Why are Sterling/Euro & Dollar exchange rates falling?

Friday 23rd September 2011

Good morning. It was a very volatile day in the currency markets yesterday. Notably the GBP/USD exchange rate dropped to a 1 year low, after the Federal Reserve warned about significant downside to the U.S. economy and triggered broad risk aversion in financial markets.

As the Dollar is a safe haven currency, it strengthened. The 1 year low is even more remarkable when you consider just a few weeks ago it was near a 2 year high! This is how rates fared throughout trading yesterday:

Markets fall as FED and others warn on growth

Yesterday the Federal Reserve warned that the US economy faced significant downside risks. The news sparked panic in the markets, and was one of only a series of grim warnings about the global economy.

Christine Lagarde, head of the International Monetary Fund, said the economic situation was entering a "dangerous place". Earlier, the president of the World Bank, Robert Zoellick, said the world's economy was "in a danger zone". The comments came after the Federal Reserve warned that the US economy faced "significant downside risks".

Also on Thursday, US Treasury Secretary Timothy Geithner said that the eurozone crisis and the political divisions in the United States were the biggest threats to the global economy.

So what does all this mean for the currency markets?

It signals significant worries about the global economy. In times of uncertainty, generally perceived safer currencies get stronger, and risky currencies weaken. This is exactly what we saw yesterday, with the safe haven US Dollar gaining significant strength throughout the day. It fell to a 1 year low, which is over 10 cents down from the 2 year high we saw a matter of weeks ago.

Riskier currencies including Sterling didn't fare as well. The Pound fell against other currencies, as investors fled from risk and rushed to move funds to Dollars. This is why we saw a general drop in most major GBP exchange rates throughout trading yesterday.

What do the analysts say?

"There's just a mad scramble to own dollars today, standing in front of the dollar is like standing in front of a moving bus. People are looking at what the Fed did last night and saying there is no new money being made available," said Michael Derks, chief strategist at FX Pro.

"The BoE doesn't help sterling, additional QE looks baked in the cake over the next couple of months. The global demand for dollars shows absolutely no sign of slowing".

Summary

It's incredibly hard to know which way things will go, but what is certain is that the volatility is likely to continue, while there is no real sign the global economy is going to recover any time soon. This will weaken riskier currencies such as the Pound, so it could be that GBP/USD rates continue to drop.

Against the Euro it's harder to call, as falls in the rate have been largely limited due to the ongoing EU debt crisis keeping the Euro weak and propping up GBP/EUR rates somewhat. Without these debt issues, it's likely Pound vs Euro rates would be significantly lower than they are at the moment.

If you have currency to buy or sell in the coming months, the best course of action is to contact us for a free consultation on your particular requirements. I can then explain the different options available to meet your needs, and ensure you don't get caught out by adverse exchange rate movements, and achieve the best exchange rate possible.

On Monday we'll have a detailed look at this weeks movements in the currency markets, particularly against the Euro and US Dollar.

Have a great weekend.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling falls after BoE minutes signal QE

Thursday 22nd September 2011
Good morning. Sterling fell to a new 8 month low against the US Dollar, fell below the €1.14 level vs the Euro and hit a 2 and a half year low versus the yen yesterday. This was after Bank of England minutes showed an increasing chance the central bank will soon opt for more monetary easing, as we predicted in yesterdays post. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1416
• GBP/USD 1.5465
• GBP/AUD 1.5485
• GBP/NZD 1.9479
• GBP/CHF 1.4019
• GBP/CAD 1.5700
• GBP/ZAR 12.586
• GBP/JPY 118.33
• GBP/DKK 8.4977
• GBP/NOK 8.9457
• EUR/USD 1.3548

Sterling falls on Bank of England (BoE) minutes

Yesterday the BoE released the minutes to the recent decision to hold interest rates, and hold off on further Quantitative Easing. Adam Posen voted for an extra 50 billion pounds in asset purchases but the minutes showed most members felt it was increasingly likely more asset purchases would be warranted at some point. As a result, Sterling fell across the board during trading yesterday.

Some members also felt the recent weakness in the economy was sufficient to justify more quantitative easing "at a subsequent meeting", raising the prospect that the BoE could start pumping money into the economy in October.

QE is widely seen to be negative for the pound as it would flood the market with the UK currency, cutting demand while increasing the BoE's balance sheet. For this reason Sterling has dropped significantly against other currencies.

