Pound falls sharply on news of more BoE Stimulus

Friday 15th June 2012
Good morning everybody. Why has the Pound fallen against the Euro this morning? Things can change very quickly in the currency markets, and in my last post GBP/EUR rates were getting close to €1.25. The facts have now changed, and so has the exchange rate; the Pound has fallen sharply this morning, after The Bank of England announced yesterday evening that it will launch two new stimulus packages in response to the worsening economic outlook:


Sterling falls sharply on news BoE to pursue more stimulus

When the markets opened at 8am this morning the reaction was severe, and Sterling has dropped sharply across the board, as the chart above shows.

In the new developments, it was announced that together with the government, it will provide billions of pounds of cheap credit to banks to lend to companies. Banks will also have access to short-term money to deal with "exceptional market stresses". The chancellor said the measures would "inject confidence".

In the announcement, the governor Mervyn King said that "We are not powerless in the face of the eurozone debt storm. Together we can deploy new firepower to defend our economy from the crisis on our doorstep,"

Indeed on this blog I have been warning for some time that the EU debt crisis could well start to affect the UK, and this is what we are now seeing.

The Bank has already pumped £325bn into the economy through its quantitative easing (QE) programmes, hoping that the institutions that sell bonds to the Bank then use the money to buy up other assets, but that hasn’t always been the case. Some have said that they have held on to the money undermining the effectiveness of QE. Regardless the additional currency in the system has weakened the Pound in recent months.

You can read more about the £140bn scheme to kick-start stagnant economy here on the telegraph website.

Euro crisis deepens and affects Spain

As expected, Spain is the latest country to be dragged into the debt crisis, having earlier in the week taking a €100 billion bailout of its banks. Yesterday it was seen that Spain's borrowing costs hit 7% which is a level widely seen as unsustainable. Italy's borrowing costs also rose sharply meaning we could now see bailouts for these two countries.

Greek elections this weekend

With Greek elections taking place this weekend in what is being seen as a referendum on the euro, analysts have warned of potential further shocks to the financial sector. If the anti austerity Syriza party succed, then they may well effectively be voting themselves out of the single currency.

What is certain is that whatever happens this weekend, the market reaction on Monday morning is likely to be quite severe, as for many weeks investors have been waiting for this event before deciding what to do with their currency.

On Monday I will post a full analysis of the results, and what the Greek elections could mean for the Pound/Euro exchange rate forecast.

Pound/Euro exchange rate forecast

Many clients have been convinced that the Euro debt crisis would continue to weaken the Euro making the GBP/EUR exchange rate higher. Indeed on this very blog I have been warning for some time that this may not be the case, and in fact the UK is not immune to the EU’s problems. Sterling is at risk of falling if more stimulus is needed. This is now what has happened, and the 3.5 year highs seen recently now seem a distant memory.

Where rates will go moving forwards is impossible to predict, but with so much uncertainty surrounding the UK and EU economies, rates could go either way. Currently there is not much support for Sterling in the wake of yesterdays announcements, and so in the short term I don’t expect rates to rise back to €1.25 any time soon. I would expect rates to stay in the €1.22 to €1.2350 range for the moment, but on Sunday when the election results are seen, I'm sure the market will correct accordingly. Of course I will post a full analysis of what the election results mean on Monday morning.

What to do if you need the best exchange rates

With much volatility and conflicting opinions on where markets are headed, it’s more important than ever to know your options, and take advantage of the expert knowledge I can offer you for no cost. I have worked in the FX markets for nearly 10 years and so have a very good knowledge of not only what moves exchange rates, but strategies and tools you can use to help you achieve the best possible exchange rate.

If you need to buy or sell any international currency, send me a free enquiry now to find out what your options are. Everybody’s requirement & attitude to risk is different, but in having a free consultation and gaining full knowledge of all the options available to you, you can make an informed choice on what is best for you.

Click here to send me a free enquiry

EU Debt crisis & Pound/Euro forecast

Wednesday 13th June 2012
Good morning everybody. We started the week down in the €1.22’s against the Euro, which was supported by news of Spain’s Bank bailout over the weekend. It was hailed as great news for the Euro, and initially the single currency seemed supported. The spin did not last long however, and soon after markets opened the Euro started to weaken again. By yesterday fears that the crisis that has spread from Greece to Spain is now on the way to Italy and Ireland – this caused the Euro to weaken yet again, pushing rates higher.

