Sterling up against Euro on risk sentiment

Thursday 20th October 2011
Good morning. Sterling rose yesterday and hit a 1 month high against the US Dollar, and was also up against the Euro. It was nothing to do with any particularly good data, rather it has been supported by better risk sentiment. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1477
• GBP/USD 1.5711
• GBP/AUD 1.5453
• GBP/NZD 1.9838
• GBP/CHF 1.4233
• GBP/CAD 1.6064
• GBP/ZAR 12.683
• GBP/JPY 120.44
• GBP/DKK 8.5436
• GBP/NOK 8.8596
• EUR/USD 1.3684

Sterling up on risk sentiment

Gains in European stock markets, and optimism that progress would be taken by euro zone policymakers towards solving the debt crisis pushed up sentiment towards the pound yesterday. Investors are returning to riskier currencies on the better EU outlook, and this helped the Pound gain against other currencies.

However, analysts are still saying that while there are signs that progress on tackling the euro zone debt crisis will be made this weekend, a comprehensive and a durable solution was unlikely and the UK would remain vulnerable to financial tensions in Europe.

The other factor that could pull the Pound back down is the risk of further stimulus by the Bank of England, especially after yesterdays BoE minutes hinted more asset purchases may be needed to help Britain's ailing economy. In the minutes yesterday it showed that policymakers voted unanimously to resume quantitative easing (QE) this month, and considered injecting even more than the 75 billion pounds agreed. They did discuss up to £100bn in easing, and this signals that further QE may be on the cards. This will likely keep any gains for Sterling limited.

Today's Data

UK Retail Sales figures are released today in addition to Nationwide Consumer Confidence, showing how confident consumers are about the economy. There are also inflation figures from Europe. Stateside we have various measures of unemployment.

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Pound lower on inflation data and BoE minutes

Wednesday 19th October 2011
Good morning. Sterling fell yesterday after inflation was higher than expected. We have the Bank of England (BoE) minutes today which analysts also expect to be dovish, so the Pound is bracing itself for a possible further drop. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1411
• GBP/USD 1.5764
• GBP/AUD 1.5290
• GBP/NZD 1.9716
• GBP/CHF 1.4153
• GBP/CAD 1.5932
• GBP/ZAR 12.525
• GBP/JPY 120.92
• GBP/DKK 8.4917
• GBP/NOK 8.8114
• EUR/USD 1.3814

UK Inflation data weakens the Pound

The rate of Consumer Prices Index (CPI) inflation yesterday hit its record high in September, rising to 5.2% from 4.5%. This was higher than expected, and the latest RPI measure is the highest annual rate since June 1991.

The Bank of England had already predicted that inflation would top 5% this year as a result of higher utility bills, but it expects price rises to slow in 2012 and 2013. Despite the high numbers, many economists agree with the Bank of England that inflation may soon start to fall.

Usually when inflation is high, it signals interest rates may rise to combat it. Higher interest rates create demand for a currency and it would usually strengthen. In the current climate however with interest rates at record lows, the high inflation numbers actually weakened the Pound. This is because stagflation (high inflation with low growth) means rates have to stay low, and as a result Sterling weakened and fell against other currencies.

BoE minutes today

At 09:30am today the Bank of England release the minutes to it's latest decision to hold interest rates and pump £75 billion into the economy with Quantitative Easing. Because analysts expect the minutes to be quite dovish, this has also had an impact the Pound, weakening it and pushing exchange rates lower. The minutes show what was discussed and how the voting went.

Sterling vs Australian Dollar

The Australian dollar gained against the Pound yesterday, on reports that France and Germany were ready to sharply boost the eurozone's rescue fund amid a solid performance on regional equity markets. This combined with the weaker pound has pushed GBP/AUD rates down from it's highs in the last month, and this is expected to continue while the Pound remains under pressure.

Moody's downgrade Spain

Moody's has downgraded the rating of Spain's government bonds. The ratings agency cut Spain two notches, two days after Standard & Poor's took the same decision. Moody's said it had cut the rating because there had been no credible resolution to the eurozone debt crisis.

There has been little effect on the currency markets, because there has been so many downgrades of the main economic zones, the currency markets now seem to be paying little attention any more.

Today's Data

Today is quite important for Sterling, as we see the BoE minutes to their recent decision to pump £75bn into the economy. We will see what was discussed and how the vote went, and may well impact on the value of the Pound. There are further inflation numbers from the USA today, but no data of note from the Eurozone.

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Pound up against Euro, but gains may be short lived

Tuesday 18t October 2011
Good morning. Sterling fell against the US Dollar yesterday, tracking losses in the Euro. The weaker Euro however helped push GBP/EUR rates up by nearly 1%, after comments from German officials tempered optimism that a European Union summit this week will produce a comprehensive plan to tackle the euro zone debt crisis. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1495
• GBP/USD 1.5750
• GBP/AUD 1.5546
• GBP/NZD 1.9978
• GBP/CHF 1.4178
• GBP/CAD 1.6135
• GBP/ZAR 12.673
• GBP/JPY 120.91
• GBP/DKK 8.5568
• GBP/NOK 8.8865
• EUR/USD 1.3700

Euro weakens pushing GBP/EUR rates higher

The German Finance Minister yesterday dampened demand for the euro when he said Sunday's summit of EU leaders will not present a definitive solution for the region's significant debt problems. This weakened the Euro, making the single currency cheaper to purchase.