If you are selling currency for Sterling, it's looking very good at the moment. With the Pound so weak it's a good time to convert currency back into Pounds. However if the Euro debt crisis continues to cause worries, rates could start to recover.

If you have currency to convert to Sterling, contact me today to discuss the options we have available to help you achieve the best exchange rates possible.

Today's Data

Canadian Retail Sales are released at lunchtime, followed by Jobless numbers from the USA. There are no releases from the EU or UK today.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling at risk of fall due to Quantitative Easing

Wednesday 21st September 2011
Good morning. Sterling remains near 8 month lows vs the US Dollar, but was up slightly against the Euro following the downgrade of Italy's credit rating. More losses for the Pound are expected today if the Bank of England (BoE) minutes show Quantitative Easing (QE) is discussed. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1480
• GBP/USD 1.5691
• GBP/AUD 1.5299
• GBP/NZD 1.9095
• GBP/CHF 1.4016
• GBP/CAD 1.5613
• GBP/ZAR 12.204
• GBP/JPY 119.72
• GBP/DKK 8.5485
• GBP/NOK 8.8934
• EUR/USD 1.3665

Sterling at risk of a drop due to Quantitative Easing

At 09:30am this morning we will see the minutes to the recent Bank of England minutes. We already know that interest rates were left on hold. What we will be looking for is any sign QE was discussed at the meeting. If it was, then this will weaken the Pound as it will show that QE is the only method the BoE has to try and stimulate the economy. Quantitative Easing is explained here on the Bank of England site.

Sterling has been performing quite well against the Euro of late, due to the fact its the best of a bad bunch of currencies. We expect continued pressure on the Pound in the coming days and weeks, and we could well see exchange rates fall.

Gloomy data and surveys in recent weeks have stoked fears about the economic outlook, while MPC members Martin Weale and Charles Bean said in interviews last week that the risks had grown recently.

Currency Exchange 'too costly'

There is an interesting article on the BBC site this morning, about how currency exchange for holiday cash it too expensive. We don't deal in cash at all, only bank to bank transfers, however it does show that using the Bank to convert your currency is often a very expensive way of doing it. The same applies when transferring larger sums, and that's where we come in. Our rates are up to 5% better than the banks can offer, and on a large transfer this can represent a significant saving.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling falls against Euro & USD on QE concerns

Tuesday 20th September 2011
Good morning. Sterling fell against both the Euro and US Dollar yesterday. This is due to uncertainty in Europe pushing investors back to the safe haven US Dollar. GBP/EUR rates fell as there are concerns there may be mention of Quantitative Easing by the Bank of England this week. This is how rates fared for GBP/EUR and GBP/USD during trading yesterday:










Pound falls to 8 month low vs US Dollar

Sterling hit a new 8 month low against the dollar yesterday, tracking losses in the euro which fell as concerns over policymakers' lack of progress on the euro zone debt crisis fuelled demand for the relative safe haven of the greenback. The increased demand for the USD strengthened it, making it more expensive and pushing GBP/USD rates down.

"There is increasing uncertainty over where the policy response in the euro zone crisis is going to come from, which means safety first as people continue to sell equities and the dollar is king," said Chris Turner, head of FX strategy at ING.

It's a great time to convert USD to Sterling, so if you are currently holding dollars and need to convert it, send us an enquiry now to find our more about our rates.

Pound vs Euro rates drop on QE concerns

Speculation that Bank of England minutes which will be released this Wednesday will indicate policymakers are considering further quantitative easing also weighed on the pound. Further QE measures would flood the market with the UK currency and reduce demand. This has caused Sterling to fall as investors position themselves for such a move.

Investors have been pricing in such a move from the BoE as recent comments from policymakers appear to signal they are increasingly ready to vote for further monetary stimulus to boost lacklustre UK economic growth. It's due to these reasons exchange rates fell slightly through trading yesterday.

Today's Data

In the EU, we see lots of figures from Germany including inflation data, and German and EU economic sentiment surveys. In the US we have an interest rate decision & the FOMC minutes. We also see RBA minutes which could affect GBP/AUD rates. There is no data of note from the UK today.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Weekly GBP/EUR & GBP/USD round-up, and weekly data

Monday 19th September 2011

Good morning. It's Monday morning, so let's take stock of movements in GBP/EUR and GBP/USD over the last weeks trading, in our Monday weekly round-up. In this week’s Report:

• Central Banks in Co-Coordinated move
• GBP/EUR falls from 6 month high
• GBP/USD remains near 8 month low
• Round up of the week’s data that may affect rates

(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

Monday morning saw the GBP/EUR reach a six month high of 1.1720 (interbank). As the week progressed, trading rates returned to a more familiar level of around 1.14+ as we have seen over the last couple of weeks.

