Why has Sterling risen today? / This weeks economic data

Monday 27th January 2014 
Sterling has had a pretty good run today, steadily rising and recovering from the drop we saw at the end of last week, as you can see from today's GBP/EUR chart below. There haven't been any significant data releases today, so why has the Pound risen? 

I think the reason for today’s gains are two-fold. Firstly, we have some key growth figures for the UK tomorrow. When they are released I’m expecting it to show Britain confirmed as the strongest major economy in Europe, so part of today’s gains are the market positioning itself ahead of the official release tomorrow. Just last week the International Monetary Fund upgraded its outlook for the UK in 2014, so this optimism is driving the Pound forward at the moment. 

A second reason for the gain today could be a general sell off of weaker currencies and assets. As you can read here, the fact that the FED may taper it’s QE programme this week have meant that investors have been selling riskier assets like the Euro, and buying perceived safer currencies like Sterling, so that will be another reason for the gains for the Pound today.

However despite recent gains for the Pound, it's worth bearing in mind that economists warn that the recovery remains fragile, with a downturn in consumer confidence posing a threat to positive momentum. In the last few months we’ve seen the Pound/Euro rate get to 1.21/1.22 several times, before dropping back away again. 

The currency market is very volatile at the moment, and so if you need to buy or sell currency in the near future, it’s worthwhile getting in touch to discuss your requirements with me. I can let you know your options and explain which way your exchange rate may move. In addition to my market knowledge, the rates I can source for you are often up to 5% better than banks and other financial institutions offer. 

What could affect exchange rates this week?

Below are the main scheduled releases that I think will have an effect on exchange rates this week. Tuesday will be a key day as we have the latest UK growth figures. Those that need to buy or sell Euros should watch out for this. 

Remember if you need to buy or sell currency and want the best rates, get in touch with me by clicking here and I can provide you a quote in addition to answering any questions you may have about which way the market is moving. The rates I can source can be up to 5% better than banks can offer, so it’s certainly worth comparing what I can offer you. 

Monday 27th January 2014 

As explained above today has been very quiet on the data front, with only some data from Europe that was a little better than expected. Due to the market selling riskier currencies and assets today however as I have outlined above, the Euro has weakened and GBP/EUR has risen. 

Tuesday 28th January 2014 

Today will be a key day for the Pound, as at 09:30am we will see the latest GDP figures from the Office for National Statistics. The forecast is to show quarterly growth of 0.7%. Recent UK data has been impressive, so if the number is better than 0.7% expect rates to rise. Of course if the number is lower, exchange rates could fall. There’s nothing else of note today other than a measure of Consumer Confidence from the USA. 

Wednesday 29th January 2014 

Nothing from the UK today, and only some minor German confidence data, so the GBP/EUR rate will continue to be driven by Tuesdays GDP numbers. 

Of more importance today will be the interest rate decisions from the USA and New Zealand, so we could see an effect on GBP/USD and GBP/NZD rates today. I expect the US may announce further tapering of their QE programme. If they do, then it may weaken the USD and send GBP/USD rates higher. 

Thursday 30th January 2014 

Quite a busy day today. Starting in the UK we see the latest Mortgage and Credit numbers. In the Eurozone we have several different measures of consumer sentiment released at 10am. This is followed at lunchtime by inflation numbers from Germany, Europe’s largest economy. 

Elsewhere we have some key US releases at 13:30pm: GDP figures, Unemployment and Jobless Claims. I therefore expect quite a choppy day for GBP/USD rates depending on the results. 

Friday 31st January 2014

The only UK release today is a measure of Consumer Confidence. Of more importance for the GBP/EUR rate will be inflation and unemployment numbers from Europe which are due at 10am. 


Getting the Best Exchange Rates 

• Looking for the best exchange rates? 
• Want to know if your rate will go up or down this year? 
• Unsure when to go ahead and fix a rate? 
• Keen to get a quote to compare with your bank or existing broker? 

Click here to send me a free no obligation enquiry now and I can get in touch to discuss any of the above with you to help you decide what to do. I look forward to hearing from you. 

Alastair Archbold

Sterling surges higher as Mark Carney issues Forward Guidance

Wednesday 7th August 2013 
Good afternoon. Today has been extremely volatile on the currency markets with Sterling surging higher against other currencies. The new Bank of England governor Mark Carney addressed Parliament and delivered his Quarterly inflation report. 

