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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Weekly GBP/EUR forecast, and the weeks data

Monday 12th March 2012
Good morning, and welcome to a new week in the currency markets. As customary for a Monday morning, today I will take stock of last weeks movements in exchange rates, particularly the Pound/Euro cross. In addition, I will look at the weeks data releases that may have an impact on the value of the Pound vs other currencies.

In this week’s Report:

• Euro gains strength on Greek debt swap deal
• No change in EU or UK Interest Rates
• EU debt crisis continues to drive exchange rates
• Round up of the week’s data that may affect rates

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

Sterling vs. Euro;

Last week saw another fairly choppy week’s trading for the sterling/euro cross, as once again headlines were dominated by the continuing Greek debt crisis. After dropping into the €1.17’s the previous week, Sterling began a recovery against the euro as recent positive UK data has helped support the pound, as concerns over another round of quantitative easing have been dampened. The British Chambers of Commerce, the largest business lobby group in the UK, revised down its forecast for economic growth in 2012 but said there would be no need for further monetary stimulus by the Bank of England.













Worse than expected house price data on Tuesday did little to affect sterling’s performance against the euro during the early part of the week as investors were more concerned over the mounting uncertainty over Greece's progress in completing a debt swap deal. A survey by mortgage lender Halifax showed house prices dipped 0.5%in February, compared to forecasts of a 0.3% rise.

The pound lost ground against a firmer euro midweek as the market focused on events in Greece and after European Central Bank President Mario Draghi said there were signs of stability in the euro zone economy.

There was very little else in the way of events or data releases for the UK last week, apart from a Bank of England policy decision on Thursday which resulted in no change to the quantitative easing target or to interest rates. The Bank of England's announcement marks the third anniversary of the bank's decision at the height of the financial crisis in 2009 to cut interest rates to a record-low 0.5% and start buying financial market assets with newly created money. As expected, the pound showed little reaction to this.

"Sterling's movements in the near term will be more the result of euro/dollar ... The euro has been rallying as there is a more optimistic feeling about Greece and Draghi was more neutral with no suggestion of an imminent rate cut," said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.

"The Bank of England was a non-event, but the minutes will be very interesting for clues on whether we should prepare for another round of QE or not."

The pound ended the week trading in the mid 1.1950’s against the euro, slightly down on where it started Monday around the 1.20 level. Even a half cent change in rates can make a significant difference in the return on your sterling, particularly for larger transfers.

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Weekly Economic Data that may affect exchange rates

Monday – It’s a quiet start to the new trading week, with nothing of note from the UK. The main event is in Europe, where EU Finance Ministers are meeting today. There are also German wholesale prices. There is also a monthly budget statement from the USA.

Tuesday – UK data today comprises RICS House Prices & Goods Trade Balance. In the Eurozone there are EU and German confidence surveys. Retail Sales from the USA are released later in the afternoon, in addition to a US interest rate decision coupled with the FOMC minutes in the evening.

Wednesday – 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.

Thursday – We’ll start in Switzerland today, where there are economic forecasts and an interest rate decision; we expect rates to be left at 0%. In the EU we have a report by the ECB, coupled with Employment and Jobless measures. We also have Jobless data from the USA in addition to PPI inflation data.

Friday – We end the week with Trade Balance figures from the EU. Inflation data is released from the USA later in the day along with industrial production. There are no releases from the UK today.

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Pound/Euro falls March 2012 forecast predictions

Friday 9th March 2012
Good morning. Why has Pound/Euro fallen? Yesterday the Pound fell against the Euro, and rose against the US Dollar. It was developments in Greece and the EU that drove rates, with renewed optimism over the EU economy strengthening the Euro and other riskier currencies such as Sterling. So, the Pound gained against many currencies, but fell against the Euro, as the charts below illustrate:

~Currency Movements on Thursday 8th March 2012~











Euro strengthens on optimism over Greece

The Euro gained strength yesterday, becoming more expensive to purchase. It was due to Greece making progress on their debt swap. Analysts said the euro may have scope for short-term gains on a positive outcome to the Greece deal.