Speculation of the possible downgrade of French banks at the beginning of the week saw the rates increase. This was shown when the Credit Rating agency Moody’s downgraded two French banks after reviewing their exposure to Greek debt. Credit Agricole was cut from Aa1 to Aa2 and Societe Generale from Aa2 to Aa3. A third bank, BNP Paribas, is being kept on review for a possible downgrade.

You would assume that this news would weaken the Euro, but as we are so closely tied to the single currency, it has seen the GBP get caught up in the problems.

Confidence in the Eurozone was further shaken by the resignation of Jurgen Stark the chief economist of the European Central Bank. Stark resigned over his opposition to the ECB's bond-buying program, representing turmoil in the ECB with one of their key members walking out.

As the week progressed five of the World’s central banks announced a move to help resolve the Eurozone financial situation. The Federal Reserve, Bank of England, European Central Bank, Bank of Japan and Swiss National Bank will provide additional lending, and follows the fears about the exposure of banks in the EU and the potential collapse of the Eurozone during the debt crisis.

The leaders of France and Germany met late in the week and in put some confidence back into the Euro stating that Greece is an "integral" part of the Eurozone. Mrs Merkel and Mr Sarkozy said in a joint statement: "Putting into place commitments of the (bailout) programme is essential for the Greek economy to return to a path of lasting and balanced growth."
This strengthened the Euro and pushed rates back down from the highs we saw at the beginning of the week.

As we have seen over the last few weeks, the continued volatility in the foreign exchange markets have provided huge swings in the exchange rate. With all the economic uncertainties across the world, exchange rates are likely to remain extremely choppy over the next few weeks, therefore if you are buying or selling Euro’s in the next 6 months, contact us today for a free consultation.

Do you need to buy or sell Euros? Send us an enquiry now.

Sterling vs. US Dollar;

As the chart belows clearly shows, rates to buy US Dollars have been in steep decline over the last month. This reversed slightly last week, when we saw the world’s main central banks announce joint action to provide Dollar liquidity, aimed at securing the funding needs of banks struggling to meet them in the market.

Sterling slipped against the Dollar on Friday to trade within sight of 8 month lows, hit by signs that Bank of England officials were edging closer to more UK monetary stimulus, as investors watched events in the Eurozone closely. "The QE discussion is gaining momentum in the UK and is likely to keep GBP under pressure," said Morgan Stanley analysts in a note.

Sterling was down on Thursday in reaction to the co-ordinated central bank announcement. Markets expect interest rates to remain around historic lows at least until the end of 2012, with some further easing of policy also being factored in.

Manufacturing data from the US yet again disappointed to the downside with Empire state manufacturing and the Philly fed both posting negative readings in August. The data was virtually ignored by equity markets but with unemployment remaining persistently high in the US, traders cannot be too confident of a global recovery getting back on track. Not a single job was created in August and this is the first time that has happened since 1945.

A story of note from last week revealed that more than £4 billion was wiped off UBS shares as losses of $2 billion were uncovered stemming from trades put on by a trader in their London office. After Nick Leeson and Jerôme Kerviel, it seems that another ‘rogue’ trader is about to enter the banking history books. This time it’s the turn of the Nottingham University educated, Kweku Adoboli.

The bank has not announced where the losses were made, but there is speculation that it could have stemmed from trades in the Swiss Franc which moved over 10 cents in a matter of minutes after the SNB announced it was pegging the currency to the Euro. UBS profits will be all but wiped out in Q3 but as the revelation was more company specific, other financial stocks still performed well.

Do you need to buy or sell US Dollars? Send us an enquiry now.

Weekly Economic Data that may affect exchange rates

Monday – A very quiet start to the week, with only Nationwide House Prices for the UK. There is also some housing data from the US later in the afternoon.

Tuesday – Again quiet for the UK, with no data of note. In the EU, we see lots of figures from Germany including inflation data, and German and EU economic sentiment surveys. In the US we have an interest rate decision & the FOMC minutes. We also see RBA minutes which could affect GBP/AUD rates.

