Pound/Euro gains February 2012 Forecast Predictions

Wednesday 1st February 2012
Good morning. The Pound surged through trading yesterday afternoon, rising to a 2.5 month high against the US Dollar, and rising close to an 18 month high above €1.20 against the Euro. This was all due to hopes that Greece will reach a deal with its private creditors this week. The Below charts show how rates moved throughout the day yesterday

~Currency Movements on Monday 30th January 2012~

Pound makes significant gains against Euro

As the charts above clearly illustrate, Sterling had a great run agains the Euro yesterday, gaining by over 1%. Look at it go! It was due to hopes a deal to help Greece is imminent. Greek Prime Minister Lucas Papademos said negotiators had made significant progress in debt restructuring talks, sparking optimism the country may avoid a chaotic default.

This buoyed sentiment towards the euro and lifted riskier assets and currencies, including sterling. As a result, the Pound gained against both the Euro and US Dollar. This is because the Pound is seen as a risky asset, so the increased confidence strengthened the Pound. However, despite the gains, there is much in the next week or two that could reverse Sterling's fortunes.

Analysts still predicting Sterling will fall

Despite the jumps in the GBP/EUR and GBP/USD exchange rates, the Pound could come under pressure later this week, with purchasing managers' surveys on manufacturing, construction and services likely to give further evidence of the fragility of the UK economy.

Indeed, data yesterday highlighted the sharp declines in money supply and consumer credit, however the negative data had little effect on sterling. It does however increase the chance of further Quantitative Easing next week at the BoE's meeting on Thursday. Many in the market expect the Bank of England will announce another round of quantitative easing under its asset purchasing programme in February in an attempt to boost the economy.

The last time QE was announced Sterling fell across the board. It's difficult to forecast what effect it may have however. As it is being widely predicted, it will be partly priced in to the market rates already, however I expect further drops for the Pound should the BoE indeed go ahead with further QE.

What you should do if you need best Euro exchange rates

With the mid market rate again over the €1.20 mark, it represents the best buying levels for close to 18 months. With the risk of QE pulling the Pound back down, there are a few options you have if you need to buy Euros in the next 6 months.

You could fix the rate now on a Forward contract, so you lock in today's rates for up to 2 years and are protected against a fall in rates. You would need to lodge 10% of the total you want to convert as a deposit, with the remaining 90% due when you want the Euros transferrred. While protecting against downward movements in the rate, it does not allow you to take adcantage of any subsequent gains.

If you wanted to gamble on rates getting even higher, consider a Stop Loss. This is where you place an order for me to buy currency should it fall below a pre agreed level. In this way you can aim for higher, but have a worst case scenario should rates fall.

It should be noted that this is the 5th time rates have broken €1.20 in the last few years, and each and every time the spike is short lived, to be followed by a correction lower. If it were me needing Euros in the next 6 months, I would fix the rate as soon as possible, considering back in October it was €1.13.

If you need to buy Euros and want the best exchange rates, contact me now.

Today's Data

We’ll start down under today – Australia has Building permits, Commodity prices and Trade Balance figures – if good this could push GBP/AUD even lower than it already is. The UK releases its PPI data this morning also.

In the Eurozone there are also inflation figures. In the USA there are some important releases – Jobless Claims, Labour costs and Nonfarm productivity.

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.

Greek debt worries weaken Euro. Again.

Tuesday 31st January 2012
Good morning. There were no UK data releases of note yesterday, so yet again exchange rates were driven by events in the Eurozone. Sterling gained against a broadly weaker euro ahead of an EU summit in Brussels, with investors cautious as talks continued between Greece and private creditors on a debt swap deal. This pushed GBP/EUR rates higher, but not by much and rates remain under €1.20. Against the US Dollar, the Pound fell slightly as the weaker Euro drove investment to the safe haven US Dollar.

~Currency Movements on Monday 30th January 2012~











Pound gains vs Weaker Euro

European Union leaders yesterday had a meeting to discuss a deal introducing a permanent bailout fund for the euro zone, the European Stability Mechanism (ESM), and finalise a fiscal compact that will introduce a balanced budget rule in national legislation.