As the market focused on events in Greece, European Central Bank President Mario Draghi said there were signs of stability in the euro zone economy, and basically stated Greece would be allowed to default if necessary. This gave renewed optimism about the EU economy, and as such the Euro gained strength, along with other riskier currencies such as Sterling. This is why Pound/Euro exchange rates have fallen March 2012.

ECB and BoE leaves interest rates on hold

As I predicted yesterday, both central banks left rates on hold, and the BoE decided not to pursue any further Quantitative Easing for the time being. It's what the market expected, and so the decisions had little effect on exchange rates.

Going forwards, I think that at some point later this year, the ECB will make a rate cut which could weaken the Euro. Also the minutes to the BoE decision in 2 weeks time, will shed more light on if and when more QE will be on the way.

Today's Data

We end the week with a host of UK data including the latest GDP estimate, Trade Balance, Industrial Production, Manufacturing Production and Producer Price Index figures. Germany also releases Trade Balance numbers and inflation data. Stateside there are unemployment data and more trade balance figures - also we have the all important non farm payrolls, which often has a big effect on GBP/USD rates.

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Greek debt swap - how could it affect exchange rates?

Thursday 8th March 2012
Good morning. The Pound fell slightly yesterday against the Euro and US Dollar, as a fragile UK economy and weak technical outlook weakened Sterling. Today we will see UK and EU interest rate decisions, and also details on the Greek bond swap, which needed to avoid a disorderly default. We could see quite a volatile day for exchange rates. Today I will look at this in detail, after a snap shot of how rates move through the day yesterday:

~Currency Movements on Tuesday 6th March 2012~











UK and EU Interest Rate decisions today

It's the first Thursday in the month, and so we will see the Bank of England (BoE) and European Central Bank (ECB) Interest rate decisions. I expect both central banks to leave rates on hold, and no increase in the Quantitative Easing (QE) measures from the BoE.

Despite no change in policy expected today, recent positive UK data have dampened prospects for more monetary easing from the Bank of England. This has helped the Pound gain in recent weeks against other currencies. However, with UK growth sluggish at best and inflation seen falling back towards the Bank of England's target, more asset purchases could still be on the horizon, so don't expect any significant gains for Sterling.

Greek debt swap today; crucial for Greek bailout

Today is the deadline for the Greek debt swap. This is where private sector bondholders, such as banks and pension funds, must agree to take a 53.5% cut in the 206bn euros of Greek bonds they hold. If they don't, then Greece will not get its latest bailout of 130bn euros, meaning they may well suffer a disorderly default, which would be a disaster for the Euro.

75% of Bond holders need to agree, or no money for Greece. At the time of writing, 58% had agreed, falling short of the required amount. You can read more about the deal itself here on the BBC site. The deal is seen as determining whether or not the country can remain in the euro.

EU stocks have suffered this week on speculation the deal would not happen, and this had also weakened the Euro, helping rates climb to near the €1.20 level. Most analysts do expect the deal to go through. If it does, GBP/EUR rates could fall slightly. If it doesn't, we could see further Euro weakness, although whether rates will climb much above the €1.20 level remains to be seen.

Either way it's a crucial time for the EU debt crisis, and as such could cause some volatility in exchange rates. If you need to buy or sell Euros, contact us now to find out how the current situation may affect you, and what you can do to protect yourself.

Today's Data

As always for the first Thursday in the month, both the UK and EU decide on Interest Rates, with no change expected. The BoE will also decide whether to expand the QE programme, but this is highly unlikely. Elsewhere, in the USA we see some Jobless Claims, and there is also an interest rate decision for Canada. Of course, the Greek debt swap deal will be very closely watched by the markets.

