Sterling vs Euro at risk of further falls

Thursday 13th October 2011
Good morning. Sterling has risen to a 4 week high against the US Dollar, as investors move away from the safe haven currency, weakening USD and making it cheaper to purchase. Against the Euro however, the Pound has fallen to the €1.14 level, as changes to the EU bailout fund look set to go through, strengthening the Euro and pushing rates lower. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1400
• GBP/USD 1.5733
• GBP/AUD 1.5395
• GBP/NZD 1.9764
• GBP/CHF 1.4069
• GBP/CAD 1.5998
• GBP/ZAR 12.2767
• GBP/JPY 121.19
• GBP/DKK 8.4769
• GBP/NOK 8.8355
• EUR/USD 1.3818

Sterling rises to 4 week high vs US Dollar

Sterling has risen to it's highest in a month against the US Dollar. Exchange rates for USD are now well above the 14 month low of $1.52 we saw recently. There has not been any particularly poor data from the USA, it's simply the fact that with the uncertainty surround Greece and financial markets, investors had been moving to the safe haven USD, strengthening the Dollar.

With markets becoming calmer ahead of an EU vote on the bailout plan, investors returned to risk and moved out of the USD, weakening the currency and pushing exchange rates up.

Euro gaining strength ahead of bailout plan

Political rivals in Slovakia have agreed to support a crucial bill ratifying changes to the EU bailout fund in exchange for early elections. It is proposed to expand the effective lending capacity of the European Financial Stability Facility to €440bn euros.

The fund would also be empowered to buy eurozone government debt and offer credit lines to member states and to banks. Top EU officials urged the country on Wednesday to ratify the bill swiftly. The news has given renewed confidence to the markets, and the result is a stronger Euro and lower GBP/EUR exchange rates.

Given we expect further poor data from the UK, it's likely rates could fall further in the coming weeks

UK Economic figures likely to weaken the Pound

Figures yesterday showed that UK unemployment rose by 114,000 between June and August to 2.57 million, a 17-year high, according to official figures. This is bad news for Sterling exchange rates, as poor data weakens Sterling giving it less buying power in the markets.

Analysts think that the UK economy is likely to get steadily weaker through the rest of this year, and the Bank of England's future decisions on asset purchases will be largely driven by overseas developments, BoE chief economist Spencer Dale said yesterday.

Fellow BoE policymaker Adam Posen said he was also pleased that the BoE had decided to further ease monetary policy last week.

With further weakness expected, it's likely rates could drop further, therefore if you need to buy Euros in the next 3 months, contact us today to discuss how to get the best possible exchange rates for Euros.

Today's Data

Today is quite a busy data for fundamental data releases. Starting in the EU, we have German inflation figures and a report from the European Central Bank. In the UK we have Trade balance figures which often have an impact on exchange rates. In the USA there are Jobless figures and a monthly budget statement.

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Sterling vs Euro exchange rate forecast

Wednesday 12th October 2011
Good morning. Further poor UK data has pushed Sterling down against other currencies. The Euro also strengthened pushing GBP/EUR rates down quite a bit, after Greece's international lenders said the country would receive vital bailout funds next month. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1423
• GBP/USD 1.5594
• GBP/AUD 1.5641
• GBP/NZD 1.9905
• GBP/CHF 1.4170
• GBP/CAD 1.6017
• GBP/ZAR 12.297
• GBP/JPY 119.52
• GBP/DKK 8.5012
• GBP/NOK 8.8790
• EUR/USD 1.3650

Sterling remains weak due to poor UK data

The UK's recovery is likely to be the weakest of any since the end of World War I, the National Institute for Economic and Social Research said yesterday. Other figures from the Office for National Statistics data showed the manufacturing sector shrank in August, putting further pressure on the Pound.

The ONS data showed the UK's manufacturing output was 0.3% lower August than in July. Compared with a year ago, it was 1.5% higher, which is the weakest annual growth since February 2010. Analysts said the sluggish economic data and comments by BoE policymaker David Miles defending QE added to the impression UK monetary policy could remain extremely loose for some time.

"The recent data has been a mixed bag and can't see anything to get too bullish about sterling," said a London based trader. The general view in the markets is that Sterling is likely to remain under pressure against other currencies such as the Euro and US Dollar.