However, this was overshadowed by negotiations on a debt swap deal in Greece, which has weakened the Euro slightly and pushed GBP/EUR rates higher. Greece must reach a deal with its creditors to receive a second rescue package and avoid a disorderly default.

In the absence of any significant UK economic data releases, this drove the market yesterday.

Pound gains against US Dollar

As regular readers will be all too aware by now, when there are times of economic uncertainty such as those currently faced by the Eurozone, the US Dollar tends to gain strength due to it's safe haven status. Indeed this is what we saw yesterday, with the Pound losing ground against the Greenback, however we are only just below the recent 5 week high, and significantly above the recent 18 month low.

Today sees inflation data and consumer confidence measures for the states. Neither of these are likely to be very positive, so this could stop the Dollar gaining significant strength.

Pound to weaken as we get closer to QE?

Many market analysts, me included, expect the Bank of England will increase asset purchases under its quantitative easing programme in February. That is likely to weigh on sterling, although comments by BoE policymaker David Miles on Friday dampened the prospect.

Data releases this week for the UK will be watched very closely, as it is these that will influence whether the BoE indeed decide to opt for further stimulus next week.

Today's Data

Starting in the UK we have Consumer Credit, Mortgage Approvals and Net Lending. Of more importance will be the EU unemployment figures released at 10am. In the afternoon we see Canadian GDP and Industrial Prices, and in the USA we see inflation data and a measure of consumer confidence.

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.

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

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

Monday 30th January 2012
Good morning. Another Monday, so let's start the week with a full breakdown of the last weeks movements in the currency markets.

In this week’s Report:

• Pound/Euro hits 4 week low
• Sterling/Dollar rises to 5 week high
• UK headed back to recession, more QE on the way
• 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 the volatility continue in the currency markets as Sterling dropped to a 4 week low against the Euro. With the UK economy shrinking by 0.2% in the last quarter of 2011 and poor UK retail data being released, Sterling fell away from the €1.20 highs we have seen over the last few weeks. One of the only positives for the UK was the news from the BoE (Bank of England) that all 9 members had voted against more QE which lent some valuable to support to the pound. There were also some positive sounds coming from Greece as leaders met Private Creditors to look at reducing Greece’s rising debt levels.













Official Figures released last week showed that the UK economic activity shrank by 0.2% in the last three months of 2011 compared to the 0.6% increase we saw at the end of the third quarter. Chancellor, George Osborne, said the figures were disappointing but not a surprise. "They are not entirely unexpected because of what's happening in the world and what's happening in the Eurozone crisis," he said. "The truth is that dealing with those problems is made more difficult by the situation in the Eurozone."

Retail sales fell in January as shoppers reined in their spending at the start of the year, the CBI says. Its monthly survey found 44% of retailers said sales volumes were down on a year ago. Ian McCafferty, the CBI's chief economic adviser, said: "Shoppers have reined in spending across the board at the start of the New Year after taking advantage of early discounting last month, which boosted pre-Christmas sales.” He added that poor sales were likely to lead to further falls in the rate of inflation.

Key talks between Athens and its private creditors took place last week as they try to agree a debt write-off that would dramatically reduce Greece's debt levels. If an agreement can be reached, Greece is in line to receive 130bn euros in additional bailout funds. Without the latest bailout package Greece would struggle to repay 14.5bn euros of loan repayments that are due in March. The agreement would see Greece's debts dramatically reduced by half to its private creditors.

With the GBP/EUR rate falling this week we have seen a rise in the number of stop losses placed with our brokers and banks. This is where clients look to protect themselves against any adverse exchange rate movements. E.g. you can place a Stop Loss order to buy your Euros should they drop below a pre agreed level - for example €1.15. In this way you can continue to take advantage of gains in the rate, but have a ‘worst case scenario’ should the market move against you. To put this into prospective if you did not have a stop lose in place and the rate dropped to where it was just a few months ago, purchasing €200,000 would cost you nearly £10,000 more.

Send me a free enquiry now to find out how much we can save you.