After months of decline for Sterling, the Pound has surged against other currencies today, so in my post this afternoon I will analyse what he said, the impact on the economy, why it caused exchange rates to rise, and what this means for exchange rates going forwards. 

‘Forward Guidance’ from the Bank of England 

The new Bank of England (BoE) governor Mark Carney today addressed parliament, giving his quarterly inflation report, his first since taking over the helm last month. It was already widely expected he would outline his new policy of ‘Forward Guidance’ and indicate that interest rates would remain low for some time. 

How did it affect exchange rates? 

 

As you can clearly see from the chart, when the speech started at 10:30am, Sterling immediately dropped quite significantly, as had been expected. You can see the dip at 10:30am this morning when Pound/Euro rates fell from 1.1530 to 1.1440.

The dip was not to last however, and very quickly the Pound recovered its losses, and kept on going. Again looking at the chart you can see the exchange rate rocketing higher, above where it started the day, and eventually levelled out around 1.1645 against the Euro. 

Click here to get a quote on our commercial exchange rates. 

So why did the rate drop, and then make a huge recovery? 

Firstly the reason it dropped was speculation that he would indeed say interest rates would remain low for some time. Market analysts, myself included, have been saying for some time that if he did indeed say interest rates would remain low, expect Sterling to drop, and initially this is indeed what we saw. 

The reason there was such a massive bounce back was the terms that he outlined as parameters for when rates would start to rise. He pledged to keep them on hold until the official unemployment rate fell below 7%. This is his ‘forward guidance’. Under its central forecast, though, the Bank does not expect unemployment to fall to 7pc until September 2016. So in effect, he’s saying interest rates will remain low for another 3 years. 

So you would have expected the Pound to fall further on this news, however Economists said traders were expecting a much tougher target than 7 % unemployment, hence the reason for today’s robust performance for Sterling. The Institute of Economic Affairs said Mr. Carney's forward guidance was "the most dangerous development in UK monetary policy since the late 1980s". So experts are mixed on the effect it will have. 

So what does this mean for the economy? 

If rates do remain on hold until 2016, they will have been at their record low for nearly 8 years. The last time this happened was the 12 years that spanned the Second World War and the period of austerity that followed. 


The economy does seem to be recovering however. Recently we’ve seen good Retail Sales, good growth figures, strong manufacturing and industrial production, good growth forecasts and decent house price increases. And although welcoming the recovery, Mr. Carney stressed that it “remains weak by historical standards”. 

“There is understandable relief that the UK has begun growing again. But there should be little satisfaction. Much is at stake as we seek to secure the recovery and return inflation to target,” he said. 

The Bank expects inflation to remain at 2.9pc this year, fall to 2.4pc by the end of 2014 and hit 2pc in late 2015. The Bank stressed that it will keep the stock of quantitative easing steady at £375bn until the end of 2016 as well, and could increase it if the economy slipped backwards. 

You can read a detailed report here on the BBC website of what he said and the impact on the economy.

What does this mean for exchange rates? 

Right now this means good buying opportunities for anyone that is buying a foreign currency with Sterling. The gains are a surprise to the market, and so if you need to buy currency, consider taking advantage of the gains we have seen. We can fix your exchange rate for up to 2 years into the future, and you only lodge 10% of what you want to convert now. This protects you from the rate falling. 

Moving forwards much will depend on economic figures. If they start to disappoint, then we could still see further QE from the BoE which would cause the Pound to fall back away. 

Need Euros at the best exchange rate? Send me a free enquiry. 

For those selling converting currency back in to Sterling, rates are now moving against you. A week ago the Euro to Pound rate was close to a 2 year high, with Forward guidance in place and the economy recovering, further good figures could mean the rate gets worse for you. 

Selling property abroad and want the best Euro to Pound rate? Make a free enquiry now and find out about your options.

How to get the Best Exchange Rates

The first step is to send me a free enquiry by clicking here. I can discuss your requirements in detail, run over the options you have available, and help you decide on the optimal time to convert your funds. This means you can make an informed choice on what is best for you.

When you decide to fix a rate, the levels I can achieve are incredibly good commercial rates, that are up to 5% better than you can achieve at banks and other financial institutions. 

Send me a free enquiry now and find out how good our exchange rates are.