In today’s post I’ll have a detailed look at the EU problems, the UK’s exposure to them, and what it all means for the Pound/Euro exchange rate forecast.

EU worries push Pound/Euro close to €1.25

Over the weekend it was announced that Spain became the fourth country in the crisis-torn Eurozone to ask for international aid when it was forced to ask for a bailout to prop up a banking system saddled with £150billion of toxic property loans.

The financial markets initially welcomed the deal but investors soon sounded the alarm over the impact the bailout will have on the country’s mountainous debts. On Monday morning everyone was hailing it as great news for the Euro. Hmmmm.

The initial optimism proved short-lived when the markets started trading in earnest on Monday and Tuesday. The Euro suffered considerably as fears over how the money would be funneled to banks hit sentiment, as questions surrounded the terms of the deal, which will add to Spain’s debt burden.

Indeed Spain's borrowing costs have risen to the highest rate since the launch of the euro in 1999, and also Italy's 10-year bond yield rose to 6.28%, a rate not seen since January, as concerns about its finances rose. The interest rates are seen as unsustainable in the long run for two countries weighed down by huge debts. So there could be more bailouts for other countries.

Crisis Spreading to other countries?

While the Eurozone debt crisis has been a cause of concern for some time, it has so far affected relatively smaller economies such as Greece and Portugal. However, as the crisis spreads to bigger nations such as Spain and Italy, there are fears that growth in the region may slow even further.

Cyprus, which is heavily exposed to Greece, hinted it may become the fifth country in the single currency to need a bailout following the rescues of Greece, Ireland, Portugal and now Spain.

It is this spread that has spooked the markets and caused the Euro to fall in value yesterday, getting close to €1.25. So maybe the bailout wasn’t the ‘great news for the Euro’ that the spin doctors had hoped for on Monday morning. Indeed they are, in my opinion, still simply 'kicking the can down the road' and hoping the problem will go away.

Pound remains vulnerable

Following a string of recent weak UK data, a growing number of analysts think the BoE could opt for another bout of asset purchases under its quantitative easing programme, possibly as early as next month. It remains uncertain whether or not the BoE will opt for further QE.

Although the economy is weak, some policymakers have expressed concern that inflation remains too high. But BoE policymaker Adam Posen struck a dovish tone on Monday, saying the central bank should buy assets other than government bonds in order to boost the UK's ailing economy. I for one think we will see further QE, and in fact the IMF and BoE have hinted as much in recent weeks. More QE would weaken the Pound, and of course if the EU debt crisis continues to spread then it will also affect the Pound due to our exports.

What does all this mean for exchange rates?

They key question everyone wants to know is will the GBP/EUR rate keep going up past €1.25 testing new highs, or will it drop back away again as it has now done several times since hitting the 3.5 year high several weeks ago.

One thing I am certain of is that the Euro will continue to lose value. What is impossible to quantify is how the Pound will fare in the shadow of the EU problems. 50% of our exports go to Europe, and of course our banking industry is heavily tied to the EU, so a further escalation of the crisis could start to affect the Pound.

Couple this unknown quantity with the threat of further QE and there is a strong case to be made for the Pound/Euro rate to struggle to make further gains and indeed drop back away.

Don’t just hope for the best rates; make it happen

With much volatility and conflicting opinions on where markets are headed, it’s more important than ever to know your options, and take advantage of the expert knowledge I can offer you for no cost. I have worked in the FX markets for nearly 10 years and so have a very good knowledge of not only what moves exchange rates, but strategies and tools you can use to help you achieve the best possible exchange rate.

If you need to buy or sell any international currency, send me a free enquiry now to find out what your options are. Everybody’s requirement & attitude to risk is different, but in having a free consultation and gaining full knowledge of all the options available to you, you can make an informed choice on what is best for you.

Click here to send me a free enquiry

Weekly GBP/EUR forecast, and the weeks data

Monday 11th June 2012
Good morning. So another Monday morning and a fresh week to look forward to. Today I will take a look back at the reasons why the GBP/EUR exchange rates are being pulled in both directions due to the continuing crisis in Europe, and the possibility of more QE in the UK. In addition we will look at what measures you can take to protect against adverse exchange rate movements.