Sterling vs. US Dollar;

Last week saw a complete reversal in Cable’s fortunes after GBPUSD rates went from an 18 month low to a 5 week high. The Pound began gaining against the Dollar as talks of a Greek bailout package put pressure on the Greenback as risk appetite increased, although any gains made were moderated by concerns over another round of Quantitative Easing in the UK. It’s expected that the Bank of England will announce that it will buy billions of Pounds worth of gilts as early as next month.













"Sterling/dollar has been weak in the last month, primarily because of the weakness of the euro but also because of evidence of renewed UK economic weakness," analysts at Lloyds said, adding that the run-up to any announcement of further QE was typically negative for the pound.

Sterling briefly suffered losses against the Dollar midweek as data released showed Britain’s economy contracted in the fourth quarter, shrinking by 0.2%, below the consensus forecast of a 0.1% contraction. Growth for the whole year was just 0.9 percent, less than half the expansion recorded in 2010. The Pound’s losses midweek were only temporary however, as the U.S. currency came under broad selling pressure after the U.S. Federal Reserve announced that it would keep interest rates near zero until late 2014 and may opt for more stimulus.

In light of this, sterling rose to $1.5719 (Interbank), its strongest since Dec. 22.

Although Sterling made gains of around 2% against the Dollar last week, market participants said these gains could be only temporary in nature. "Our view is still that this period of dollar weakness we've seen this year will prove temporary so we're not looking for cable to break back into the $1.60s," said Lee Hardman, currency strategist at BTM-UFJ. "Maybe the market is getting ahead of itself in terms of anticipating QE3, that does create some scope for disappointment which could help the dollar regain some lost ground in the coming month," he added.

To put last week’s gains into perspective, a typical purchase of $400,000 would have cost around £3010 less on Friday than if it had been bought on Monday. To take advantage of the recent gains, contact your dedicated account manager at Foremost Currency and take the first step to making the most of your currency.

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Weekly Economic Data that may affect exchange rates

Monday – There are no UK releases of note today. In the EU however we have German Inflation Data (which can impact interest rates) and Retail Sales (which reflect consumer confidence). In the USA we see Personal Consumption & Personal Income data.

Tuesday – Starting in the UK we have Consumer Credit, Mortgage Approvals and Net Lending. Of more importance will be the EU unemployment figures released at 10am. In the afternoon we see Canadian GDP and Industrial Prices, and in the USA we see inflation data and a measure of consumer confidence.

Wednesday – Today Nationwide releases its house price data for the UK, which reflect the national economy as a whole. In the EU there are various releases of inflation for both Germany and the EU as a whole. In the states there are Mortgage Approvals, Manufacturing data, Employment Numbers and Car Sales data.

Thursday – We’ll start down under today – Australia has Building permits, Commodity prices and Trade Balance figures – if good this could push GBP/AUD even lower than it already is. The UK releases its PPI data this morning also. In the Eurozone there are also inflation figures. In the USA there are some important releases – Jobless Claims, Labour costs and Nonfarm productivity.

Friday – We end the week with more UK House price info, this time from the Halifax. There are also further inflation numbers to add to those released earlier in the week. The Eurozone also has further inflation numbers and Retail Sales. Across the pond, we have Non-Farm Payrolls and Unemployment data – both of which often affect GBP/USD rates.



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Sterling falls again on Poor UK data/Optimism on Greece

Friday 27th January 2012
Good morning. Sterling dropped yesterday to a 4 week low against the Euro on poor UK Retail Data, and hopes of progress in Greek debt talks bolstering the single currency. Against the US Dollar however, Sterling hit a 5 week high after a host of Economic data including Unemployment was much worse than expected, weakening the USD and making it cheaper to purchase. It's these points I'll cover today after the usual snapshot of yesterdays movements:

~Currency Movements on Thursday 26th January~











UK Data disappoints, weakening the Pound

Yesterdays UK data was the CBI Distributive Trades Survey, which is released by the Confederation of British Industry. It's an indicator of short-term trends in the UK retail and wholesale distribution sector, and can have an impact on the formulation of economic policy at the Bank of England and within Government.

