Why has the Pound dropped from €1.22 to €1.2050?

Monday 3rd February 2014 
Since my last post we have seen further volatility in the Pound/Euro exchange rate. On Friday we saw rates hit €1.22, but the spike was short lived as has often been the case in the last few months. In trading today, rates fell quite a bit, falling to €1.2048 at the time of writing. 

In today’s post I’m going to explain what caused rates to rise only to quickly fall back away again. I will also look at what data is due this week that I think will affect exchange rates. 

Pound/Euro hits €1.22 on EU inflation data. 

On Friday we saw some very low inflation figures from Europe, which mean the European Central Bank may take action to help protect the eurozone's fragile recovery. Official figures showed that eurozone inflation fell to 0.7% in January, down from 0.8% in December and further below the ECB's 2% target. 

It has fuelled worries about whether the euro bloc could suffer deflation, potentially de-railing economic growth. As such, the only tool in the ECB’s box to combat this, is cutting the EU interest rate or possible the deposit rate. This would help combat deflation, but due the lower return on offer, it would also weaken the Euro. 

Mario Draghi, president of the ECB, has said that although inflation was "subdued, and expected to remain subdued" for about two years, he was confident that it would return to target. But he added that the ECB was ready to act if necessary. 

It was this comment that hints at lower interest rates in the EU, and we saw this being priced into the market on Friday, and it was this that caused rates to climb to €1.22 as the Euro lost value and became cheaper to buy.

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Why have rates fallen today to €1.2050? 

There are 2 reasons for the drop in rates today. Firstly we saw some better than expected data from Euros. Eurozone manufacturing grew strongly in January on the back of new orders, a closely-watched business survey suggests, with Germany leading the way. This counteracts the bad news we saw on Friday, and so the Euro regained some strength and has become more expensive to buy. 

Also this morning, we saw some poor UK Manufacturing data that was a little lower than expected. This weakened Sterling, and combined with today’s EU data has pulled rates from the high of €1.22 on Friday, to €1.2050 this morning. 

What other data could affect exchange rates this week? 

For Pound/Euro rates, I think that Wednesday and Thursday will be important dats. There are various inflation and Retail Sales numbers on Wednesday, and on Thursday we will see the latest Bank of England (BoE) and European Central Bank (ECB) interest rate decisions. We probably won’t get any surprises from the BoE, however there is a small chance the EU could cut rates. 

I think it’s probably unlikely, but we may see the president Mario Draghi hint at action in the coming months. Either of these things would push Pound/Euro rates higher. 

On Friday we also have some further Manufacturing data from the UK, along with the latest Trade Balance figures. If better than expected then the Pound could gain, but anything that disappoints the market would caused the Pound to fall away quite sharply. 

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Sterling up after Retail Sales smash forecasts

Friday 17th January 2014 
This morning at 09:30am we saw the latest UK retail sales figures. These are watched closely as they reflect the overall economic situation in the UK, and for this reason the numbers often have an effect on exchange rates. 

The figures this morning were significantly above forecast, and as you can see from today’s GBP/EUR chart below, they have caused a big spike in exchange rates:

 

The numbers showed that sales in December were up 5.3% on a year ago, and this is the fastest annual sales growth in more than nine years. The forecast was for 2.6%, so it's significantly better than expected. The figures from the Office for National Statistics (ONS) suggested growth in consumer spending above the expectations of many analysts. 

There aren’t many other significantly releases today, other than a speech by a Bank of England member at lunchtime, and some US Housing numbers later this afternoon. 

Do you need to buy Euros?

The spike this morning has pushed GBP/EUR rates back up to a 12 month high. 

We’ve seen this happen several times now over the last 6 weeks, only for the gains to be short lived and rates to drop back away again, so if history repeats itself we could well see rates drop back away. 

If you need to convert Pounds to Euros, this could be a good opportunity to take advantage of this spike. 

If you need to buy Euros and would like to see what rates I can offer you, click here to send me a free enquiry. 

Are you converting Euros back to Pounds? 

Rates have been above the €1.20 level for some time now, and we have seen it spike several times before dropping back away. If you need to convert Euros to Sterling then the medium term forecast for the market moving against you should ring alarm bells. 

 You can use tools such as Stop Loss Orders to help you achieve the best rates possible. If you would like to find our more about how these works and the excellent exchange rates I can offer you, click here to get in touch with me today. 

Are you converting another currency, for example NZD, AUD, CAD, USD, CHF? 

I can trade most of the world’s major currencies, at exchange rates that are up to 5% better than banks can offer. This combined with the range of currency contracts available and my excellent knowledge of the currency markets could save you thousands of Pounds if you need to convert one currency to another. 

Why are you reading this? Perhaps you’re buying or selling a property abroad, or buy or sell goods in a different country, but whatever your requirements, you are likely reading this because you want to know which way exchange rates may move, and would like to achieve the best exchange rate possible. 

Get in touch with me now my sending me a free enquiry. 

I can have a brief chat with you over the telephone, discuss your requirements, explain the options you have available, and let you know the rate I can offer. By getting in touch you could well save yourself thousands of Pounds. 