His comments helped boost GBP/EUR rates up from a 5 week low. However the Pound dropped against other currencies such as the US Dollar. The comments spooked investors and we saw a flight back to the safe haven US Dollar, which usually strengthens when there is global economic uncertainty.

Sterling at risk of falls due to poor data

Despite the gains seen yesterday, it's worth noting this is nothing to do with any strength in the Pound, rather it's Euro weakness pushing up rates. Many analysts said there was little reason to buy sterling given weaknesses in the UK economy and loose monetary policy.

The ITEM Club yesterday downgraded its growth forecasts for the UK, which didn't do Sterling any favours. We now await data on UK inflation and retail sales which are expected to show the economy's recovery remains frail, so this could mean the current spike in GBP/EUR rates are short lived.

Some analysts said this week's data may have limited impact on sterling given that the UK central bank has already moved to bolster the economy with more quantitative easing, which involves flooding the market with pounds and thereby decreasing demand for the currency.

Today's Data

Retail Price Index, Consumer Price Index, and CBI trend survey are all released for the UK today. All of this can impact future interest rate movements and so can affect GBP. In the EU we see Economic sentiment figures. US data comprises inflation data.

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Weekly GBP/EUR & GBP/USD and the weeks data

Monday 17th October 2011
Good morning. As regular readers will know, on a Monday I take stock of movements in GBP/EUR & GBP/USD over the last week, with forecasts on what may happen in the coming week. I will also list the most important economic data to watch for that may affect rates.

In this week’s Report:

• Poor economic figures hurt Sterling
• G20 discuss EU debt crisis
• Downgrading of Banks continues
• 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;

Sterling lost over 2% against the Euro last week as it fell from above 1.16 on Monday, to end the week struggling to remain above 1.14. The main data releases couldn’t have been more confusing when trying to gauge the current state of the UK economy with jobs figures on Wednesday showing that the UK unemployment rate is at its highest since 1994, rising above 8%, followed by data on Thursday that showed the trade deficit figures for August were narrower than expected.













The improvement in trade figures was a result of £0.2billion increase in exports, reaching their highest levels since records began in 1998, and a £0.2billion fall in imports, and is something the Bank of England have been hoping for since the credit crunch took hold in 2008 as increased exports should stimulate growth in the economy (and potentially create more jobs...)

Unfortunately news from the Eurozone was pretty downbeat. At the beginning of the week there were concerns that Slovakia would be the only 1 of the 17 member nations not to ratify the increased European Financial Stability Facility which is where every Eurozone member (including the smallest nations like Slovakia) are putting together a bailout fund of €440billion. It was thrown out in the first vote but went through in the second round on Wednesday and the Euros performance was visibly better afterwards, gaining another cent against the Pound, and moving nearly 2% against the US Dollar to reach a 1 month high of 1.3890.

Even the downgrading of Spain’s sovereign debt rating by ratings agency Standard & Poors, just a week after another of the big agencies Fitch had done the same couldn’t stop the Euros rally.

Looking ahead the Pound will most likely be driven by goings on within the UK as opposed to further afield. We know now that the bailout fund for the Eurozone has been approved it doesn’t look like the EU or IMF are willing to let the Euro fail, especially after there were more rumours today that Greece would be receiving another bailout before the end of October.

It therefore looks like the Bank of England could be solely responsible for which way the Pound moves as we get closer to Christmas since they announced a further £75 billion quantitative easing on 6th October. If this turns out to be the only time then the Pound may start to find its feet as we move through the 4th quarter. However, MPC member Charles Beans said in a national newspaper last week that the Bank of England would expand its asset purchase programme if necessary meaning any further concerns about the UK economy could swiftly be followed by more QE, and potential further falls in the value of Sterling.

With this in mind make sure you are in touch with the Foremost Currency Group about your Sterling/Euro currency requirements to help you avoid any adverse market movements.

Are you looking for the Best Exchange Rates for Euros? Contact us now.

Sterling vs. US Dollar;

Last week saw the markets start to settle following the frivolities of the previous week. After cable reached a 10 month low of 1.527 (Interbank) the previous week’s trading after the Bank of England initiated a £75 Billion program of quantitative easing (QE) the Pound seemed relatively buoyant at the start of last week finishing the day almost 3% higher against the Dollar.

Under normal circumstances the market would normally expect the currency of an economy that enter a QE program to remain consistently weak for some time after the event happens. However because most of the other major banks are themselves considering QE it has not weighed as heavily on the Pound this time around.













After Sterling's impressive rebound on Monday the currency was again stopped in its tracks following poor growth data with traders stating that Sterling was still vulnerable to further selling off. Fundamentally Sterling is still a weak currency and a weak cable cross is beneficial to the UK export market which is often commented on by the BoE governor ‘Mervin King’. Sterling’s recovery against the Dollar was always going to be limited as the US Dollar remains a safe haven currency for investors whilst there is uncertainty within the world markets.