The forecast was for a 12% gain, however the actual figure was a 22% decline. The poor result reversed the gains made on Wednesday, and pushed GBP/EUR rates to a one month low.

Also Reports that private holders of Greek debt would accept a lower coupon on new bonds, and a successful short-term debt auction in Italy, encouraged investors to cut hefty short positions in the euro. In plain English, this means there is now more hope of progress with regards to Greek debt, and as a result the Euro gained some strength, becoming more expensive to purchase and compounding the drop in Pound/Euro rates.

Sterling climbs to 5 week high vs US Dollar

As has been the case for some time, GBP/USD rates have been trading inversely, as the debt crisis drives flows of investment into and out of the US Dollar. So as a result of the better outlook in the EU, the Dollar has weakened off slightly.

Of more importance was yesterdays economic data from the states. There were various measures of Jobless Claims and Homes Sales from the USA yesterday, and all of them were worse than forecast. This also weakened the US Dollar slightly. In the last week GBP/USD had hit an 18 month low, so the spike to the upside should please anybody that needs to buy Dollars.

Today's Data

We end the week with Consumer Confidence figures for the UK, Money Supply data from the Eurozone, and the USA releases its latest GDP figures in addition to a measure of Consumer Sentiment.

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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.

UK GDP poor, QE in Feb, Pound rises - why?

Thursday 26th January 2012
Good morning. Yesterday GDP figures showed the economy contracted by 0.2% in the last quarter, and in the run up to the release Sterling fell across the board. The minutes to the BoE meeting to discuss QE however revealed all 9 members voted not to increase it, and this then lent some support to the Pound. Concerns about the European Central Bank having to write down its Greek bond holdings as part of a deal to avoid a disorderly default also weighed on the single currency, pushing GBP/EUR rates up.

Today we will look at the GDP and BoE release, analyse why it pushed the Pound up, and take a look at how QE in February may affect Sterling exchange rates. Below you can see the drop in the run up to the data release at 09:30am, and then the recovery after the BoE Minutes:

~Currency Movements on Tuesday 24th January~











UK GDP shows we're headed to recession

UK economic activity shrank by 0.2% in the last three months of last year according to official figures released yesterday, in the form of GDP. The figures, from the Office for National Statistics (ONS), are a preliminary estimate, which could be revised either up or down by 0.2%. The quarterly fall in GDP is the first since the last three months of 2010, when freezing weather was blamed for a 0.5% drop.

The new figure was worse than had been feared, as most economists had pencilled in a 0.1% fall in activity. It also indicates the UK could head back to recession, defined by 2 consecutive quarters of negative growth.

In the run up to the figures, the Pound dropped significantly, as the market was braced for a possible worse figure. When the actual figure was released, it was only 0.1% worse than forecast, and so the effect on exchange rates was limited. In fact Sterling actually rose against the Euro, but this was due to the BoE minutes, which I'll cover in the next paragraph.

Bank of England minutes cause Pound to rise, despite more QE on horizon

Bank of England minutes released yesterday morning showed members voted unanimously to keep total asset purchases at 275 billion pounds. However, the minutes also said a further expansion of asset purchasing was "likely" to be required. The fact that no BoE policymakers voted for an increase in QE this month is what caused the Pound to rise after the release.

Many clients were surprised the GBP/EUR rate rose despite worse GDP, but it's because nobody voted for QE, signalling it's not quite the certainty that it was. Analysts still think it will happen in February however, and as this has already been widely predicted, the Pound actually gathered a little support.

"If they are saying "likely" in the minutes that pretty much means definitely. That's a pretty strong word from the MPC who would normally sit on the fence," said Lee McDarby, head of corporate dealing at Investec Bank PLC.

Although the last round of QE in October did not weigh significantly on sterling, traders said the need for further economic stimulus added to a shaky outlook for the pound.

Concerns about the European Central Bank having to write down its Greek bond holdings as part of a deal to avoid a disorderly default also weighed on the single currency, pushing GBP/EUR rates up.

