Bank of England could cause Pound to fall sharply

Friday 18th September 2015
FED leave interest rates on hold 

Last night the US Federal Reserve opted to keep interest rates at their low of 0.25%. There was a small chance that they would raise interest rates but this didn’t materialise. The FED Chair Janet Yellen cited the slowdown in China and emerging markets as the reason to keep the benchmark rate and this has weakened the Dollar making it a little cheaper to purchase. The rate climbed to around $1.5650 but has since started to slip away. They will raise rates at some point, probably early next year, so any rise in the rate should be taken advantage of, as it’s likely the GBP/USD will drop in the medium term.  Therefore if you need US Dollars, consider a 'Stop Loss' order to protect against a sharp drop. I've read forecasts from Barclays Capital with expectations of $1.43 by the end of this year!  

Click here for a quote on US Dollars.

Will Pound/Euro rates go up or down? 

The initial reaction to the FED move was for GBP/EURO to fall. There are 2 reasons this happened. Firstly, investors that had lodged funds in USD to take advantage of the possible rate hike moved them back to Euros, causing the single currency to gain. Also, the fact the USA have left rates on hold mean the UK are likely to do the same for many months, and this caused the Pound to weaken slightly. However, throughout today, the rate has clawed its way back up to around €1.37:



Rate cut by the Bank of England could send the Pound lower

The Pound/Euro exchange rate may move lower in the coming months however. A month or two ago, everybody thought the Bank of England would raise interest rates and this had caused the Pound to rise. A hike is now incredibly unlikely any time soon though, and in fact the UK may have to cut interest rates. 

The Bank of England’s chief economist has said that the bank may have to cut rates to combat low inflation, rather than raise. Inflation may not pick up in the second half of the year, and there are risks of fallout from emerging economies, he said in a speech. Should those risks materialise, a rate cut would be a viable option, he said. 

The UK economic recovery has stalled of late. Softening employment figures and weakening surveys on manufacturing and construction output suggested growth in the UK could slow in the second half of the year and inflation might not pick up as expected. Furthermore, problems in emerging markets could be a drag on UK growth and the headwinds from those economies were unlikely to abate any time soon. 

I personally don’t think a rate cut is on the cards, but at the same time there is very little chance of them opting to raise rates. This is likely to keep the Pound low for the coming months. Any clients looking to purchase Euros should therefore consider their options to ensure they don’t get a lower rate than is necessary. 

Get in touch to discuss your options 

If you need to buy or sell Euros, or indeed any international currency, then get in touch to discuss your options. I can explain the various ways you can protect yourself against the rate moving against you, and provide a quote for you to compare with your bank or exiting broker. I can typically secure exchange rates up to 3% better than banks and other brokers may offer, which could save you thousands of pounds if you are converting a large sum. 

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Pound falls slightly on poor Industrial and Manufacturing Production figures

Wednesday 9th September 
After gradually rising this week, the Pound has fallen slightly against the Euro and US Dollar today due to worse than expected UK data. Figures released earlier today showed that UK Industrial and Manufacturing production fell at its sharpest pace in more than a year. I warned on Monday that if the figures were worse than forecast Sterling could fall, and while the expected numbers were predicted to show slight growth, the actual numbers showed a decline of -0.4% & -0.8% respectively. As you can see from today’s GBP/EUR chart below, Sterling fell by around 1 cent against the Euro, however has since started to claw back its losses. (Click here to see my live currency chart)

Tomorrow key for whether Pound will rise or fall in the coming months 

At 12pm tomorrow, we will have a much clearer idea of whether Sterling is likely to rise or fall in the coming months, based on interest rate expectations. The Bank of England will announce its decision on interest rates, and they will almost certainly keep them on hold at 0.5%. Straight after the decision however, they will give a statement and release the minutes to the meeting. This will be key as it will show the views of the Monetary Policy Committee and what was discussed, and how many of the members if any voted for rates to rise. 

If these minutes give any hint that interest rates will rise early next year, then the Pound is likely to gain against other currencies. If they show that actually recent economic developments mean that rates will stay on hold for most of 2016, then expect the Pound to fall. 

How do I think the BoE decision could affect exchange rates? 

It’s impossible to predict currency movements of course, but I think that it’s quite likely the Pound could fall. I reach this conclusion because the current global economic downturn risks affecting the UK’s growth prospects, and raising interest rates too soon could hamper the steady recovery that Britain has been making relative to other major western economies. For this reason I think rates will stay on hold for around 12 months. This also means that investors are less likely to want to keep Sterling assets, and as a result Sterling exchange rates could fall. 