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Pound/Euro rates range bound at €1.20

Wednesday 7th March 2012
Good morning. For Pound/Euro rates, it's been a very flat week so far with the cross being range bound around the €1.20 level. Sterling fell against the US Dollar however due to a fall in House Prices and poor Retail Sales. Weakness in the Euro has counteracted the fall in the Pound, which is why GBP/EUR has hardly moved, as yesterdays chart demonstrates:

~Currency Movements on Tuesday 6th March 2012~











Pound/Euro rates remain flat around €1.20

As the graph above shows, GBP/EUR rates again hardly moved yesterday, and were in the 1.1980 - 1.2010 range all day long. The Pound actually weakened early in the day following a fall in UK House Prices, and poor Retail sales suggesting the economy is still sluggish.

The exchange rate then bounced back due to mounting concern over the Greek debt issue. The bailout deal still isn't fully agreed, and there is a deadline on Thursday regards bond auctions which could mean Greek suffers a disorderly default. The news worried investors, and the Euro weakened as a result, pushing rates back to €1.20 or so.

Despite the relatively good rates, it would appear the pair cannot sustain levels above €1.20. The rate keeps briefly breaking through this barrier, only to correct lower quite quickly. The current rate is only just below the best in 19 months, so for any Euro buyers that want to take advantage of the rate, send me a free enquiry now.

Pound/Dollar drops to 11 day low

Due to the poor UK data, GBP/USD rates fell yesterday. The rumours coming from te Eurozone also helped to strengthen the Dollar, so while we saw GBP/EUR recover in the afternoon, the GBP/USD rates continued to fall as the charts above clearly demonstrate.

With the EU debt story far from over, I personally think the US Dollar could continue to strengthen, which may well pull GBP/USD even lower in the coming weeks.

Today's Data

There are GDP figures today from down under. Staying with the antipodean currencies, there is a New Zealand interest rate decision. The only EU data of note are German Factory Orders. Most data today is from the states: Employment, Productivity, Mortgage Applications and Consumer Credit.

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

Monday 5th March 2012
Good morning. Last week the Pound surged against the Euro, close to a 19 month high. As usual for a Monday, today I will take stock of what moved the market last week, the outlook and Pound Sterling Forecast for Pound Euro rates March 2012. Today I will purely focus on this currency pair, in addition to a breakdown of the weeks data that I think will affect exchange rates.

In this week’s Report:

• Bank of England comments strengthen Sterling
• ECB Start LTRO; find out what this means for rates
• Pound/Euro forecast for March/April 2012
• Round up of the week’s data that may affect levels

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

Sterling vs. Euro;

The Pound had a very good run against the Euro last week gaining over 2 cents from where it started on Monday morning due to the scaling back of expectations of more Quantitative Easing (QE) from the Bank of England, and the European Central Bank pumping more cash into their banking system. The data earlier in the week was pretty mixed and the Sterling/Euro pair traded in a very tight range of around ½ a cent.













It was Wednesday when the rate started to increase as the ECB started a liquidity operation known as a LTRO (Longer-Term Refinancing Operation) that enabled Eurozone banks to borrow an unlimited amount of medium term debt at a subsidised rate. Also earlier in the day we heard that Standard & Poor’s, one of the big ratings agencies, had downgraded Greece’s credit rating.

The figures from the LTRO showed that 800 Eurozone banks took advantage of the subsidised debt on offer by borrowing EUR 529.3bn up from the last auction in December when only 523 banks went in for funds. For the Eurozone this will hopefully mean that participating banks will be able to cover their funding needs in the short term and relieve some pressures on the EU banking system.

We also saw that the Euro area unemployment rate had edged up slightly in January which put more of a squeeze on the single currency but it wasn’t all plain sailing for the Pound either. We have seen mixed data from the UK over the last few weeks and on Thursday UK manufacturing PMI dropped to 51.2 in February (50 is the level that divides expansion from contraction) showing that the recent improvement in manufacturing may be losing pace. While this isn’t disastrous, if the more important service sector PMI due on Monday follows suit then we could see the Pound come under some pressure.