Today's Data

Today Germany releases its latest consumer confidence measures. In the USA there is a host of data including Jobless Claims & New Home Sales. New Zealand releases Trade Balance figures in the evening.

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.

UK GDP and BoE minutes effect on Sterling

Wednesday 25th January 2011
Good morning. The Pound briefly hit a 4 week low vs the Euro yesterday, before recovering to around €1.20. Sterling also rose against the US Dollar, despite many in the markets predicting today could well generate weakness for the Pound. At 09:30 am today we will see the latest GDP figures, and the minutes to the most recent Bank of England (BoE) minutes - both of which could cause significant volatility for Sterling. We'll focus on this today, after the usual snapshot of yesterdays movements:

~Currency Movements on Tuesday 24th January~











BoE Minutes and GDP - Important day for the Pound

Today at 09:30 we will see 2 important UK data releases that will have an impact on the future of Sterling. GDP figures are released which will show if the economy is growing or not, and at what pace. It's a measure of the total value of all goods and services produced by the UK, and is considered as a broad measure of the UK economic activity.

We predict that the monthly figure will show a -0.1% contraction. 2 consecutive periods of contraction mean we're officially back in recession, so if the number is indeed negative it could weaken the Pound. If it's zero or above, expect the Pound to make modest gains.

We also have the BoE minutes released at the same time. This shows the discussions and voting in the decision 2 weeks ago to hold interest rates and Quantitative Easing. If it shows they discussed QE, or the discussions hint it's on the way in February, expect weakness in the Pound.

What effect could this have on exchange rates?

Analysts said upcoming British data and events could add to concerns about the prospect of more quantitative easing as austerity measures and the impact of the euro zone debt crisis hurt the economy, potentially weighing further on sterling.

BoE policymaker Adam Posen said on Monday Britain's economic outlook had improved slightly but more quantitative easing would probably still be needed, so for the most part it could be that this is already priced in to rates. markets move as much (sometimes more so) on rumour than fact, so as it's widely predicted, it's difficult to predict what effect this might have on exchange rates.

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Pound falls against Euro, rises against US Dollar

Tuesday 24th January 2012
Good morning. Yesterday Sterling fell against the Euro by around 0.7%, pushing rates down to the mid 1.19's. Against the US Dollar, the Pound rose by around 0.5%, as the Dollar weakened on predictions it's interest rates will stay at record lows for some time to come. The below chart illustrates how exchange rates fared throughout trading yesterday:

~Currency Movements on Monday 23rd January~





















Pound rises vs US Dollar



As you can see, rates steadily rose to buy the Dollar yesterday, although many investors were cautious about pushing the pound up further on growing concerns the Bank of England will have to inject further cash into the fragile UK economy. Expectations that the U.S. Federal Reserve will keep interest rates low for some years to come helped to weaken the US Dollar and made it cheaper to purchase.



Sterling falls against Euro



The Pound did not fare as well against the single currency. The Eurozone crisis has not escalated any further since last week, and the lack of any further bad news has taken the focus off the Euro, helping it to recover some strength. As a result exchange rates have fallen away from the 18 month high we recently saw.

Poor UK GDP and possible Quantitative Easing hurts Sterling



This week we will see UK GDP figures, to show the economy contracted, a factor that is likely to undermine sterling in the short to medium term. Bank of England Governor Mervyn King is also due to speak this week while the minutes from the most recent BoE Monetary Policy Committee meeting on Wednesday are all likely to reinforce expectations for further asset purchases.



It's now widely predicted that the BoE will pump further money into the economy in February, unless data released in the meantime suggests the economy is growing, which is unlikely. For these reasons it could well be that the Pound continues to drop against the Euro, while any resolution to the EU debt crisis could cause the USD to weaken, pushing rates back towards the $1.60 levels.

Today's Data



Today is a little busier, with figures showing the latest UK Public Sector borrowing. In the Eurozone there are some inflation measures, and data showing Industrial New Orders. Across the pond we will see US Manufacturing data, and Canada releases Retail Sales which show how confident consumers are about 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.