Currency Exchange Rate Forecast 2014

Tuesday 29th July 2014 
Good morning. It’s been a very quiet start to the week for the currency markets, with no data of note being released yesterday. Today is also quiet, so in today’s post I will give a quick round up of where exchange rates stand, and list the rest of the week’s economic data releases that I think could affect exchange rates. 

Pound/Euro 


The GBP/EUR rate cannot seem to sustain its highs. We have seen the rate climb into the €1.26’s before dropping back off. That’s exactly what we’ve seen happen again this morning. So why is the rate to buy Euros peaking and failing to climb higher? 

It’s because all the recent good news regarding the UK economy is no longer surprising the markets, and is now largely priced into the value of the Pound. I think in the short to medium term it’s unlikely we’ll see any more significant gains. In the medium to longer term however, if the EU needs to try and pump money into the economy then the Euro could weaken further and push rates higher. Also the closer we get to interest rates going up then the Pound could start climbing, but that’s probably some way off. 

Those looking to buy Euros should consider fixing the rate while it’s at a 2 year high, given that the rate seems to have peaked. Those that need to convert Euros to Pounds over the next year should consider fixing the rate on a Forward contract. While I don’t expect the rate to go higher in the short term, I do expect it up around €1.30 into next year. 

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Pound/Dollar 


With this exchange rate, we keep seeing it break above $1.70 before dropping back off again. This morning rates have dipped back into the $1.70’s.The reasons for this are the same as outlined in the Euro section above – the impressive UK economic figures are now largely priced into the Pound. 

Unlike Pound/Euro however, I expect Pound/Dollar rates to drop back away. There are 2 reasons I think this. Firstly, the US economy is starting to recover, and as this continues the Dollar will gain strength and become more expensive to buy. Secondly, as the Euro gets weaker, generally the Dollar gets stronger, so I expect this currency cross to drop off in the coming months.

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Do you want the best exchange rates? 


Are you buying selling property abroad and need to convert funds? Do you have accounts overseas you need to keep topped up? Perhaps you are a business that buys and sells goods in the Eurozone and need to convert between Pounds and Euros? 

Whatever your currency needs, I can help you source excellent exchange rates, fast international transfers, and various contract types to protect against markets moving against you. 

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This week’s economic data that could affect exchange rates 


Tuesday 29th July 2014 - The only data of note today was released earlier this morning, with UK mortgage approvals coming in slightly better than expected but lending figures slightly below the forecast. They effectively cancelled each other out so no change for the Pound. Later this afternoon we have US Consumer confidence numbers, which could affect Pound/Dollar rates. 

Wednesday 30th July 2014 - There is nothing of note from the UK today other than consumer confidence figures at midnight. We do however have lots from the EU and US so it could be a volatile day on the currency markets. 

Starting in Europe, we have Industrial Confidence, Economic Sentiment measures, in addition to inflation numbers from Germany. So lots here that could give an indication how the EU economy is faring, and this could affect Pound/Euro rates. 

It’s a very busy day in the states. We have Gross Domestic Product (GDP) figures which often affect exchange rates. There is also an interest rate decision, and although I expect rates to stay on hold, any comments or hints at future policy could affect GBP/USD. 

Thursday 31st July 2014 - Pound/Euro could be affected today by German Retail Sales and Unemployment numbers, and EU wide inflation figures. Canada releases its latest GDP figures, and over in the USA we have measures of unemployment. 

Friday 1st August 2014 - Inflation figures from Europe and the UK will be watched closely today by Sterling/Euro buyers. Other than that all data is from the states: Earnings, Unemployment, Inflation, Sentiment, and the all-important Non-Farm Payrolls that often causes large swings in the GBP/USD rate. 

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Pound drops from new highs after Bank of England minutes

Wednesday 23rd July 2014 
Since my last post on Monday, the Pound/Euro rate had been slowly creeping up until today, due to weakness in the Euro. In fact this morning rates touched a new high of €1.27, but as has been the case of late the gains were not to last… 

Bank of England minutes causes Pound to fall 


This morning at 09:30am the Bank of England released its recent minutes showing what was discussed and how they voted when interest rates were recently kept on hold. As you can see from the chart below, GBP/EUR edged up to €1.27 just before the announcement. This was because there might have been some of the 9 member committee that had voted for rates to rise. 