I look forward to hearing from you. Have a great weekend. 

Alastair Archbold

Will the Pound get higher against the Euro?

Tuesday 10th September 2013
Good afternoon. Since my post last week, the Pound continued to rise, however now seems to have hit the peak and we haven't seen further gains. In today's post I'll have a look at recent economic data, how it's affected exchange rates, and what to look out for in the next week that is likely to move the currency markets. In today's report:

• Pound fails to break through €1.19 level
• UK economy is turning the corner
• US jobs data disappoints, sending GBP/USD higher
• Upcoming data that might push rates higher or lower

Has Pound/Euro peaked or will it go higher? 

The last few months have been good for the Pound, with lots of good economic data giving Sterling strength, and help exchange rates recover close to where they were back in January. At the end of last week the GBP/EUR rate peaked at just over €1.19.

Since then things seem to have stabilised. We saw rates slip away to €1.18 yesterday, and today we have seen a mild recovery to €1.1850 against the Euro, and so the rise has ended. But does this mean it's the peak or will rates continue to climb to €1.20 and above?

Firstly let me say that nobody can predict the markets. If I could then I would be a billionaire and sat on my yacht rather than sat at my desk on the trading floor! What I can do however is explain what has moved the market, and the arguments for what could move the rate up or down in the coming weeks and months.

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Sterling is range-bound between 1.18 & 1.19

So, last week Sterling pulled back from a 4 month high against the euro on after some poor UK data releases. UK industrial output fell short of expectations and the trade deficit unexpectedly widened sharply. The figures mean that the recent consistently strong UK data has come to an end, and it has also led investors to bring forward expectations of when interest rates would rise.

Also last week the Bank of England made no new attempt to talk down borrowing costs and this means that rates could rise much sooner than the central bank has flagged, possibly as early as late 2014. By contrast, the European Central Bank said it was ready to lower interest rates. This has helped the Pound remain strong and the Euro weak. 

The UK economy is "turning a corner", Chancellor George Osborne has said in a speech in London. Mr Osborne cited "tentative signs of a balanced, broad based and sustainable recovery", but stressed it was still the "early stages" and "plenty of risks" remained.

Also helping the pound are recent surveys on UK manufacturing and services which indicate economic growth may accelerate in the second half of the year. So on paper the UK economy is looking good, so why isn't the Pound rising any more?

The currency markets move on rumour, and as the economy is expected to continue to recover, this is already priced in to the market, so even if we keep getting good data it's not going to much of a surprise, and the market now seems to have peaked and is unable to break through the €1.19 level.

If you are buying or selling Euros, find out about our rates by clicking here.

So if you are buying Euros, do you fix a rate now or wait?

Ultimately only you can make this decision. Given however that rates are close to the best they've been since the end of January, I think that holding out for a higher rate could easily mean you lose out on the current levels should we see the Pound weaken again. By hanging on, you could be holding out for an inch and risk losing a yard So if I needed Euros in the next 6 months I would do one of two things.

One option is to fix the rate now. It's a very good rate, and means you are taking advantage of the recent rise in the value of the Pound. Even if you don't need your Euros now, you can fix the rate for up to 2 years with a Forward contract, and only lodge 10% of your Sterling now, the remainder when you want the Euros transferred. 

The second option is a Stop Loss order. If you are hoping the rate will go higher, this allows you to do this but not risk losing out should the market move against you. This works by placing a lower level, 1.17 for example, and should the market drop below this we automatically buy your currency and fix your rate. 

In this way you can continue taking advantage of any gains, but have a 'worst case scenario' or safety net so you know the worst rate you will get should Sterling start to drop. 

Click here to send me a free enquiry if you need the best exchange rates. 

Pound/Dollar rates rise

In addition to the good UK data mentioned above, 2 other things have helped the Pound/Dollar rate rise. Firstly we had some poor US jobs data that has weakened the USD making it cheaper to buy.  

The mediocre jobs report may add fuel to the argument that the US economic recovery is not yet robust enough to sustain itself without the additional help of the Fed - more QE would mean the Dollar could weaken further. 

Also it now looks like military action in Syria may not happen, and if it does it's some way off. This has added some stability to the markets, oil and commodities have fallen, and investors have moved away from the safety of the Dollar and into riskier assets, all of which mean a higher GBP/USD rate. 

Economic data for the next week

If I was buying or selling currency in the next week, there are a few data releases I would be keeping an eye on:

Wednesday - We see UK jobs and unemployment data, which could affect the Pound depending on whether it's better or worse than expected. 

Thursday - UK inflation is released today, and because it can impact interest rates, it often affects exchange rates. Also today we have a speech by the ECB president Mario Draghi, and his comments often affect GBP/EUR rates. US unemployment data is also released today. 

Friday - US Retail sales and Inflationary measures may affect GBP/USD rates. 

If you need to buy or sell currency, would like to find out about our rates, or would be interested in discussing the market to help you decide when to fix your rate, click here to send me a free no obligation enquiry.