Greece defers debt payment, but Pound/Euro rates fail to recover

Monday 8th June 2015

Greece defers debt payment, but Pound/Euro rates fail to recover

On Friday, it was announced that Greece will defer the payment that was due, and lump it together with a series of other payments due into on single payment of €1.5bn at the end of the month. So given they didn’t make the payment, why didn’t the Euro weaken and GBP/EUR rates rise? 

The news was actually a non-event, and had been widely expected. In fact, the markets seem to think that the delay gives all parties additional negotiating time which could lead to a formal agreement to conclude the bailout. 

The Pound/Euro rate this morning has already fallen nearly a cent, due to the CBI cutting UK growth forecasts, weakening the Pound.

Other EU data in the last few days has been strong, which is stopping the Euro getting any weaker. If the Greeks can indeed come to a conclusion over their debts by the end of this month, expect GBP/EUR rates to fall further. 

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US Jobs data causes GBP/USD rates to fall 

On Friday we saw the latest US Non-Farm Payrolls, which is a measure of new jobs created excluding the agricultural sector (because that’s seasonal). The number was 50,000 more than expected, which is a very robust result for the US. As such, the US Dollar gained strength and pulled GBP/USD rates lower. 

What could affect exchange rates this week? 

Below I’ve listed the main scheduled releases that I think could affect exchange rates. Of course ongoing developments in Greece, and the current G7 meeting could also affect things at any time. For a more in depth discussion about what could affect the exchange rate you’re looking at, feel free to get in touch with me. 

Monday 8th June 2015 – Today is relatively quiet, with some Industrial Production data and Trade Balance numbers from Germany, which had little effect on exchange rates. Later today we have Retail Sales numbers from the UK that are a good barometer of overall UK economic activity. If good, Sterling may gain. 

Tuesday 9th June 2015 – IN the UK today we have an inflation report. Depending what it contains, it could cause speculation on when UK interest rates may rise, and so could affect the Pound. We also have EU Gross Domestic Product. I’m expecting a quarterly reading of +0.4%. If the actual number is higher than this then GBP/EUR rates could fall. 

Wednesday 10th June 2015 – Today is a very important one for the UK. We have: Manufacturing Production, Industrial Production, RICS House Prices and the latest GDP estimate from the NIESR. All of these releases give a good idea how the UK economy is faring, and so simply put, better than expected numbers would strengthen the Pound and vice versa. Further afield, New Zealand has its latest Interest Rate decision and policy press conference, so GBP/NZD could also be affected. 

Thursday 11th June 2015 – Today Australian releases lots of Unemployment numbers along with House prices, so those watching the GBP/AUD rate should watch for today. Over in the United States we have Jobless Claims, and the latest measure of US Retail Sales. If these numbers continue to show an improvement in the US Economy, expect GBP/USD rates to fall. 

Friday 12th June 2015 – A very quiet end to the week, with the only data of note Germany wholesale Prices and US inflation data. 

To discuss your currency requirement, find out what data could affect the exchange rate you’re looking at, or to simply get a quote on the exchange rate I can offer you, follow the link below. 

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Pound/Euro breaks through €1.39 - will it last?

Friday 6th March 2015
In the last few days the GBP/EUR exchange rate has climbed further, today briefly going through the €1.39 level before dropping back away. As we’ll see in a moment there are 2 reasons for the gains; weakness in the Euro caused by the European Central Bank (ECB) Quantitative Easing programme, and better than expected US Jobs data driving investment from the Euro, and into the US Dollar. Here’s how the GBP/EUR rate has moved this week: 

ECB Quantitative Easing 

This week the European Central Bank (ECB) confirmed it will start its €1.1 trillion Quantitative Easing programme, following the UK and USA that did the same a number of years ago. The aim is to spur an economic recovery by printing money and buying government backed assets. They have done this despite raising their growth forecasts. They stated yesterday that they would continue QE even if the economy showed signs of recovery. 