Of course, the BoE governor Mark Carney is highly unpredictable and it is impossible to second guess what effect his comments may have on the Pound. I’m quite sure however that tomorrow will see a change in the value of the Pound one way or the other. 

Are you worried about exchange rates moving against you? 

Regardless whether you are buying or selling foreign currency, the worst thing you can do is simply sit back and watch the market, hoping that the rate will move in a favourable way for you. The currency markets are highly unpredictable and this approach could cost you dearly. 

If you have a currency transaction to perform there are a number of ways I can be of help. Firstly, I can source rates of exchange that are very close to the published market level, and up to 5% better than banks or other currency brokers can offer. Secondly, with over 15 years’ experience in the FX Markets, I have a very good knowledge of what can affect exchange rates, and can help you to make an informed decision on when to lock in a rate of exchange. 

I would welcome the opportunity to speak to anyone that needs to get a quote on their exchange and explain how I can help you. Click here to send me your details and I will get in touch personally to discuss your requirements today. 

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Pound/Euro in free-fall, drops into the €1.35's

Friday 1st May 2015 
Well, we've all been saying the Pound/Euro rate was at risk of a serious fall, and that's exactly what we're now seeing. GBP/EUR has absolutely tumbled in the last few days. On Wednesday morning the rate was sitting at a near 8 year high of €1.40, however when I walked onto the trading floor this morning, I was shocked to see the market sitting in the €1.35’s. That’s a drop of more than 3% in just a few days as you can see from the chart below that shows the GBP/EUR rate over the last 2 days: 

Will the Pound keep falling against the Euro? 

The only reason rates were holding at €1.40 was the concern that Greece would not be able to meet its debt repayments. This had been causing real uncertainty over in Europe, and the Euro was very weak. As I outlined in my last post, actually the Eurozone economy is looking much more robust. Their QE programme is taking effect, and it looks like Greece will play ball with the IMF and its creditors. 

Focus has now shifted to the UK election. This uncertainty is starting to weigh on the Pound and is pulling exchange rates down across the board. We may see a recovery after the election, depending how the markets react to whatever coalition is put together, which could take a few weeks to do after polling day. Personally I think it will get worse before it gets better. Hopefully we won’t see a Labour/SNP deal, as without meaning to sound political, I don’t think the financial markets would react favourably to that given the effect it may have on business and the economy as a whole! I expect rates to be as low as €1.30 to €1.33 over the next month before recovering back to around €1.40. 

Do you need to buy Euros in the next 6 months? 

Buying a €250,000.00 property abroad has become more than £5000.00 more expensive in the last few days, really illustrating how quickly things can change in the currency markets. There is no way to predict the market, but what you can do is have a strategy to ensure you don’t get a low rate unnecessarily. 

If I needed Euros within the next 6 to 8 weeks, I would give serious consideration to fixing a rate now. Yes it’s a little lower, but bear in mind in January it was down at 1.25, and actually you’re still doing very well. If I had longer to play with and didn’t need Euros until maybe much later in the year, I would probably hedge my bets and fix a rate on at least 50% of what I needed, allowing me to take advantage of a recovery in the rate should that happen, and reduce my exposure to the market. I can fix commercial rates of exchange for up to 2 years, and clients only need to lodge 10% of the total they want to convert. 

Click here to find out more about the rates I can offer, or to discuss the market and options you can consider. 

Do you need to convert Euros back to Pounds? 

Well the last few days has really helped! You’re getting a much better rate due to the renewed Euro strength. Things may get better for you as the election approaches, but I think in the medium to long term we’ll see things get back to €1.40 and above. 

If I was selling Euros to Pounds, I would probably place a ‘Stop Loss’ order. This is an instruction to lock in a rate if the market starts moving against you and goes through a pre-agreed level. In this way you can still take advantage of any further Sterling weakness, but not leave yourself exposed should the rate snap back to where it has been in the last few weeks. 

Getting the best exchange rates 

The above is just a brief outline of the kind of things I can offer, from market knowledge to help you make an informed decision on when to fix a rate, to sourcing exceptional rates of exchange and a range of contract types to help you make the most of your currency. 

I can source rates of exchange for over 30 currencies, that are up to 5% better than the bank can usually offer. I have worked in the financial services industry for 16 years, with the last 10 specialising in commercial foreign exchange for private and business clients. If you need to exchange currency on a bank to bank basis, then get in touch with me for free to see how I can help you. Whether you’re buying or selling property abroad, want to top up a foreign account, or have business requirements to make or receive payments in foreign currencies, I can help you get the best possible rates. 