Euro gains strength, pushing GBP/EUR rates down

Slovakia's parliament has voted against measures to boost the powers of the eurozone bailout fund yesterday, which is seen by analysts as vital in combating the EU debt crisis. The governing coalition had linked the vote to a confidence motion and as a result has effectively been toppled.

Slovakia is the last of the eurozone's 17 members to vote on expanding the European Financial Stability Facility. However a second vote could be held soon and is likely to succeed.

The fact the second vote is likely to go through caused the Euro to strengthen during late trading yesterday, pushing Sterling lower against the single currency.

Today's Data

Unemployment figures from the UK are the main numbers to watch for today. An increase in those claiming unemployment benefits would weaken Sterling. There are some industrial production figures from the EU later in the morning.

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Sterling falls vs Euro but up vs US Dollar

Tuesday 11th October 2011
Good morning. Sterling has dropped vs the Euro, on a French & German plan to do what was necessary to shore up banks, settle the Greek debt crisis and help growth in Europe. This strengthened the Euro and pushed rates down. The Pound was up against the US Dollar. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1462
• GBP/USD 1.5658
• GBP/AUD 1.5709
• GBP/NZD 1.9998
• GBP/CHF 1.4136
• GBP/CAD 1.6121
• GBP/ZAR 12.295
• GBP/JPY 120.02
• GBP/DKK 8.5298
• GBP/NOK 8.9204
• EUR/USD 1.3653

French / German plan strengthens the Euro

The Euro gained strength yesterday as investors took comfort from the pledge by French and German leaders to do what it takes to protect European banks from the debt crisis. This pushed the GBP/EUR rate down as markets were calmer about developments with the EU debt crisis.

Markets were also boosted by the bailout of troubled Franco-Belgian bank Dexia, dispelling fears it could go bankrupt. Following talks with French President Nicolas Sarkozy in Berlin on Sunday, German Chancellor Angela Merkel said the two nations were "determined to do the necessary to ensure... the recapitalisation of Europe's banks".

The leaders said they were close to a detailed package to ease the crisis and would give further details within weeks. All eyes are now on the G20 meeting in Cannes at the beginning of November, analysts say.

The net result is GBP/EUR rates slipping back towards the lows we saw last week after the BoE announced further QE.

Sterling recovering slightly despite fall in GBP/EUR

Despite the stronger Euro pushing rates down, the Pound was actually up slightly against the US Dollar and other currencies. Analysts said a lack of UK data meant moves in the pound were largely driven by swings in risk appetite, with the negative reaction to the announcement of more quantitative easing (QE) from the BoE wearing off.

"The market is coming back to the view that a country taking affirmative steps to resolve its problems is supportive for a currency," said Lee McDarby, head of dealing at Investec.

BoE policymaker Martin Weale said on Sunday there was still room for more QE, as Britain's economy struggles in the face of fiscal austerity and a potential deepening of the euro zone's dent crisis.

"Normally more QE would be negative for a currency, but given most of the major central banks are contemplating more easing themselves, it's not weighing on the pound as much this time around," said Michael Derks, chief strategist at FX Pro.

Today's Data

Industrial and Manufacturing production figures are releases from the UK today. These will be watched quite closely as it’s one of the few sectors showing growth, so poor results could reflect a slowdown in the economic recovery. There is also a GDP estimate for the UK showing total growth. With markets open after the break in the USA, the minutes to the recent FED decision to hold rates will be released.

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 and the weeks data

Monday 10th October 2011
Good morning. It's a Monday morning, so let's take stock of where rates have moved over the course of the last week, which was an extremely volatile one for the currency markets!

In this week’s Report:

• Bank of England announce £75bn Quantitative Easing
• GBP/USD falls to 14 month low
• GBP/EUR hits 7 month high before dropping sharply
• 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

Last week saw GPB/EUR hit the highest level in 7 months, briefly breaking the €1.17 level. The gains were short lived though, and by the end of the week rates were around the €1.1550 level, however still very close to the 7 month high considering it had been in the €1.13’s just several weeks ago. The volatility within the Eurozone has continued with decisions made on Quantitative Easing (QE) and Moody’s downgrade of banks within Greece, Portugal and the UK.