This weakened the Euro further, pushing the GBP/EUR rate above €1.38 in trading on Thursday. Effectively the ECB’s president Mario Draghi has got what he wanted – a much weaker Euro which makes EU goods and services cheaper. The Euro is now at a near 8 year low against the Pound, and a 12 year low against the US Dollar. 

However if QE has the desired effect, which it has seemed to do in Britain and America, it could start lending some support back to the single currency. 

US jobs data causes GBP/USD to drop, and GBP/EUR to rise 

Figures today showed that the US economy added 295,000 jobs in February, which is much higher than had been expected. It’s also the 12th month in a row the economy added more than 200,000 jobs, the longest such run since 1994. 

The stronger-than-expected jobs figure strengthened the US Dollar and caused GBP/EUR rates to drop by almost 2 cents:

 

The flow of investment into the Dollar also hurt the Euro, which weakened further and briefly pushed GBP/EUR rates above €1.39. 

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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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Sterling/Euro falls into €1.24’s – will it go back up?

Tuesday 18th November 2014 
The Pound has continued to fall against the Euro, and today has dipped into the €1.24’s. A week ago rates were €1.28+ so this is a big drop in a short period of time. The rate started to drop when the UK inflation numbers came in very low, which I touched on in a post last week. This means that the Bank of England are likely to keep rates on hold for quite a while. 

The reason for today’s drop was twofold. Firstly we had further UK inflation numbers that were slightly lower than expected, compounding the view the economy isn’t ready for a rate hike, and the Pound dropped a little. Soon after, we had some sentiment data from Germany, Europe’s largest economy. This showed that sentiment rose in November for the first time in almost a year, surpassing expectations and raising hopes of an improvement in their economy after it dodged recession in the third quarter. 

This data gave some strength to the single currency, and made it more expensive to purchase. 

What will happen with Sterling/Euro next? 

It is very hard to call. On the one hand you can look at the trend over the last 3 months. If you look at the chart above, you can see that rates have dropped to these levels quite a few times, only to then bounce back up. This could well happen again, especially as the EU may well pursue a Quantitative Easing programme which could weaken the Euro. However this is not a given; past performance is not necessarily an indicator of future performance. 

Tomorrow we have the minutes from the recent Bank of England interest rate decision. Last time 7 of the 9 members voted to hold rates, and 2 voted to raise them. In the light of the recent inflation numbers, if less than 2 voted to raise rates this time, expect the Pound to fall further. 

When should you buy or sell Euros? 

Given there is no way to predict the market, the best course of action is to use tools to make sure you don’t get a lower rate than necessary. In this climate if I had Euros to buy or indeed convert back to Pounds, I would use a ‘Stop Loss’ order. 

This allows you to instruct me to convert your sums if the exchange rate drops below a pre-agreed level. If the rate gets better for you, great you can take advantage of a swing in your favour without leaving yourself at risk of a further drop in rates. 

This is just one example of the tools I offer to help you get the most out of your currency, in addition to very sharp exchange rates that are close to the mid-market level. If you have an upcoming currency requirement, why not get in touch with me by completing an enquiry form here. I can discuss your particular needs, run over your options, provide you a quote and see if we can save you money over your bank or existing broker. It’s free to make an enquiry and does not obligate you in any way. 

The exchange rates I achieve for my clients can be as much as 5% better than banks offer, and when converting large sums the savings often run into thousands of pounds. 

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Sterling/Euro €1.21 & Sterling/Dollar $1.6740

Tuesday 15th April 2014
Sterling is holding firm above €1.21 against the Euro, and has risen to $1.6740 vs the US Dollar. The Pound has however remainder relatively range-bound this week without pushing much higher than that. Its 2 things keeping the rate supported: firstly we had the ECB president over the weekend say that if the Euro strengthens, they will look at stimulus. Today, UK inflation numbers were as expected, increasing the chance of an interest rate hike in the UK next year. 