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Pound/Euro back to €1.38, will Sterling go up or down?

Wednesday 8th April 2015
Since the Easter break, Pound/Euro rates have seen a very decent recovery, rising from 1.3550 to 1.3800 today, as you can see from the chart below: 

Before the Easter weekend, the Pound had come under pressure due to political uncertainty in the run up to the general election. This had pulled rates down from 1.38 to the 1.35’s. The reason it has gained and recovered these losses is due to better than expected UK economic data. 

Why has the Pound gone up against the Euro? 

This week we have seen figures that show activity in the UK's services sector grew at the fastest pace in more than 6 months. We have also seen the Confederation of British Industry (CBI) forecast UK economic of 0.7% in the three months to March which is better than it has been. We also recently saw the Office for National Statistics (ONS) revise economic growth upwards. We’ll have to wait a few more weeks however before the first official estimate of the UK's economic growth for this year. 

Will Sterling go up or down in the next few weeks? 

All in all the numbers are good, and this has given renewed optimism for the Pound. I still don’t think this will be sustained. We saw a very similar trend a week ago when rates rose to 1.38, but he gains were short lived. As you can also see form the chart above, the rate quickly dropped back 2 cents and the reasons for this remain – political uncertainty on the run up to the general election. 

In addition to election jitters, Sterling could come under pressure this week due to a statement from the Bank of England. They don’t want the Pound to be this strong against the Euro and we may see comments designed to weaken Sterling. Also watch out for Friday when the latest Industrial and Manufacturing production figures are released. The numbers are expected to show growth of 0.3% and 0.4% respectively. If the actual numbers are lower than this Sterling will fall against other currencies and vice versa. Also on Friday a GDP estimate could affect the Pound. 

Do you need to convert currency at the best exchange rates? 

If you have a currency transaction to perform, would like a quote, or to simply discuss the market or anything I’ve covered above, contact me for a free no obligation consultation by clicking below. 

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Pound hits 20 month high of €1.25 after interest rate rise hint

Friday 13th June 2014 
Good morning. Friday the 13th, unlucky for some, but not those that need to move Pounds to Euros. Sterling has surged higher following a speech by the governor of the Bank of England Mark Carney, in which he has signalled that interest rates may rise this year. I’ll go into a little more detail in a moment, but in a nutshell this has caused Sterling to rise higher, hitting a 20 month high of €1.25 against the Euro, and testing a 5 year high of $1.70 against the US Dollar: 

Mark Carney hints at interest rate rise 

Last night in a keynote speech, Mr Carney said a rate rise "could happen sooner than markets currently expect". He acknowledged there was "already great speculation about the exact timing of the first rate hike" from their record low of 0.5%, adding that the decision was "becoming more balanced". 

The news immediately caused the Pound to gain, as the rumour of higher interest rates attracts investment into the Pound, giving it strength and causing exchange rates to rise. 

Will the Pound go up or down against the Euro?

Nobody knows which way the exchange rate will go, but in general the markets move more on rumour than fact. This means that the rumour of higher rates is now getting priced into the market, hence the current excellent buying level for Euros. 

In my view, from what we know right now it’s likely the Pound will remain strong, and the Euro will remain weak, so we could well see rates go higher. However there are situations that could cause it to fall back away, so you should be aware of these if you need to buy Euros and are holding out for a higher rate. 

In his speech he also described the perils ahead for the economy. He said he would look to his ‘trusty canoe’ to ‘navigate the most rapid and treacherous waters’. These include: 

• A housing market which could ‘overheat’ 
• High levels of household debt and a record current account deficit. 
• He warned the UK economy is ‘currently unbalanced internally and externally’, adding this had to be addressed to turn the recovery into a ‘durable expansion’. 
• Carney also pointed to ‘old imbalances persisting and new ones emerging.’ 

So there are lots of warnings that the economic recovery is not guaranteed to continue, and so there is the risk the Pound could drop back away. We also have the Eurozone that is taking significant steps to bolster their economy, and if these measures work the Euro could gain strength pulling rates back down. 

What should you do if you need to buy or sell foreign currency at the best rates? 

Your first step should be a free consultation, which I can provide over the phone with no obligation. I can discuss your particular requirements, explain the various tools you can use to protect against the market moving against you, and provide you a quote to compare with your bank or existing broker. 

I can provide rates up to 5% better than available elsewhere, on up to 25 different international currencies, and the savings can be considerable. 

Make a free no obligation enquiry with me now by clicking here. 

Alastair Archbold