In this week’s Report:

• BoE hold off more QE, for now at least
• EU markets get the jitters over Spain
• Global Economic turmoil continues to drive rates
• Round up of the week’s other data that may affect rates

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

Sterling vs. Euro;

The BOE left interest rates on hold at the record low of 0.5% again this month and despite speculation, resisted pumping more money into the quantitative easing program which helped support the pound on Thursday. However the minutes from this meeting out later in the month will state how the members voted and will be eagerly awaited for signs of any on the horizon. As there was an outside chance of QE, the fact there was not gave Sterling a slight boost. However, it’s now very likely we will see more stimulus in the coming months, so the Pound could well fall in value.













What's happening in Europe? Will the Euro get weaker?

Moving to the EU, with all eyes on the problems in Greece recently the focus seemed to be shifting towards other euro countries. The Spanish credit rating was downgraded to a triple B status by the Fitch rating agency, a strong sign it thinks Spain's ability to honour its debts is weakening. This fuels rumours that Spain could be the next country to seek a bailout and speculation over the growing size of the bailout could begin to mount.

Elsewhere, France has had to cut its growth forecasts for Q2 (April to June) of this year to -0.1% having previously predicted there would be zero growth. This cut is another sign of the lack of growth within the Eurozone after the latest set of official figures confirmed the EU economy achieved zero growth in the first three months of 2012.

The GBP/EUR rates this week have seen highs of 1.2416 and lows of 1.2283. Putting this into real terms, a transfer of £100,000 would have a difference of just over 1300 Euros in just 3 trading days.

With the continuing problems in the EU, pressure from the IMF for the UK to cut interest rates further and the likelihood that there will be further funds pumped in to the UK’s QE program, the GBP/EUR rates really could go either way in the following weeks.

Options to help you get the best exchange rates

At the Foremost Currency Group we can help protect you from an uncertain market. Waiting until the last minute and leaving your transfer to chance can often prove to be a very costly mistake. So what are your options?

Do Nothing – This high risk strategy means relying solely upon a spot contract and one won’t know the rate of exchange achievable until the actual point of buying the currency. The volatility and unpredictability of the currency markets makes this strategy high risk and speculative. The markets do move both ways, so it could result in a win (or lose) situation, however it does make budgeting for the future virtually impossible.

Secure a Forward Contract – This will enable you to lock into a rate of exchange the moment you know you have a currency requirement in the future. It will protect you against any market movement, both positive and negative and you will know exactly how much the transaction will cost you.

Use Currency Options –The two key tools are a Stop Loss order, which will protect you against adverse exchange rate movements and secure your currency if it falls below a pre-agreed level. The other is a Limit order, which is placed at the top end of the market to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you.

Whatever your requirements, send us a free enquiry now.

Weekly Economic Data that may affect exchange rates

Monday – We ease into the new week light on data. Of note are German wholesale prices released at 7am, followed later in the day by some House Prices from the Royal Institute of Chartered Surveyors.

Tuesday – Starting in the UK we have the latest Industrial and Manufacturing production figures. Later in the day we will see a GDP estimate from the NIESR. Other data of note today is a budget statement and speech by the US Federal Reserve.

Wednesday –In the EU today we see German inflation data and EU wide Industrial Production. Over in the States we have Inflation data, Retail Sales and Business Inventories. There is also an interest rate decision for New Zealand.

Thursday – A monthly report from the ECB is released today, followed by inflation data. In the USA there are further inflation measures and jobless claims, unusually for a Thursday there are no UK releases of note.

Friday – We end the week with UK Trade balance data, followed by EU trade balance data. In the USA consumer sentiment figures are released.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

Bank of England decide not to pursue QE, for now..

Friday 7th June 2012
Good morning. The markets remain very volatile with the Pound/Euro rate continuing to be pulled in two directions. Only yesterday we saw lows in the €1.22's and highs touching €1.24's, illustrating just how unpredictable things are at the moment. So today I'll take a look at what is pulling the rate; Fears of Spain having debt trouble, and when the Bank of England are likely to pursue Quantitative Easing.

The Bank of England and Quantitative Easing

Yesterday the Bank of England left it's interest rates at 0.5%, and left quantitative easing unchanged at £325bn despite mounting speculation that it would take steps to stimulate growth this month. Before the decision, it looked like around 25% of analysts thought they would pursue more stimulus, and so this was partly priced into the value of the Pound.

