Thursday 19th June 2014 The currency markets have stabilised somewhat, with Pound/Euro now stuck at €1.25 and failing to be able to break through that resistance level. Pound/Dollar however has risen to a 5 year high of $1.70+ following yesterday’s meeting of the US Federal Reserve (FED). In today’s post I’ll take a look at these 2 currency pairs, and explain how you can take advantage of these excellent rates even if you don’t need to transfer your currency for some time. Sterling/Euro
We saw the Pound hit a 20 month high against the Euro this week of 1.2562, however some poor UK data has now brought the rate back down to 1.25. This was due to UK Retail Sales that were lower than expected. The main reason rates are so good are the rumour UK interest rates are going to go up this year, and the fact the EU have recently cut their interest rate. (Higher interest rates or the rumour of higher rates tend to boost a currency due to the higher return for investors.) This interest rate speculation has now mostly been priced into the market, which is why the current level is now stuck at €1.25. If you need to buy Euros, then consider locking in the rate while it’s so good. It could creep higher of course, but you don’t want to hold out for an inch and risk losing a mile. Sterling/US Dollar
Today rates have risen to their highest since 2009, and the level is now sat comfortable above $1.70. Last night the FED announced a further tapering of their Quantitative Easing programme. Usually you would expect this to strengthen the currency and bring GBP/USD rates down, however it was what was not said that the markets focused on. There was no hint or discussion of interest rates going up any time soon, and they also cut their growth forecasts, resulting in the USD weakening making it cheaper to buy, pushing the exchange rate to the highest in many years. How to take advantage of the current exchange rates
If you need to convert currency, the current levels are very attractive indeed. Many of my clients have been taking advantage of these levels by using a ‘Forward Contract’. This works by fixing today’s rate of exchange for up to 2 years, but you only lodge 10% of the total you want to convert. In this way you can guarantee a rate while protecting yourself against the market dropping away. This helps you to budget effectively, while retaining the majority of your capital. To discuss this type of contract, or to obtain a quote on the currency exchange you need to perform, click below to send me a free no obligation enquiry today. I can provide rates that are up to 5% better than banks or other brokers. Click here to send me a free no obligation enquiry now.
Tuesday 17th June 2014 Good afternoon. The pound dipped slightly this morning, after figures showed that inflation has fallen to 1.5% in May compared with 1.8% in April. The market had been expecting the number to be a little higher, so the immediate effect for Sterling was a dip in rates. As you can see from the chart below however, the dip was not to last, as some poor Economic Sentiment figures from Europe released shortly after brought the GBP/EUR rate comfortably above the €1.25 mark again:
It is the sixth consecutive month that inflation has been below the Bank of England's 2% target, which would generally mean that there is now less call for the Bank of England to raise interest rates. The market has clearly shrugged off the figures, probably because separate figures from the Office for National Statistics showed that UK house prices leapt by 9.9% in the 12 months to April, and a rate hike would help cool the housing bubble slightly. What next for exchange rates?
We are currently at an 18 month high for Pound/Euro, and around a 5 year high for Pound/Dollar. Tomorrow is all about the central banks. At 09:30am we will see the latest minutes from the Bank of England (BoE) showing what was discussed at their recent interest rate meeting. It will be very interesting to see if any members voted for a rate hike. Of more interest will be any accompanying comments that may indicate when the BoE will look to hike interest rates. Later in the day it is the US Federal Reserve’s turn to decide what to do with interest rates, and like the UK any hints they give to future policy could affect the Pound/Dollar cross. Getting the best exchange rates
I can source exchange rates for over 35 international currency pairs, traded in both directions, (for example EUR, USD, DKK, CHF, DKK, CAD, NZD, AUD, SEK, NOK, HUF, TRY, AED, PLN, CZK, SGD, THB, CNH etc). Whether you need to convert Pounds to Euros to buy a property abroad, or convert a foreign currency back to Pounds, I can help save you a significant sum. Get in touch for a free quote to compare with your bank or existing broker, as the rates I source can be up to 5% better. I’m afraid we don’t deal in cash or holiday funds, only bank to bank transfers for transfers of £5000+ Click here to send me a free no obligation enquiry now
Friday 13th June 2014 Good morning. Friday the 13th, unlucky for some, but not those that need to move Pounds to Euros. Sterling has surged higher following a speech by the governor of the Bank of England Mark Carney, in which he has signalled that interest rates may rise this year. I’ll go into a little more detail in a moment, but in a nutshell this has caused Sterling to rise higher, hitting a 20 month high of €1.25 against the Euro, and testing a 5 year high of $1.70 against the US Dollar: Mark Carney hints at interest rate rise
Last night in a keynote speech, Mr Carney said a rate rise "could happen sooner than markets currently expect". He acknowledged there was "already great speculation about the exact timing of the first rate hike" from their record low of 0.5%, adding that the decision was "becoming more balanced". The news immediately caused the Pound to gain, as the rumour of higher interest rates attracts investment into the Pound, giving it strength and causing exchange rates to rise. Will the Pound go up or down against the Euro?