The Dollar slipped on Wednesday against all the major currencies including the Pound after investors scaled back on long term positions in the Dollar as it was broadly seem that the exposure to the market was too great and the risk was too high. This knocked the Dollars performance and Sterling gained over 1 % against the greenback despite damning UK employment figures being released the same day. The figures showed that unemployment claimants are on the rise and worryingly almost a quarter of 16-24 year olds are now out of work.

The end of the week saw the Pound continue to gain against the Dollar after a sharp rise in the performance of the Euro which saw the Dollar slip. Traders encouraged caution over cable as there are still risks to the downside, not least that there is still the threat of further QE. However for now sterling seems to be content with riding on the back of other currencies performances, albeit good or bad and until Sterling’s fundamental show consistent signs of improvement the status quo is unlikely to change.

Unfortunately for currency purchasers this uncertainly makes life a bit trickier. Whether you are buying or selling it is important to keep up to date with market movements to ensure you maximise your position in this difficult market.

Are you looking for the Best Exchange Rates for US Dollars? Contact us now.

Weekly Economic Data that may affect exchange rates

Monday – We have a fairly quiet start to the week, with no data of note from the UK or EU. Any further developments regarding the EU debt crisis however could still affect rates. From the USA we have some industrial production figures.

Tuesday – Now we get going with UK fundamentals: Retail Price Index, Consumer Price Index, and CBI trend survey are all released today. All of this can impact future interest rate movements and so can affect GBP. In the EU we see Economic sentiment figures. US data comprises inflation data.

Wednesday – Today is quite important for Sterling, as we see the BoE minutes to their recent decision to pump £75bn into the economy. We will see what was discussed and how the vote went, and may well impact on the value of the Pound. There are further inflation numbers from the USA today, but no data of note from the Eurozone.

Thursday – UK Retail Sales figures are released today in addition to Nationwide Consumer Confidence, showing how confident consumers are about the economy. There are also inflation figures from Europe. Stateside we have various measures of unemployment.

Friday – On to Friday, and Australia releases import and export data. Germany has various confidence measures, and as the largest economy in the EU this could impact EUR prices.

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G20 meet to discuss EU debt crisis

Friday 14th October 2011
Good morning. Despite Trade Balance figures for the UK being better than expected, Sterling fell against the US Dollar as both the Pound and the Euro weakened after the European Central Bank said that the sovereign debt crisis could damage the euro's reputation. I would have thought that obvious, but there was still market reaction to the statement. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1443
• GBP/USD 1.5759
• GBP/AUD 1.5452
• GBP/NZD 1.9828
• GBP/CHF 1.4152
• GBP/CAD 1.6073
• GBP/ZAR 12.368
• GBP/JPY 121.21
• GBP/DKK 8.5169
• GBP/NOK 8.8737
• EUR/USD 1.3771

UK Trade Balance better than expected

The UK's trade deficit narrowed in August official figures have shown. Analysts said the stronger exports may boost the economic growth figures, however there were limited gains for Sterling on the news.

Howard Archer, chief UK economist at IHS Global Insight, said the August figures were "appreciably better than expected". The latest trade figures come a week after the Bank of England announced that it would inject a further £75bn of new money into the UK economy through another round of quantitative easing.

G20 Finance ministers to meet over Eurozone

Finance ministers from the G20 group of nations are meeting France later today to continue efforts to find a solution to the EU debt crisis. Greece remains the focal point but there are also fears that the crisis could spread to other countries such as Spain and Italy. This comes a day after the ECB warned that the Euro's reputation is at risk due to the debt crisis.

This weakened the single currency a little pushing GBP/EUR rates up, but as the UK is also exposed to the debt problems, gains were limited and today rates remain in the mid €1.14's.

Other news yesterday from the Eurozone was that Spain has had it's credit rating cut. Standard & Poor's reduced Spain's long term rating by one point saying there was weak growth and high levels debt. This is only one week after rating agency Fitch also cut Spain's rating.

There were other downgrades yesterday of the creditworthiness of UK banks Lloyds and RBS, and also UBS. This shows that there are real concerns both over the health of UK and EU banks. The markets have reacted very little however, probably as there have been so many downgrades all over the world, it's the same for everyone and so there has been no real effect on exchange rates.

Sterling vs Australian Dollar

The Pound had been making some gains against AUD in recent weeks. Antipodean currencies tend to weaken when there is global economic uncertainty, as they are perceived as risky. When there is volatility investors tend to unwind Carry trades and return to the safe haven currency, weakening AUD.

As some risk has returned to the markets following better US Data, we have seen GBP/AUD slip back slightly of late however. Generally Australia largely avoided the recession, and it's higher interest rates have been keeping it strong and exchange rates low relative to where they have been in recent years. If we see an interest rate cut in Australia in the coming months then we could see the rate increase more, but while there is so much turmoil in the markets investors will remain wary of the AUD.

Today's Data

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 exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

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.

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 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.

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.