When they announced no change for the moment, the Pound then corrected to the upside. If you look at the chart, you can see the instant reaction at 12:00pm yesterday when the announcement was made.

I actually thought there was an outside chance of them announcing further stimulus. Indeed the decision contrasts with the recommendation from the International Monetary Fund (IMF), which last month urged the Bank to restart QE to help restore Britain’s faltering recovery.

I now expect a much higher chance of further Quantitative Easing in July. It's likely that they have simply held off, as should the situation in Europe deteriorate further, they will have this in their back pocket to try and stimulate growth. So, expect a rocky road for Sterling in the coming months.

Spain issues spook the market

There have been reports in the past few days that Spain was seeking an immediate bailout from eurozone funds. I recent weeks I have been warning that behind the headlines about Greece, Spain and other EU countries are facing serious problems. There is every likelihood that the EU will see a domino effect with debt issues spreading.

Spain's economy minister has since dampened speculation that the country is about to seek a bailout of its bank sector, saying that no decision would be made until audits of the banks were completed, possibly by the end of June.

Giving some support for the Euro was strong demand for Spanish bonds at an auction on yesterday, which was seen as a key test of the country's ability to raise funds, but it had to pay a higher interest rate. The rate on the 10-year bonds was 6.044%, up from the 5.743% paid when bonds were last sold in April.

What next for Pound/Euro exchange rates?

I wish I could foresee what will happen, but unfortunately nobody can! On the one hand, the Euro is being pulled down by the well publicised problems with Greece and Spain. I think the Euro will continue to get weaker.

Will the Pound/Euro rate go up though? I don't think it has much further it can go. It peaked several weeks ago in the €1.25's, but speculation on QE in the UK will likely limit any further gains. Being in recession with more QE widely predicted, I can't see where any Sterling strength is going to come from .

If you need to buy or indeed sell Euros, then contact me today for a free consultation on your options. There are various ways we can help you take control of the market to help you get the best exchange rates.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

Sterling/Euro & Pound/Dollar forecast outlook

Saturday 2nd June 2012
Good morning. For a change today's post comes to you on a Saturday morning - I thought given the long 4 day break in the UK, I would post the latest currency news for the next 4 days. UK markets will re-open on Wednesday morning, and blog posts will resume then. Today I will do my usual analysis of where rates have moved in the last week, and the forecast for future exchange rate movements.

In today's Report:

• Pound/Euro falls back on poor UK data
• Pound/Dollar tumbles 10 points in a month
• EU debt crisis continues to spook markets
• Round up of the week’s other data that may affect rates

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

Sterling vs. Euro;

Last week we have again seen a similar fluctuation in the GBP/EUR cross to previous weeks, with the rates moving close to the recent 3 and a half year high near the mid 1.25’s, before dropping down to the high 1.23’s later on in the week. This has been as a result of some important activity within the Eurozone which includes increasing troubles within Spain and poor manufacturing data within the UK which will be explained in more detail below the graph.













Eurozone Problems Continue to weaken the Euro

Over recent weeks the main problems within the Eurozone were from within Greece due to the political unrest that we have seen recently. However this week we have seen fresh concerns from Spain surrounding their banking sector. The Spanish bank ‘Bankia’ on Friday revised their 2011 figures from a €300m profit to a €2.98bn loss, followed then by a request to the state for a €19bn bail-out. Shortly after this announcement, the rating agency Standard and Poor's (S&P) downgraded Bankia and four other lenders within Spain to ‘junk’ status.

Another big problem in Spain at the moment is the status of their bond yield. They are currently trading at a level of 6.5%. In the long term yields higher than 7% are deemed to be unsustainable. Greece, Portugal and the Rep. of Ireland were all at this level when they received international bail-outs, which is beginning to look like a very big possibility for Spain.

There is also still a massive amount of uncertainty surrounding Greece’s future within the Eurozone. Recent opinion polls within Greece have been contradictory of each other with varying results on whether the left wing Syriza party, or the right wing New Democracy party are leading the election, which is to be held on the 17th of June. With these problems in the Eurozone we saw the pound rise to mid €1.25’s throughout the week against the Euro, and we saw these levels stay quite flat until the end of the week.