Nobody knows which way the exchange rate will go, but in general the markets move more on rumour than fact. This means that the rumour of higher rates is now getting priced into the market, hence the current excellent buying level for Euros. In my view, from what we know right now it’s likely the Pound will remain strong, and the Euro will remain weak, so we could well see rates go higher. However there are situations that could cause it to fall back away, so you should be aware of these if you need to buy Euros and are holding out for a higher rate. In his speech he also described the perils ahead for the economy. He said he would look to his ‘trusty canoe’ to ‘navigate the most rapid and treacherous waters’. These include: - A housing market which could ‘overheat’
- High levels of household debt and a record current account deficit.
- He warned the UK economy is ‘currently unbalanced internally and externally’, adding this had to be addressed to turn the recovery into a ‘durable expansion’.
- Carney also pointed to ‘old imbalances persisting and new ones emerging.’
So there are lots of warnings that the economic recovery is not guaranteed to continue, and so there is the risk the Pound could drop back away. We also have the Eurozone that is taking significant steps to bolster their economy, and if these measures work the Euro could gain strength pulling rates back down. What should you do if you need to buy or sell foreign currency at the best rates?
Your first step should be a free consultation, which I can provide over the phone with no obligation. I can discuss your particular requirements, explain the various tools you can use to protect against the market moving against you, and provide you a quote to compare with your bank or existing broker. I can provide rates up to 5% better than available elsewhere, on up to 25 different international currencies, and the savings can be considerable. Alastair Archbold
Monday 9th June 2014 Good afternoon. Apologies for the blog being quiet over the last week or so, as have been out of the country. Much has happened in my absence however, with the European Central Bank (ECB) last week announcing a raft of measures aimed at stimulating the EU economy. Today I will cover what they did, and how it has affected the currency markets and exchange rates. Pound/Euro hits 18 month high after ECB cut interest rates
In their announcement last Thursday, the ECB revealed they have cut its benchmark interest rate from 0.25% to 0.15%. They also announced negative interest rates and cheap long-term loans to banks in a bid to boost the economy and encourage banks to lend to businesses rather than hold on to money. The ECB is the first major central bank to introduce negative interest rates and it is a little step into the unknown. The effect for exchange rates is a weaker Euro and the GBP/EUR rate rising to 1.24 which is the highest in 18 months. Why has it weakened the Euro?
It’s due to the lower return for investors. With interest rates now at 0.15%, people are more likely to invest funds in somewhere with a higher return. This means that funds are moved out of the Euro into other currencies, and the lower demand weakens the currency and makes it cheaper to buy, hence the rise in the GBP/EUR rate. Denmark did a similar thing a few years ago with the aim of weakening the Danish Krone, and the negative interest rate helped to stabilise the currency. For the EU there are 2 main benefits. The weaker currency helps to boost exports while making imports more expensive, which is helpful when inflation is too low. The move was quite widely expected, and in my most recent post I predicted they would cut and the GBP/EUR rate would go up. Because it was widely forecast however, it was for the most part priced into exchange rates already which is why the upwards move for GBP/EUR was relatively small. Do you need the best exchange rates?