There is expectation that the Greek bailout package is close to being approved and according to press reports, officials are expected to meet again on Friday to give a final sign-off so that may give the Euro some support.

What will move exchange rates in the coming months?


All in all there are a multitude of factors that will continue to affect the GBP/EUR cross over the coming months; the “will they/wont they” argument about QE in the UK, whether or not the UK economy is really back on track, further Eurozone downgrades for economies and banks alike, and the continuing debt crisis in Europe to mention but a few of the main ones.

Whatever happens over the next couple of weeks, we still expect mid-market rates to remain range-bound between 1.175 & 1.205 which may not sound like much of change but when put into perspective on a €250,000 purchase, it can make a difference of over £5,000.

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Weekly Economic Data that may affect exchange rates

Monday – Today’s UK data comprises Halifax House prices and Inflation data. In the Eurozone there are also inflation numbers that may affect future interest rate movements. We also see EU Retail Sales showing how confident consumers are about the economy. Elsewhere, there are some Factory and Manufacturing numbers from the USA.

Tuesday – The only UK data today is the BRC Retail Sales Monitor. If more importance will be the latest EU GDP figures, so expect a choppy day for GBP/EUR rates. In Australia there is an interest rate decision; no change is expected but the RBA has surprised us in the recent past.

Wednesday – More GDP figures today, this time from down under. Staying with the antipodean currencies, there is a New Zealand interest rate decision. The only EU data of note are German Factory Orders. Most data today is from the states: Employment, Productivity, Mortgage Applications and Consumer Credit.

Thursday – As always for the first Thursday in the month, both the UK and EU decide on Interest Rates, with no change expected. The BoE will also decide whether to expand the QE programme, but this is highly unlikely. Elsewhere, in the USA we see some Jobless Claims, and there is also an interest rate decision for Canada.

Friday – We end the week with a host of UK data including the latest GDP estimate, Trade Balance, Industrial Production, Manufacturing Production and Producer Price Index figures. Germany also releases Trade Balance numbers and inflation data. Stateside there are unemployment data and more trade balance figures.

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Pound rises against Euro March 2012 Forecast predictions

Friday 2nd March 2011

Good morning. Sterling has had a very good run this week, rising against the Euro and US Dollar following positive comments from the Bank of England, coupled with continued uncertainty over the Greek Bailout. Today I will look at what has caused the Pound to rise against the Euro March 2012. The below charts show rate movements yesterday:



~Currency Movements on Thursday 1st March 2012~























Why has the Pound risen against the Euro?



The Pound rose higher yesterday against the Euro, despite UK manufacturing data that was slightly worse than forecast. This was due to less chance that the Bank of England will embark on another round of quantitative easing in the next few months. There are also hopes that the British economy will not plunge back intro recession, and this also gave Sterling some strength.



BoE governor Mervyn King nudged the bar higher on Wednesday when he told lawmakers the bank will be guided by upcoming data when deciding whether to print more money. It had been thought that another £25bn of stimulus would happen in the next few months, but the latest data has reversed these expectations.



When QE is on the cards, the Pound generally weakens due to the chance of the flooding of Pounds into the economy. Now this is less likely, the Pound has gained against other currencies.



Euro weakens, becoming cheaper to purchase



The euro also weakened yesterday by around 0.3%, and this compounded the rise in GBP/EUR rates. The Euro came under broad pressure after a massive injection of cheap funds for the European Central Bank - as with QE, when there is a flood of funds, the increased supply reduces demand, making it cheaper to purchase.



With rates now very close again to the €1.20 level, it's looking good for those that need to buy Euros. In recent times on every occasion rates have reached this level, the rate has dropped back away quite quickly again. With this in mind, if you need to buy Euros click here to find out how we can help protect against rates going the wrong way, and get you a level of exchange up to 5% better than banks or other brokers.



Today's Data



The EU economic summit continues, and there are further inflation numbers for the EU. There are some minor construction numbers from the UK, and GDP figures released from Canada at 13:30.



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