UK Data disappoints, pulling Sterling lower

Pulling rates back down was the UK Purchasing Managers’ Index (PMI), which came in very low on Friday against what was expected. We currently have a level of 45.9 compared to the predicted 49.8. Companies cut back on production and employment as inflows of new business declined amid rising uncertainty among domestic and overseas clients. The headline index fell by 4.3 points over the month, the second-steepest fall in its 20 year history. At 45.9 we currently have the lowest PMI figures for over 3 years which has significantly weakened Stirling against a basket of currencies and pushing the GBP/EUR rate towards the high 1.23’s.

The only other key data releases of note within the Eurozone came from Germany. Unemployment change data was released with an unchanged figure following a predicted 5k decline. Consumer Price index data was also released at 1.9%, coming in 0.1% lower than predicted.

We have a very important week coming up with regards to data releases. There is lots of data being released by The European Monetary Union (EMU) including Producer Price Index, Retail Sales, GDP figures and interest rate decisions from the European Central Bank. Spain also have the release of their PMI data.

Back in the UK we have the very important releases of interest rate decisions and Quantitative easing, of which an increase of monetary stimulus has been predicted by many experts over the last month.

With some very important data being released it is shaping up to be a very volatile week for the GBP/EUR cross with the potential for the rates to fluctuate massively. It will definitely be worth your while if you are looking to exchange your currency over the next few weeks, to get in touch with us to discuss your options:

Click here to send me a free enquiry now

Sterling vs. US Dollar;

Last week was a dramatic one in the markets with the GBP/USD rate shedding around six cents in a week. Throughout last week the dollar strengthened against the pound ending the session around a four and a half month low. More talk of a Greek exit from the Euro-zone and a lacklustre response to the fiscal crisis in Europe is weighing on the pound, which had a miserable May, losing ground against the surging US dollar.













In the US, consumer confidence fell to its lowest levels in eight months as fears over the global economy caused unrest. The Consumer Confidence Index fell from 68.7 in April to 64.9 its lowest levels since October 2011. Consumer spending currently makes up around 70% of the U.S economy activity so the figures are watched closely, but even with the announcement the dollar continued to gain strength over the course of the day.

A run of positive UK data midweek could not save sterling from falling to its lowest levels for a long time. Worries over Spain’s rising borrowing costs and banking sector once again caused the value of the greenback to increase as investors headed back to the safe haven dollar.

Last Friday data showed that British manufacturing activity shrank at its fastest pace in three years in May as a broad-based global economic slowdown hit demand for British goods. This weakened the pound heavily and saw fresh lows for the currency pairing.

Also on Friday the hotly awaited non-farm payroll figures were released, American employers in May added the fewest workers in a year and the unemployment rate unexpectedly increased as job-seekers re-entered the workforce, further evidence that the labour-market recovery is stalling. There was not much of a reaction to the figures but as soon as the US markets opened, Greenback weakened against Sterling and rates pushed up higher.

It is a brave person who simply waits for the rates to move in their favour. With so much uncertainty in the markets it is important to know your options to help you make an informed decision as to when you make your move.

Click here to send me a free enquiry now

Weekly Market data that might affect exchange rates

Monday – UK Markets are closed for Spring Bank Holiday, however we will see some Halifax House Price data. There will also be various EU releases however including inflation data and Investor Confidence measures.

Tuesday – UK markets remain closed for the Jubilee. There are some EU retail Sales, Inflation data and German factory orders. There is also an interest rate decision for Australia and Canada.

Wednesday – UK Markets reopen today and there’s a lot to digest. EU GDP figures are released at 10am, and later in the morning we have an interest rate decision for the EU, followed by a press conference. There could be GBP/EUR volatility on the back of what happens today. Over in the states there are some productivity measures and the Fed’s Beige Book (this reports on the current economic situation in the USA).

Thursday – Today we see the latest decision on UK interest rates and Quantitative Easing. It’s this that will likely drive Sterling’s value in the coming weeks, so keep a close eye on what happens today. Over in the USA we see Jobless Claims and measures of consumer credit.

Friday – We end the week with a raft of data from Germany, Europe’s biggest economy: Wholesale Prices, Imports and Exports & Trade Balance figures. These releases are followed by inflation measures for the UK. Later in the afternoon we see US Trade Balance figures and Unemployment data from Canada.