The start of the week saw trading around the €1.16 level with everyone still waiting for news of whether the UK will be implementing more QE on Thursday. The GBP/EUR hit €1.17 as it was announced that Greece will miss its deficit reduction target. Wednesday also saw Moody’s downgrade of even more of Greece’s and Italy’s banks further increasing the chance of default. Poor construction data in the UK kept the GBP/EUR steady as everyone waited for the Bank of England’s decision on QE.

The revised GDP figures showed the economy is pretty much at a standstill, and has been now for 6 months. As the BoE announced £75 billion worth of QE at 12.00pm traders saw the Euro drop over 1% within a matter of minutes. The BoE hopes that through added QE the economy will get the much needed bump started as more people and investors are able to borrow and spend more to help stimulate economic growth and increase the strength of the GBP.

Speaking at his last news conference before stepping down, ECB President Jean-Claude Trichet’s urged "banks to do all that is necessary to reinforce balance sheets" where needed. The European Central Bank is offering unlimited new one-year emergency loans to banks to help steady the Eurozone. The ECB would also help the banks by spending 40bn Euros (£35bn) buying assets from them known as covered bonds.

The end of the week saw Moody's downgrade the credit rating of twelve UK financial firms including Lloyds, RBS, Nationwide, and Santander. Nine banks in Portugal were also downgraded further showing how closely linked we are to the single currency. The news sent bank shares lower, with RBS 3.8% off and Lloyds losing 3.36%.

Even though we are now down from the highs seen earlier in the week, the GBP/EUR rate is still doing well compared to the end of August where we were around the 1.13 level. Even though there does seem to be added volatility and uncertainty, the fact is that exchange rates are currently still much better than they have been in the past and we are still hovering around a 6 month high.

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Sterling vs. US Dollar;

There were a number of hotly anticipated market events toward the later stages of last week for this cross. Thursdays Bank of England meeting was always going to draw the attention of traders’ eyes with speculation rife that a further tranche of Asset Purchasing or Quantitative Easing as it’s commonly known would be announced by Mervyn King and his cronies on the Monetary Policy Committee. The big news from the US was always likely to come from Friday’s Non Farm Payroll with a lot of talk about jobs creation being a big factor in whether or not the US would enter a double dip recession or not.

True to expectations the Bank of England did announce a new programme of QE however releasing up to £75bn to the markets. The extent of the programme surprised the markets, as in the past they have done it in £25bn increments. The scale of the stimulus certainly was not expected and as soon as it was announced, Sterling fell sharply by over 1% against the major currencies and quickly slipped fell to a 14 month low against the Dollar.











Fridays downgrading of 12 UK financial companies by the rating agency Moody’s, including Lloyds, RBS, Nationwide, and Santander further added to Sterling’s woes. Moody's said it now believed the UK government was less likely to support some firms if they got into trouble leading the market not only to sell shares in many of the 12 companies but also the pound.

As a back drop to this, America is still widely benefiting from its renowned safe haven status in light of the European Sovereign debt crisis and should have been further boosted by a stronger than expected number in Fridays Non Farm Payroll. However in the kind of twist almost entirely unique to currencies, the Dollar actually weakened against the pound after the number was released, potentially due to a renewed sense of risk appetite from traders when may have taken the number as a signal that the US will avoid double dip.

All in all last week was extremely volatile on this cross with excellent opportunities for both buyers and sellers. Next week looks set to be similar with a raft of data releases from both sides of the pond including the Federal Reserve meeting minutes and retails sale prices for both nations. You can see more detail on the data releases later in the report.

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Weekly Economic Data that may affect exchange rates

Monday – US Markets are closed today for Columbus day, so there is no data from the states. We will see some Housing data from the US. In the EU there are trade balance figures from Germany, and some confidence measures for the EU as a whole.

Tuesday – Industrial and Manufacturing production figures are releases from the UK today. These will be watched quite closely as it’s one of the few sectors showing growth, so poor results could reflect a slowdown in the economic recovery. There is also a GDP estimate for the UK showing total growth. With markets open after the break in the USA, the minutes to the recent FED decision to hold rates will be released.