 
As it happened, all 9 members voted to keep rates on hold, signalling that rates are likely to remain at 0.5% for some time to come. Even though unemployment is dropping and the economy is growing, I think rates will not go up anytime soon until wage growth catches up. If they raise rates too quickly it could destabilise the recovery. You can read a detailed report on what happened today here on the BBC website.

Will Pound go up or down against Euro?


For the reasons outlined above, I can’t see the Pound gaining much more strength in the short term, so those that are looking for the best exchange rates should consider fixing now while it’s so favourable. By holding out hoping for more gains, you will probably find there is more to lose than there is to gain. 

For those converting currency back to Sterling, get in touch for a free consultation on your options. The Pound will get stronger eventually as we get closer to a rate rise, but there are ways to protect against the market moving against you such as Forward contracts, Stop and Limit orders. 

To find out more about the excellent exchange rates I offer, the contract types available, or simply to have a chat about which way the currency markets are going then click below to send me a free enquiry today. 

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Pound falls slightly from recent highs due to Ukraine crisis

Monday 21st July 2014
The Pound fell a little towards the end of last week, as worries about the tensions between Russia and the West in Ukraine meant that investors sought out safe haven currencies. When there is global uncertainty, it often causes ‘safe-haven’ currencies like the US Dollar to strengthen as international investors move out of riskier currencies, like the Pound. This is the main reason for the slip from the recent highs we have recently seen. 

Sterling has surged over the past year as Britain's economy has shown signs of a strengthening recovery, fuelling expectations that the BoE will hike interest rates before the year's end. In contrast the EU economy is faltering and they are likely to pursue stimulus measures which have weakened the Euro. 

Despite this, in recent months the Pound gets to levels in the €1.26’s against the Euro and the $1.71’s against the Dollar before dropping back away. Given Sterling can’t seem to sustain its gains, now is a good time to take stock of your currency needs. 


To discuss how I can help you get the best exchange rates, or to simply have a chat with a currency expert to talk about which way the rate may move, get in touch with me for a free consultation. I can discuss the currency you need to buy or sell, explain what could move the rate and help you to decide when to fix your exchange rates. When the time comes, I can provide you a quote to compare with your bank or existing broker, and even a small improvement could save you thousands when converting a large sum. 

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This week’s economic data releases 


What causes exchange rates to move? 

There are 4 main things – economic data releases, political events, natural disasters and uncertainty caused by war. Most of things are impossible to foresee, such as the current crisis in Gaza and Ukraine which could cause investors to seek safe haven currencies such as the US Dollar. 

What is known in advance are economic data releases. I have listed below the coming weeks scheduled releases that could affect exchange rates. For more detailed information on how these could affect the exchange rate you are interested in, contact me for a free consultation. 

Tuesday 22nd July 2014 

There are no UK releases today. In Australia we have a speech by the RBA governor so there may be some volatility for GBP/AUD rates. Other than that all data is from the USA – Inflation numbers and Home Sales. 

Wednesday 23rd July 2014 

Today could be interesting for the Pound, as we have the latest Bank of England minutes, showing what was discussed and how they voted in their recent decision to hold interest rates. There could be clues as to when UK interest rates may rise which could affect Sterling. 

In the Eurozone we see Consumer confidence figures and over in New Zealand we have their latest interest rate decision and Trade Balance figures. I think they may raise interest rates which would cause GBP/NZD to fall. 

Thursday 24th July 2014 UK 

Retail Sales numbers are released this morning, which are a good barometer of overall economic activity and so could affect the Pound. In the EU we have some inflation numbers. In the USA the latest jobless numbers and home sales figures are released, in addition to manufacturing PMI figures. 

Friday 25th July 2014 

UK Gross Domestic Product (GDP) numbers are released this morning. The expected figure is 3.1% - any higher and the Pound could rise, any lower and it could fall. 

In the USA we have Durable goods orders which often involve large investments which are sensitive to the US economic situation, so this release could cause some volatility in GBP/USD rates. 

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