Getting the best exchange rates

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.

Click here to send me a free enquiry

Spanish bailout fears drive Exchange Rates

Thursday 31st May 2012
Good morning. So far the week had been fairly flat, hence the lack of updates since Monday morning. Pound/Euro rates had been stuck at €1.25 and Pound/Dollar rates range bound in the $1.56 to $1.57 range. This all changed yesterday however and we saw market movement on the back of developments from Spain...

Spain concerns spook markets

Further concern in the Eurozone has caused the Euro to drop further, boosting GBP/EUR rates slightly. Concerns grew yesterday that Spain may be forced to seek a bailout, which caused the Euro to plummet yet again. It’s all to do with Bond yields; they are trading above 6.5%, very close indeed to the 7% level beyond which borrowing costs are deemed unsustainable over the long-term.

A rate consistently above 7% is considered to be unsustainably high and an indication that markets think a country will be unable to pay its debts; Greece, Portugal and the Republic of Ireland were at that level when they received international bailouts.

Spain's economy has become the focus of investor concern due to the uncertainty surrounding the fate of its banking system. On Friday, Spanish banking group Bankia, which was formed from the merger of several struggling regional lenders, asked for a 19bn-euro bailout, a much larger amount than had been expected.

This of course has not been focused on too much due to the more publicised problems in Greece, but the fact is Spain, Italy and Ireland are also facing significant problems. These concerns in Spain have caused the Euro to fall, hitting its lowest rate against the US dollar for two years, falling to $1.2433. Pound/Euro rates rose slightly to €1.2530 on the uncertainty.

Pound falls against US Dollar

There was an inverse effect on GBP/USD rates, as we saw Sterling fall to a 4 month low on the worries about Spain's banking sector problems and its rising borrowing costs. This has caused a flight to safety, with investors selling currencies that are perceived to be risky to the safety of the Dollar. This caused it to gain strength, making it more expensive to purchase.

Summary on where Pound/Euro rates may go

It’s still the EU problems driving rates at the moment. A weak Euro means people want their funds in perceived safer currencies such as Sterling and the US Dollar. This is keeping the Pound nicely supported against the Euro, however it has meant the stronger USD has become more expensive to purchase.

Moving forwards, many analysts are worried that the UK will need to pursue more Quantitative easing, indeed the Bank of England and International Monetary Fund both warned as much last week.

If they do pursue QE, it could weaken the Pound and make it a less attractive alternative to the Euro. This could well start to pull GBP/EUR rates back down.

But won't the EU problems mean the rate will keep getting better?

Not necessarily. Many clients reading the news are holding off buying their Euros on the expectation Europe will continue to have problems, the Euro will continue to weaken and thus become cheaper to purchase. I do happen to think the Euro will weaken more, but what most people are not factoring in is how the UK may be affected by the crisis, and by how much Sterling could weaken if we do see more QE.

While nobody can predict where rates will move in the coming weeks and months, I would caution that in holding out for an inch, you could very easily lose a yard. Rates to buy Euros are currently just shy of the best in over 3.5 years. Now of course they could go even higher, but it’s just as likely we could see things plummet back below 1.20 again, as forecast recently by Deutsche Bank. If you need to buy or sell Euros, simply hoping the rate will move your direction could prove very costly indeed. It’s simply gambling and speculating and could cost you dearly.

You therefore have several options:

• Fix your rate now so you know where you are and are protected against any decline in the rate. With the current uncertainty this is what I would do, but then I am risk averse and don't like gambling!
  

• Wait and see and buy your currency later; this could result in a win or lose situation and is no more than a gamble.

• Hedge your bets; convert half your funds now, and take a gamble on the other half. This strategy gives you some level of protection regardless where the market moves

• Use Currency Options – Stop Loss and Limit Orders allow you to instruct us to buy your currency if the rate drops below, or rises above, a certain level. This means you can still take advantage of gains in the rate while having a worst case scenario.

Each person’s requirements and attitude to risk are of course very different, so the best course of action is to discuss the options available, the market forecasts and to see how good our rates are.

So, get in touch now and send me a free enquiry. We can have a brief chat regarding your options and I can explain the mechanics of how our service works. I look forward to hearing from you.

Send me a free enquiry now to make the most of your currency.

* Please note we can only assist with bank to bank transfers for transfers of £5000+
I’m afraid we don’t deal in cash, or holiday funds at all.