In today’s post I’ll take a look at these 2 things that are keeping rates supported, and explain how you can take advantage of the current rates which are around a 16 month high. 

ECB warns of stimulus if Euro strengthens further 

ECB President Mario Draghi said in Washington on Saturday that "further strengthening of the exchange rate would require further stimulus." 

So what does this actually mean? 

If the Euro were to strengthen, it would become more expensive to buy and Sterling/Euro rates would fall. His comments effectively say that if the Euro were indeed to strengthen, they may pursue a Quantitative Easing programme to stop it doing so. This has kept GBP/EUR rates at the €1.21 level. 

So if this is the case, could rates go higher? I don’t think so, unless they actually decide to go ahead and pursue a QE programme. At the moment it’s just rhetoric, so while it’s keeping rates from falling, it’s unlikely they will rise in the short term. 

For those of you that need to sell Euros, this means rates are likely to remain range-bound so you may wish to consider fixing a rate sooner rather than later. It’s the same story for Euro buyers, as rates have failed to go higher than these levels recently. 

UK Inflation numbers also keep the Pound supported 

Inflation numbers came in as expected at 1.6% this morning. Some in the market thought the number would be a little lower, which would have meant less chance of an interest rate hike in the UK in 2015. 

Higher interest rates mean a higher return for investors, so speculation it will happen sooner rather than later is good for the Pound. As the number was as expected, it remains the case we think rates will rise in 2015, so this gave Sterling a little boost this morning. 

Are you looking for the best exchange rates? 

Whether you need to convert Sterling to Euros, move Euros back to Pounds, or convert any other major currency – I can help you source excellent rates of exchange that are up to 5% better than banks can offer. When converting large volumes, the savings can be very considerable indeed. 

Why not get in touch for a free chat about the service I can offer? I can offer you a consultation to discuss the options available to you, provide you with a rate to compare with your bank or existing broker, and discuss with you what’s happening in the currency markets to help you decide when to fix a rate. 

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Call me directly: +44 (0) 1442 892 066 

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Pound/Euro forecast: recovers on Greek worries

24th May 2012
Good morning. It’s been yet another volatile week for Sterling/Euro exchange rates. Early in the week the Pound weakened off, falling into the €1.23’s. This was due to concerns by both the Bank of England and IMF on growth, increasing the chance of further Quantitative Easing. The fall in rates was halted yesterday however, when the Euro weakened again significantly over Greek Euro exit fears, pushing rates back close to €1.25.

In today’s post I’ll look at these events in detail and analyse what may cause Pound Euro rates will go up or down in the coming months.

Pound/Euro rates gain on Greek concerns

GBP/EUR rates surged yesterday after a report saying that the Greek government may be making preparations for leaving the euro. Also weakening the single currency was Germany’s central bank saying that the developments in Greece were "highly alarming".

"Greece is threatening not to implement the agreed reforms and consolidation measures," the Bundesbank said in its latest monthly report. It said that scenario could create substantial challenges for the Eurozone.

Many analysts think that Greece may abandon the austerity measures and be forced out of the euro. Ms Lagarde from the IMF said that they did not like that prospect, but that it was "prepared for all possible situations". But she said that the costs of Greece leaving could be so high that other members of the Eurozone might be prepared to pay more to keep Greece in the euro.

The continued worries have pushed rates back up as the chart demonstrates.

Bank of England: More QE on the cards?

Yesterday we saw the latest Bank of England (BoE) minutes on their recent decision to hold off further Quantitative Easing. Policymakers voted by 8-1 this month against pumping more money into the economy, but the decision was "finely balanced" for some members.

One interesting thing the minutes showed was that the crisis in the Eurozone could hit the UK's economy, which would make the case for extra stimulus more compelling. This is what will likely stop GBP/EUR rates continuing to surge towards €1.30, as any further QE will likely weaken the Pound significantly.