Wednesday – Unemployment figures from the UK are the main numbers to watch for today. An increase in those claiming unemployment benefits would weaken Sterling. There are some industrial production figures from the EU later in the morning.

Thursday – Today is quite a busy data for fundamental data releases. Starting in the EU, we have German inflation figures and a report from the European Central Bank. In the UK we have Trade balance figures which often have an impact on exchange rates. In the USA there are Jobless figures and a monthly budget statement.

Friday – Lots of EU data today. Trade Balance figures from the EU are released at 10am, followed by various measures of inflation. In the US, retail sales will show how confident consumers are in the economy.

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

Sterling falls as £75bn Quantitative Easing announced

Friday 7th October 2011
Good morning. Sterling tumbled yesterday as the Bank of England embarked on another round of Quantitative Easing, as I said they may in yesterdays post. The scale of the stimulus (£75bn) surprised the markets, and the Pound fall sharply as a result. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1535
• GBP/USD 1.5521
• GBP/AUD 1.5822
• GBP/NZD 2.0029
• GBP/CHF 1.4252
• GBP/CAD 1.6103
• GBP/ZAR 12.298
• GBP/JPY 118.87
• GBP/DKK 8.5846
• GBP/NOK 9.0136
• EUR/USD 1.3452

Bank of England in £75 billion Quantitative Easing

Yesterday the Bank of England announced £75 billion of QE. This has surprised the markets, as in the past they have done this in £25bn increments. The scale of the stimulus was not expected and as soon as it was announced, Sterling fell sharply by over 1% against other currencies.

Analysts said the BoE's decision to buy 75 billion pounds in UK assets over four months was negative for sterling as the UK leads other developed countries in the latest round of flooding the market with currency while keeping rates historically low.

Sterling fell to a 14 month low against the US Dollar, and also fell against the Euro before recovering slightly after the European Central Bank meeting.

Find out more about Quantitative Easing here on the bbc site.

UK Banks Downgraded

Moody's has downgraded the credit rating of 12 companies including Lloyds, RBS, Nationwide, and Santander. Moody's said it now believed the UK government was less likely to support some firms if they got into trouble. This also weakened Sterling slightly.

ECB also in loans to banks

The European Central Bank is offering unlimited new 1 year emergency loans to banks to help steady the eurozone. The ECB said it would also help the banks by spending 40bn euros (£35bn) buying assets from them known as covered bonds. They left interest rates on hold, and the Euro strengthened by around 1% as some in the markets had expected a rate cut.

Today's Data

Another round of inflation numbers for the UK today, this time the Producer Price Index. We will also see the latest non-farm payrolls data from the USA. These numbers are usually quite different than forecast and so can cause volatility for GBP/USD.

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Effect of Quantitative Easing on Exchange Rates

Thursday 6th October 2011
Good morning. Sterling exchange rates rose a little yesterday morning after a UK services sector survey data was better than expected. Gains were short lived however, as the Pound remains under pressure on growing expectations the Bank of England will soon announce further quantitative easing to boost the economy, this could happen today. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1578
• GBP/USD 1.5429
• GBP/AUD 1.5937
• GBP/NZD 2.0102
• GBP/CHF 1.4298
• GBP/CAD 1.6065
• GBP/ZAR 12.243
• GBP/JPY 118.30
• GBP/DKK 8.6177
• GBP/NOK 9.0613
• EUR/USD 1.3319

Could the Bank of England announce Quantitative Easing today?

Data yesterday showed UK economic growth is almost non existent. The revised GDP figures showed the economy is pretty much at a standstill, and has been now for 6 months. This increases the case for further Quantitative Easing, which many analysts believe will happen if not today, then in November.

Pumping money into the economy would help keep interest rates low and boost the economy, however it would also flood the market with Sterling and this could push exchange rates lower. Most analysts believe they will have to pursue more QE, and this could be announced today. There are some that believe that the BoE may wait until November, by which time there will have been another round of economic data to help them in their decision.

The fact remains however that it really is a question of when, not if, they announce further QE. It is this that has been keeping Sterling on the back foot, and the reason many in the markets believe Sterling is at risk of a correction to the downside.

EU debt crisis; what next?