Pound/Euro and Pound/Dollar are both trading at very good levels. Even if you don’t need your currency for some time, you can lock in the current rates for up to 2 years with a ‘Forward Contract’. You only lodge 10% of the total to be converted, and the remainder you keep until you need your currency. In this way you can guarantee your rate and protect yourself against a downward move in the market. Regardless of which currency you need to buy or sell, I can provide a free consultation over the phone to discuss your requirements, provide you a quote, and explain the options you have available. In this way you can make an informed decision on when to fix your rate. Click here to send a free no obligation enquiry now Alastair Archbold
Friday 30th May 2014 Good morning. Exchange rates remain quite steady today. Pound/Euro rates have dropped a little this morning after some very impressive German Retail Sales numbers. This strengthened the Euro and made it more expensive, pushing GBP/EUR down into the €1.22’s. Pound/Dollar rates remain a little above $1.6730. Will Pound/Euro rates go up or down June 2014?
As regular readers of my blog will now, the current high GBP/EUR rate is all to do with interest rates. The markets expect the UK to raise interest rates, and this has been gradually priced into the market over the last few months, resulting in the highest Pound/Euro rates in 18 months. Over in Europe, the threat of deflation means that the European Central Bank (ECB) may have to cut interest rates. Next Thursday we will find out as they announce their decision. I think there is a very good chance they will cut to around 0.1%. If they do, then Pound/Euro could go higher. However should they choose to wait, then we will probably see the exchange rate drop sharply. After their decision they will give a press conference which will give an insight into their discussions. All in all, this is a very very important week for the Pound/Euro cross. (See below for other economic information that could affect the rate. What should you do if you need to buy or sell Euros at the best exchange rate?
Perhaps you need to convert Sterling to Euros, or maybe you have Euros to convert to Pounds. Whatever your requirements, this week is an important one and will have an effect on the exchange rate you can achieve. Why not take the opportunity for a free consultation on the service I offer. I can explain what the market is doing, which way the rate could go, and run over the options you can look at to protect against the rate moving against you. My service is free, and I can also provide you a quote to compare with your bank or existing broker. You could be surprised how much you could save. Click here to send me a free no obligation enquiry now. Next week’s data that may affect exchange rates this week.
As regular readers of my blog will know, the main thing that causes exchange rates to move is economic data releases. Below I have listed the main economic data that I think could affect currency rates this week. Monday 2nd June 2014 The Manufacturing PMI (Purchasing Managers Index) is the main thing on the menu today. This captures business conditions in the manufacturing sector, and as a very important indicator of overall economic conditions. This is released today by the UK, EU, Germany, and the USA so expect some volatility for Pound/Euro and Pound/Dollar. Tuesday 3rd June 2014 Nothing of note from the UK today Over in Australia we have Retail Sales numbers and an interest rate decision from the Reserve Bank of Australia (RBA). The main driver for GBP/EUR rates will be the Unemployment numbers and inflation data from Europe. Wednesday 4th June 2014 GDP numbers are released from Australia today which could affect GBP/AUD rates. We also have GDP numbers from Europe, along with inflation data. Further afield we have Trade Balance numbers from the states, and an interest rate decision from Canada. Thursday 5th June 2014 The most important day of the week for GBP/EUR rates. The Bank of England (BoE) announces its Quantitative Easing (QE) and Interest rate decision today. I don’t expect them to make any changes. However, we also have the European Central Bank (ECB) decision, and there is a good chance they could cut interest rates. The market has already partially priced this in, but if they do cut the Euro could weaken and push GBP/EUR higher. If they don’t cut, Pound/Euro rates will probably drop. They will also give a press conference after the decision which could also have an impact on rates. Friday 6th June 2014 Trade balance figures from the UK this morning could create some volatility for Sterling. There are also Trade Balance numbers from Germany. Over in the states, the main event will be the Unemployment figures and non-farm payroll numbers. Regular readers will know this release often has quite a big impact on the Pound/Dollar rate. Looking for the best exchange rates? Make a free enquiry.
Wednesday 28th May 2014 The Pound has fallen quite a bit today against both the Euro and the US Dollar. GBP/USD is now sitting at a 6 week low of $1.67, which is the biggest one day fall in 4 months. GBP/EUR has fallen to a 1 week low of €1.2288. Why has the Pound fallen?