Wednesday – Public sector borrowing is released today for the UK. This shows the deficit and can affect the value of the Pound. More importantly, we see the BoE minutes to the recent interest rate decision. Watch carefully for any mention of Quantitative Easing being discussed. If so, it could knock the pound significantly. Nothing from the EU today, but from the US later in the day we see various housing figures.

Thursday – Canadian Retail Sales are released at lunchtime, followed by Jobless numbers from the USA. There are no releases from the EU or UK today.

Friday – There is no data of note today.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling rises on Central Bank move

Friday 16th September 2011
Good morning. Yesterday evening the worlds central banks have announced a co-ordinated move to try to help the financial system. The central banks are to provide commercial banks with three additional tranches of loans to help ease funding pressures. The news have calmed the markets, and riskier currencies such as the Pound have benefited. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1427
• GBP/USD 1.5761
• GBP/AUD 1.5266
• GBP/NZD 1.9110
• GBP/CHF 1.3780
• GBP/CAD 1.5530
• GBP/ZAR 11.683
• GBP/JPY 120.96
• GBP/DKK 8.5090
• GBP/NOK 8.8291
• EUR/USD 1.3791

Central Banks in co-ordinated move

The move by the Federal Reserve, Bank of England, European Central Bank, Bank of Japan and Swiss National Bank will provide additional lending, and follows fears about the exposure of banks in the EU to eurozone sovereign debt. The debt problems had made the banks reluctant to lend and this in turn has created funding problems.

US and EU banks have been moving funds out of Europe recently because of these exposure fears, and this has been putting further pressure on the banking system. The new loans are being issued in dollars, because European banks can already access additional euro funds from the European Central Bank.

The news has been welcomed by the markets, with riskier currencies such as Sterling benefiting, and exchange rates rising slightly from the lows we have seen earlier this week. But while analysts have welcomed the move, they have also warned that more will still have to be done to tackle the underlying problem of high levels of eurozone sovereign debt.

Today's Data

A quiet end to the week. Some Net flow data from the US and consumer sentiment survey also from the US are the only releases of note.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Pound vs Euro Outlook Forecast September 2011

Thursday 15th September 2011
Good morning. Sterling fell again yesterday against both the Euro and US Dollar, on concerns over the impact of the euro zone's debt crisis on UK economic growth and British. This could force the Bank of England into more Quantitative Easing, and it's this that has pushed the Pound down. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1458
• GBP/USD 1.5750
• GBP/AUD 1.5396
• GBP/NZD 1.9312
• GBP/CHF 1.3808
• GBP/CAD 1.5626
• GBP/ZAR 11.682
• GBP/JPY 120.76
• GBP/DKK 8.5314
• GBP/NOK 8.9444
• EUR/USD 1.3743

Sterling falls to fresh 8 month lows vs US Dollar

Continuing worries over the euro zone's debt problems kept investors wary of riskier currencies such as the Pound, and the Dollar has benefited as it's perceived as a safe haven currency. This has caused significant strength for the USD, and as a result rates have dropped to an 8 month low in the $1.57's. With the Swiss Franc no longer as attractive as it was due to the SNB intervention, while there is continued turmoil we expect continued strength for the Dollar.

UK exposure to Eurozone pushes GBP/EUR lower

The EU debt crisis is placing its banking sector under severe strain. Rating agency Moody's cut the credit ratings of France's Credit Agricole SA and Societe Generale yesterday. This affects the UK because of our banks exposure to euro zone banks. While you would assume the bad news for the EU would weaken the Euro, as we are so closely tied to them it has also pulled the Pound down vs the Euro.

"The UK banking sector is exposed to the euro zone crisis, particularly to Portugal, Italy, Ireland, Greece and Spain," said Chris Turner, head of fx strategy at ING.

UK economic figures continue to disappoint

We continue to see poor data from the UK, with unemployment data yesterday showing it's biggest rise in 2 years. Sterling's recent losses have been compounded by a run of poor economic data, which many analysts believe could force the BoE into pumping more money and stimulate growth. More QE would weaken the Pound further, and next Wednesday we will see the Bank of England minutes to see if this option was discussed. It's this fear of further QE that is likely to push the Pound lower in the coming weeks.

Today's Data

From the US today we have further inflationary numbers, and Industrial Production figures. Other than that all data today is from Switzerland; an interest rate decision, Industrial Production figures, and inflation data. Given the effect the Swiss had on the markets last week, we will be keeping a close eye on these numbers.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.