Weekly GBP/EUR forecast, and the weeks data

Monday 28th May 2012
Good morning. The volatility in the currency markets continues, with wild swings in the exchange rate on a daily basis. On Friday alone the GBP/EUR rate fluctuated from 1.2430 to 1.2530 within 4 hours. Today as usual for a Monday I will look back over what has affected the exchange rate in the last week, and where rates may go in the coming weeks and months.

In this week’s Report:

• Greek worries continue to weaken Euro
• BoE & IMF warn on UK Growth
• USD strengthens due to its safe haven status
• Round up of the week’s other data that may affect rates

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

Sterling vs. Euro;

Last week we saw the pound falling off the top of a three and a half year high against the euro. During the middle of the week the pound slumped against a basket of currencies, with the Bank of England (BoE) and International Monetary Fund (IMF) concerned over growth within the UK. However towards the end of the week the pound had made a slight recovery, as you can see in the graph below.













There is still a lot of uncertainty surrounding the position of Greece within the Eurozone. The uncertainty is causing the euro to weaken significantly against worldwide currencies as we have seen with the EUR/USD cross drop below 1.26 and the EUR/JPY drop below 100.00 throughout the week. However the effect on GBP hasn’t been as large, due to concerns over UK growth keeping Sterling in check.

Greece recently announced that they were to hold a re-election on the 17th on June which will further prolong the uncertainty surrounding Greece remaining within the Eurozone. Many political and financial experts are predicting that Greece will leave the Euro, some even predicting that this will happen before the start of 2013. Despite this the European Monetary Union (EMU) will do whatever they can to keep Greece in the Euro as a default on Greek debts would be a disaster for the Eurozone and may even prompt Spain, Portugal and Ireland to attempt to do the same.

The main reason that Sterling has not seen the same strengthening against the Euro as most other currencies is due to two main factors. During the middle of last week the bank of England announced that UK growth will be strongly affected by the Eurozone debt crisis, this then lead to the BOE and the IMF suggesting that more quantitative easing (QE) may be required to protect the UK economy from the crisis in the Eurozone. The UK retail sales data was also released. Sales figures fell by 2.3% in April though some analysts feel the figures were distorted by April’s record rainfall and the sale of fuel dropping by 13.2% on the back of drivers panic buying in March over the threat of strike.

With speculation about more QE, the pound weakened against the Euro after revised GDP figures from the UK were released and showed a further 0.1% decrease to -0.3% due to the construction industry being weaker than first expected. However towards the end of the week, concerns surrounding the Eurozone came back into focus following the predictions of Greece abandoning austerity measures and leaving the euro before 2013, and the fall in German bonds and manufacturing figures. This led to a slight recovery for the pound pushing the rate back up over the €1.25 mark having dropped down to mid €1.23’s earlier in the week.

As was mentioned in posts last week, there are very contrasting forecasts regarding market movements with Deutsche Bank forecasting €1.16 in the next few months and Barclays capital forecasting that rates will reach €1.32 within the next year. As we have seen with the markets this week, there has been a very large fluctuation sometimes over the course of just a few hours.

Of course changes in the exchange rates can have a big impact on the cost of your currency purchase, so to discuss the options available to protect you, get in touch today.

Weekly Economic Data that may affect exchange rates

Monday – US Markets are closed for Memorial Day today and so markets are very quiet. There are no data releases of note.

Tuesday – In the UK today we will see Nationwide House Prices and an Industrial Trends Survey. In the Eurozone markets will look to the latest German inflation figures and Retail Sales. In the USA there are measures of consumer confidence and Home Prices.

Wednesday – Starting in the EU today we have Money Supply, Economic Confidence, Consumer Confidence & Industrial Confidence. In the UK we will see Consumer Credit, Money Supply, Mortgage Approvals and a measure of consumer confidence. We end with Home Sales data from the USA.

Thursday – Germany releases its latest unemployment data. Staying in the EU we also have some inflation data. Over in the USA we see the latest GDP figures, Unemployment and Jobless Claims. There are no UK data releases of note.

Friday – German and EU inflation data is released this morning, closely followed by EU unemployment. In the UK we also have some inflation data. We end the week in the USA with average earnings, inflation data, Non-Farm payrolls and employment data.


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