The currency markets move mostly on rumour. As regular readers of my blog will know, there has been much speculation UK interest rates will be going up at some point, and this has been driving the Pound higher as it gets priced into the market. However recent data such as this week’s poor Retail Numbers and Mortgage Approvals mean that the market is now paring back some of the more aggressive bets that the Bank of England could begin raising interest rates later this year. It now looks more likely to be next. These over-extended bets on sterling appreciation seem to have run out of steam. I have been pointing out in recent weeks that the market has got to the recent highs several times only to fall back away again, and this is exactly what we have seen happen again. Many clients took advantage of our ‘Stop Loss’ orders to protect against exactly this kind of thing, so those that have taken the opportunity to discuss their requirements with us have avoided losing more than necessary. Those that simply watched and hoped the market would keep going up will be disappointed. Don't just hope things will move in your favour; hope is not a reliable economic tool. Take control of your currency requirement by discussing your options with an expert currency broker. So which way may the exchange rate go next?
Financial markets still widely expect the BoE to be the first major central bank to raise interest rates but I think this is now very widely priced into the rates we already see. The next thing of major importance is next week’s ECB meeting, which could reveal a combination of policies to tackle low inflation and low credit growth. The key will be the timing of any stimulus if they decide to do any. If they are very aggressive in any stimulus measures, GBP/EUR will probably go back up. If however they are not specific and the markets don't think action is imminent, we could see the rate fall further still. Get in touch for the best exchange rates
I can not only help you achieve excellent exchange rates, we have various tools and contract types that can protect you against the market going the wrong way. If you have a currency transaction to perform in the next 12 months, and would like to discuss how I can help you, click below to send me a free no obligation enquiry. Click here to send a free enquiry today
Tuesday 27th May 2014 The UK and US markets opened today after being closed yesterday for the Bank Holiday. Initially things looked good for the Pound, rising against both the Euro and US Dollar as soon as the market opened at 8am. The reason for the initial gains was the Deputy BoE Governor Charlie Bean's comments at the weekend, where he said that the bank's plan to raise rates gradually means the first hike could come earlier than may otherwise have been the case. (Higher rates mean a higher return, and so the Pound gained a little strength.) The BoE governor Mark Carney speaks this evening, so any surprise comments from him could also have an effect on GBP/EUR rates, and is probably the most key event of the week in my opinion. In stark contrast, the European Central Bank president Mario Draghi said on Sunday that "more pre-emptive action may be warranted to ward off deflation". This hints to the markets that they may well pursue some sort of stimulus measures, which if they do could weaken the Euro. 
Pound falls after Mortgage Approvals
Data is thin on the ground today, so the only thing the market had to go on was this morning’s mortgage approval numbers. The figure was several thousand below what had been expected, and this took the steam out of Sterling’s run, lowering the value of the Pound by around 0.3%/0.4%. What next for exchange rates?
Focus is still on what the central banks of the UK and EU will do in the coming months. As explained above, there is lots of speculation UK rates are going up at some point, and that the ECB may well do the opposite. This has been steadily priced into the market over recent months, and is the reason GBP/EUR rates are close to an 18 month high. We will know more about any likely action in the coming weeks, and this is likely to move GBP/EUR rates from their currency position. If you need to buy Euros, or indeed convert Euros back to Pounds, then the market at the moment is treading a very fine line, and could move either way in the next few weeks. If you have a currency transaction to perform, it would be advantageous to get in touch with me about which way the market is going, and the options you have available to ensure you get the best rate and not get caught out by adverse market movements. It’s free to make an enquiry, doesn’t obligate you, and I can discuss your requirements and provide you a quote to compare with your bank or existing broker. Click here to get in touch for a quote, or to discuss the currency market. Economic Data Releases this week that might affect exchange rates
Wednesday 28th May 2014 We are very light on UK data today, but the markets will be reacting to last night’s speech by Bank of England governor Mark Carney. In the Eurozone we have the latest German Unemployment figures, in addition to EU wide measure of Consumer Confidence and Economic sentiment so GBP/EUR could be affected. Thursday 29th May 2014 The only UK data of note comes late in the day, with consumer confidence measures at midnight. The majority of the eco-stats being released today are from the United States: GDP figures, Jobless Claims, Home Sales and Consumer confidence. So there’s lots today that could well affect GBP/USD rates. Friday 20th May 2014 Again nothing of note from Britain. The only EU data worth noting is Retail Sales from Germany. It’s a very good indication of their economy as a whole, and being the largest in the EU it can sometimes affect GBP/EUR rates. Busy day in the USA again today, Income & expenditure figures, Inflation data and consumer Sentiment.