IMF also pushing for more QE

On Tuesday, the International Monetary Fund (IMF) said the UK's continuing economic weakness meant authorities should consider more QE and even cutting interest rates. The IMF said the BoE should “reassess the efficacy” of cutting rates below 0.5 per cent and called for “further monetary easing”, adding that while monetary stimulus has helped, the economy remained flat.

This again shows that while the EU problems are weakening the Euro, they may also start weakening the Pound which may actually cause rates to fall back away.

The case for Pound Euro rates going up

Looking at the Euro on its own, there is a logical case for rates rising further. The Euro will likely continue to weaken; it’s highly unlikely the Greek problems will be solved any time soon. This continued weakness will likely mean a cheaper single currency which means exchange rates would rise. However we’re not just looking at the Euro on its own, we have to factor in the value of Sterling…..

The case for Pound Euro rates going down

While the EU problems continue, the Bank of England and IMF have warned that it will soon start to affect the UK. 50% of our exports go to the EU, so a strong pound is not attractive to the BoE. For this reason, further EU problems will affect the UK economy, and with more QE now looking very likely, the Pound will weaken off and exchange rates could fall.

How to get the best exchange rates in a volatile market

As outlined above, future rate movements are highly uncertain and there are logical arguments to show both gains and falls in the rate in the coming months. Of course it can’t do both things, so for clients looking to buy or sell Euros, some could lose out significantly if rates move drastically one way.

The best option is to send us an enquiry and have a free consultation on the current market conditions, and to find out what options you have to protect against the market moving the wrong way. When converting a large sum, exchange rate movements can have a huge impact on the cost.

In knowing what options are available to you, and armed with sound market knowledge, you can make an informed decision on what action to take to help you make the most of the market. Don’t just follow the rates hoping it will move in your direction. Contact us now and take control of your currency requirement, rather than letting it control you.

Our exchange rates are much better than you can achieve at the bank, so get in touch now for free and see how much you can save.

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Pound Euro climbs to €1.20 again - will it go higher?

Wednesday 14th March 2012
Good morning. Sterling had a very good run yesterday, gaining against both the Euro and US Dollar. The gains were in part due to better than expected Trade Balance figures, coupled with ongoing concerns over Euros that weakened the Euro significantly following comments from the Eurozone Central Bank president. The charts below show how the Pound gained throughout trading yesterday:

~Currency Movements on Tuesday 13th March 2012~










UK Trade Balance Better than expected

The UK's trade deficit was less than expected in January, thanks to strong exports of cars to the US, China and Russia, according to data released yesterday.

The deficit on seasonally adjusted trade in goods and services was £1.8bn in the first month of the year, compared with £1.2bn in December, but less than analysts had forecast. The news gave Sterling a boost against other currencies.


Euro weakens following ECB president comments

European Central Bank President Mario Draghi yesterday called on banks and governments to make the most of a lull in the sovereign debt crisis as he seeks to get the ECB back to its main job of ensuring price stability.

Policy makers “see continued signs of stabilization” in the economy and banks “should use this currently more benign environment to strengthen their resilience further, including by retaining earnings, cutting dividends and bonuses,” Draghi said in a speech in Paris today. “The financial system should serve the economy, not the other way round.”

Markets took the comments as hints the lull in the Eurozone crisis could be short lived, with some forecasters increasing the chance of an interest rate cut in the EU. Lower interest rates mean a lower return for investors, and therefore generally weakens a currency.

This weakness was clearly demonstrated yesterday, with the single currency becoming cheaper to buy and GBP/EUR rates again climbing back towards the €1.20 level. Looking at recent trends as a guide, it may not last long at this level. It has reached this level several times in the last few months, only to rapidly drop back away.

Today's Data

Today there are unemployment figures from the UK which could affect the Pound. In the EU we have various inflationary measures in the form of Consumer Price Index. There are also measures of Industrial production, reflecting the state of this sector. In the USA Import prices is the main data.

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