will hike interest rates before the year's end. In contrast the EU economy is faltering and they are likely to pursue stimulus measures which have weakened the Euro. 

Despite this, in recent months the Pound gets to levels in the €1.26’s against the Euro and the $1.71’s against the Dollar before dropping back away. Given Sterling can’t seem to sustain its gains, now is a good time to take stock of your currency needs. 

To discuss how I can help you get the best exchange rates, or to simply have a chat with a currency expert to talk about which way the rate may move, get in touch with me for a free consultation. I can discuss the currency you need to buy or sell, explain what could move the rate and help you to decide when to fix your exchange rates. When the time comes, I can provide you a quote to compare with your bank or existing broker, and even a small improvement could save you thousands when converting a large sum. 

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This week’s economic data releases 

What causes exchange rates to move? 

There are 4 main things – economic data releases, political events, natural disasters and uncertainty caused by war. Most of things are impossible to foresee, such as the current crisis in Gaza and Ukraine which could cause investors to seek safe haven currencies such as the US Dollar. 

What is known in advance are economic data releases. I have listed below the coming weeks scheduled releases that could affect exchange rates. For more detailed information on how these could affect the exchange rate you are interested in, contact me for a free consultation. 

Tuesday 22nd July 2014 

There are no UK releases today. In Australia we have a speech by the RBA governor so there may be some volatility for GBP/AUD rates. Other than that all data is from the USA – Inflation numbers and Home Sales. 

Wednesday 23rd July 2014 

Today could be interesting for the Pound, as we have the latest Bank of England minutes, showing what was discussed and how they voted in their recent decision to hold interest rates. There could be clues as to when UK interest rates may rise which could affect Sterling. 

In the Eurozone we see Consumer confidence figures and over in New Zealand we have their latest interest rate decision and Trade Balance figures. I think they may raise interest rates which would cause GBP/NZD to fall. 

Thursday 24th July 2014 UK 

Retail Sales numbers are released this morning, which are a good barometer of overall economic activity and so could affect the Pound. In the EU we have some inflation numbers. In the USA the latest jobless numbers and home sales figures are released, in addition to manufacturing PMI figures. 

Friday 25th July 2014 

UK Gross Domestic Product (GDP) numbers are released this morning. The expected figure is 3.1% - any higher and the Pound could rise, any lower and it could fall. 

In the USA we have Durable goods orders which often involve large investments which are sensitive to the US economic situation, so this release could cause some volatility in GBP/USD rates. 

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What could affect exchange rates this week?

Monday 3rd March 2014 
It’s been relatively quiet since my last post, and today hasn’t seen much economic data that has affected exchange rates. We have not seen the Pound make any further gains, and we currently have GBP/EUR rates around the 1.2140 mark, and GBP/USD rates a little above $1.67. 

In today’s post, I will have a look at upcoming events this week that I think will have an impact on rates, including economic data releases and the current instability in Ukraine. 

Instability in Ukraine to affect exchange rates 

There are various things that affect exchange rates. Economic data is the main one, and in a moment I’ll analyse what we have due to be released this week that I think will move FX rates. 

Other things that can affect currency rates are natural disasters like floods and droughts. Political events like elections and new policies. Finally terrorism/instability and acts of war can also have an impact. 

Dominating the headlines at the moment are events in Ukraine. How could this affect exchange rates? Let’s start with the obvious factor – how has it affected the Russian Rouble? I can’t actually trade the rouble, but it’s a good place to start to explain the effects of the current situation. 

Russia's rouble has fallen to a fresh all-time low against both the dollar and the euro after the political turmoil in Ukraine intensified. So the instability there has weakened their currency. 

Further afield, the unstable situation is likely to affect all major currencies. Due to the uncertainty it’s creating, it will likely mean the global investors seek safety. This may mean that perceived riskier currencies can weaken, and safe haven currencies can strengthen. 

Safe haven currencies like the US Dollar and Swiss France therefore could gain strength and become more expensive to buy. Risky currencies like AUD, NZD, ZAR for example could weaken and become cheaper to buy. 

Closer to home, we could see the Pound weaken on the back of the instability, as investors sell it to move to the safety of the US Dollar while geo political negotiations take place. 

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This weeks scheduled economic data releases that could affect rates 

Monday 3rd March 2014 

It’s been relatively quiet today we did have some slightly worse than expected UK data this morning. This afternoon we say some better than expected US data that temporarily caused GBP/USD rates to drop away. 

Tuesday 4th March 2014 

Again a quiet day in terms of data releases. The only UK data of note is construction data released at 09:30am. Most information today is from Australia – an interest rate decision followed by a statement from the RBA. 

Wednesday 5th March 2014 

There is a release of interest from the UK today, an inflation report at 10am that could dictate future interest rate movements and therefore could affect Sterling exchange rates. Elsewhere, the Eurozone has a raft of releases today – Inflation data, Retail Sales and Gross Domestic Product. All of these will give a good idea how the EU economy is preforming and if the numbers are worse than expected we may see the Euro weaken in value. 

Elsewhere, we have an interest rate decision from Canada followed by a statement from the Bank of Canada. In the United States we see the latest mortgage approval numbers and employment figures. 

Thursday 6th March 2014 

It’s the first Thursday in the month, so we will see the Bank of England and European Central Bank announce their decision on interest rates at 12:00pm and 12:45pm respectively. I expect no chance from either; however comments that follow the decision could have an impact on exchange rates. If there are hints of a rate cut in the EU, Pound/Euro rates may rise. If the BoE however hint that a rate change in the UK is a long way off, expect the Pound to fall in value. 

Elsewhere today we have Trade Balance and Retail Sales data from Australia, and Jobless Claims from the United States. All in all a busy day so I do expect some volatility in FX rates today. 

Friday 7th March 2014 

We end the week across the pond – Canada releases unemployment data, and the USA has its latest Trade Balance figures, along with Non-Farm Payrolls at 13:30pm. This is usually quite different to the forecast number, so expect a choppy day for GBP/USD rates today. There is nothing of note from the UK or EU. 

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Alastair Archbold