The debt crisis is now turning into a banking crisis, with so many UK and EU banks exposed to Greek debt, this has been causing problems in the global economy. Italy has had it's credit rating downgraded, the IMF say they may step in to assist, leaders have delayed a decision to give more money to Greece - all in all there is a considerable lack of direction in the Eurozone.

These problems have weakened the Euro, and this is the reason GBP/EUR rates are not down in the €1.10 or below territory. Today the ECB will announce their decision on interest rates, but it's likely there will be no change.

What is important, is the press conference after the decision. This is where the president of the ECB gives his thoughts on the economy. Last month his comments caused significant changes in GBP/EUR so we will be watching closely today to see what impact his comments may have.

What you should do if you need to buy or sell currency

With markets extremely volatile for all the reasons above, exchange rates are very susceptible to any changes in economic figures. With so much happening at the moment, exchange rates could move either way by a significant amount. Rather than just hope rates move your way, there are various strategies you can employ to ensure you don't lose out.

Stop Loss and Limit orders allow you to place upper and lower limits in the market, so should exchange rates move up or down, your currency is bought at a pre-agreed level. In this way you can still take advantage of any gains in the rate, but not lose out should rates fall away.

You could also look at Forward contracts, where you can fix the current rate for up to 2 years, and only lodge 10% of the total now, allowing you to budget effectively for any purchase.

To discuss these types of contract, fill in the enquiry form now and send us a free enquiry. We can then discuss your particular requirements and put a strategy in place so you can take control over your currency requirement. Take control of your currency exchange, and don't let the markets control you!

Remember, our exchange rates are up to 5% better than you can get at the bank, so for any international transfers you need to do, make the most of your currency by contacting us now.

Pound at risk of more falls; QE and GDP figures

Wednesday 5th October 2011
Good morning. Sterling fell to a 13 month low against the US Dollar yesterday, and was under pressure against the Euro after weak UK construction data added weight to speculation the Bank of England may resort to more easing. Despite Italy having it's credit rating downgraded, GBP/EUR rates remain lower due to the threat of QE. At 08:30 this morning rates are as follows:

• GBP/EUR 1.1585
• GBP/USD 1.5428
• GBP/AUD 1.6154
• GBP/NZD 2.0272
• GBP/CHF 1.4218
• GBP/CAD 1.6274
• GBP/ZAR 12.541
• GBP/JPY 118.32
• GBP/DKK 8.6202
• GBP/NOK 9.0654
• EUR/USD 1.3314

Pound under pressure due to Quantitative Easing risk

Yesterday poor construction data increased the chance of monetary easing from the BoE this week. So what do the analysts say about possible QE?

"Any individual piece of data that reinforces the message the economy is not in fantastic shape and points to the Bank potentially implementing further (quantitative easing) will get a negative response from the currency," said Michael Derks, chief strategist at FX Pro.

"The extraordinary risk aversion we continue to see in the equity and commodity markets also contributes to the case for more monetary easing."

The Pound has been weakening of late due to the fact more QE may be needed to revive the flagging economy. Another round would flood the market with the UK currency, reducing demand and pushing exchange rates lower.

Problems with EU debt had been keeping the GBP/EUR rate quite high, but the QE risk is pulling the Pound back down. We're at the lowest in more than a year against the US Dollar.

George Osborne said earlier in the week he would support any such move, and that the Bank of England could announce more easing as early as this week on Thursday. This is keeping the Pound weak.

Italy credit rating downgraded

The Italian government's credit rating has been slashed by Moody's from Aa2 to A2 with a negative outlook. The ratings agency blamed a "material increase in long-term funding risks for the euro area", due to lost confidence in eurozone government debts.

Moody's said that Italy could be further downgraded to "substantially lower rating levels" if a further deterioration in investor sentiment made it even harder for the country to raise cash from the markets. The news came after markets had closed yesterday, but this morning there has not been a significant gain in GBP/EUR as the QE risk as mentioned above is keeping rates in check.

Today's Data

The most important data today is Gross Domestic Product data for the UK and EU. This will show how the relative economies are performing and could have a big impact on GBP/EUR rates. If the UK figures are worse than expected rates could fall. Either way we expect some significant movement on sterling vs euro rates 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.