Pound rises on MPC vote, but gains likely to be limited

Wednesday 20th August 2014 
The Pound has recovered slightly this morning after 2 members of the Bank of England's Monetary Policy Committee (MPC) voted to raise interest rates in August, the first time in three years that policymakers have done so. In today’s post I’ll explain why this caused Pound/Euro rates to rise, and why I think any gains will be limited and that Euro buyers should consider fixing rates sooner rather than later. I’ll also give my views on the Pound/Dollar forecast. 


Bank of England Split on interest rates 


This morning’s data showing 2 of the 9 members voted for a rate hike shows division within the BoE. It is the first time there has been a split in over 3 years. (Interest rates have been unchanged since March 2009.) It also suggested an early interest rate rise was desirable as a way of anticipating inflationary pressures from wage rises. 

Despite the split vote, it doesn’t really change all that much because yesterday’s inflation figures showed the Bank remained under no immediate pressure to raise interest rates. With inflation well below target and wage growth stagnating, any increase in interest rates at the moment would be premature. It’s for this reason that I think that the GBP/EUR rate will now be settled at around 1.25 or so for the moment and is unlikely we’ll see any more gains. Sterling has actually been in decline of late so this is likely a temporary spike upwards. 

Therefore if you need to buy Euros in the next 3 to 6 months, consider fixing the rate sooner rather than later while it’s still within a few cents of a 2 year high. You can do this by simply lodging 10% of the total you want to convert, and guarantee today’s rates for up to 2 years. 

Click here to find out the Pound/Euro rates I can offer 

Sterling /US Dollar 


We saw this rate increase too today, but gains were limited and short lived. The current rate sits a little above $1.66. Later this after we have the US version of today’s UK BoE release – the FED minutes. Any indications that they discussed easing policy or raising rates would cause the USD to strengthen and become more expensive to buy. 

Exchange rates to buy Dollars were at a 5 year high recently, but has since dropped from $1.72 to $1.66. I personally expect this currency pair to keep dropping as the US economy recovers. Rates closer to $1.60 are likely in 2015. 

Other data this week that might affect exchange rates. 


The remaining data this week is thin on the ground. We have UK Retail Sales tomorrow morning which are a good indicator of economic activity. I expect a rise of 0.4% and as usual if the number is lower than this, Sterling will likely drop in value. 

We have US Jobless numbers tomorrow, along with some EU inflation numbers. Friday is very quiet, and markets are closed on Monday for Bank Holiday. 

What does this mean for your currency requirement? 


The currency markets are very volatile, and when converting large sums even a small movement in the rate can end up costing you thousands. The service I provide is twofold. Firstly you can have a free no obligation chat with me about the exchange rate, and I can explain what is moving the rate and discuss which way it could move in the future. In this way you can make an informed choice on when to fix your exchange rate. 

When the time comes to fix a rate, I can provide commercial exchange rates that are significantly better than banks offer, by as much as 5%. This means that I can save you thousands of Pounds when converting one currency to another. 

If you need to convert funds and would like to discuss what is happening with rates, and obtain a quote to compare with your bank to see how much you can save, click below to send me a free no obligation enquiry today. It is free to make an enquiry and does not obligate you in any way. 

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Pound falls further after poor inflation numbers

Tuesday 19th August 2014 
The Pound has fallen further today, as this morning’s UK inflation figures were worse than expected. Inflation is a key indicator of when interest rates may rise. If the level of inflation gets higher than 2%, then this increases the case for the Bank of England to raise interest rates. 

We were expecting the figure to come in at 1.8%, however it was actually slightly lower than this at 1.6%. The lower number eases the pressure on the Bank of England to consider near-term interest rate rises and pushes the balance more in favour of a delay into next year. 

So that is what has caused the Pound to fall today, as the charts below shows. We are now sat at a 4 month low for Pound/Dollar rates, and a 3 month low for Pound/Euro exchange rates: 


What next for Pound/Euro & Pound/Dollar rates? 


Tomorrow morning we will see the recent minutes to the Bank of England’s decision to hold interest rates. These will show if any of the 9 members voted for a rate hike and what was discussed. 

I think there is a good chance at least one of the members voted to raise rates. If this is the case, I would expect the Pound to gain. If none of the members voted for a rise, then we could see the Pound fall even further. 

Are looking to get the best possible exchange rates? 


In addition to writing this blog to keep clients up to date with exchange rate movements, I can source you exchange rates that are up to 5% better than banks can offer. So if you need to buy Euros, convert funds back to Pounds, or indeed convert any international currency to another, then get in touch to see how I can help you. 

It is free to make an enquiry and get a quote, and you could save thousands of Pounds.

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Pound recovers over interest rate confusion

Monday 18th August 2014 
Things can move very quickly in the currency markets, and the Pound has recovered some of its losses today. So what has caused the Pound to rise? Strangely it is exactly the same as what caused it to fall last week; comments from the Governor of the Bank of England, Mark Carney. In today’s report I’ll look at the mixed signals he is giving on interest rates, and why this is affecting exchange rates.

Remember I can help you achieve exchange rates much better than available at banks, so if you need to convert one currency to another, click here to send me a free no obligation enquiry today.

Mark Carney continues to confuse the market over interest rates 


In my post last Wednesday, I explained that it was the expectation of interest rates going up in the UK that has been pushing the Pound higher and higher this year. Last week however Mark Carney hinted that rates would not be going up this year, and that is what caused the Pound to drop last week. (Higher interest rates strengthen a currency and vice versa).

Over the weekend however in an interview in the Sunday Times, he was very non-committal, saying that holding off raising rates is "an expectation not a promise"

He seems to change his mind quicker than the weather in the UK; one week he says that “rates would not rise above their current historic low, of half a per cent, before next year because of a "remarkably weak" rise in real wages.” and just a few days later he says that “the base rate may have to go up before households enjoy a rise in living standards.” 

So which is it? Confused? We are, and I think Carney may be too!  A little while ago his mixed signals over interest rates have been compared by one MP to him blowing hot and cold, like an unreliable boyfriend, and it's causing volatility in exchange rates.

What effect has this had on exchange rates? 


His comments last week caused the Pound to fall, however this morning the Pound was up again as markets try to decipher when interest rates will go up. 

So which was could rates move in the coming weeks? It’s impossible to know, and much will depend on what Carney says next.

The most important releases for the UK will be Wednesdays Bank of England minutes. These will show what Carney and his Monetary Policy Committee discussed when they recently decided to keep rates on hold. With Carney not giving a very clear picture on what his thoughts are with interest rates, these minutes will be watched very closely to try and decipher what the other 8 members of the rate setting committee think. If one or more of them voted for a rate hike, expect exchange rates to go up. If all 9 members voted to keep rates on hold, expect the Pound to fall. 

Are looking to get the best possible exchange rates? 


Get in touch to see how I can help you. Regular readers will know there is alot that can affect the exchange rate, and taking advantage of my 10 years  expertise in the currency markets could save you thousands.

You can have a free no obligation chat with me about the exchange rate, and I can explain what is moving the rate and discuss which way it could move in the future. In this way you can make an informed choice on when to fix your exchange rate. 

When you decide to fix a rate, I can provide commercial exchange rates that are significantly better than banks offer, by as much as 5%. This means that I can save you thousands of Pounds when converting one currency to another. 

 Click here to make an enquiry today and see how much you could save.