Showing posts from February, 2009

Exchange Rate Forecast

Yesterday's Currency Movements
After an intial decline in Sterling Exchange rates in early trading yesterday, Sterling rose broadly throughout the day yesterday, boosted by stock market gains, a UK government plan to insure banks' toxic assets and the fact that losses at Royal Bank of Scotland that were less than feared, although still massive.

The British government also yesterday announced a scheme under which it could end up insuring more than 500 billion pounds of bad assets in an attempt to get lending flowing again.

Spikes in Sterling exchange rates have been few and far between recently, with the general view of the UK economy being extremely poor. Despite the slight claw back Sterling made, the view of the majority of analysts is that Sterling will continue to be outperformed by the other leading currencies throughout this year, including the Euro and US Dollar.

This could be time to consider locking in the rates that are currently more than 10% better for Sterling to Euro…

Sterling Outlook very poor

Sterling has started to weaken this morning and exchange rates have fallen, following the news that the UK Economy is the worst since 1980, the IMF predict the UK will be the worst performing economy this year, and also news that RBS has posted the the largest annual loss in UK corporate history - a staggering £24.1 billion pounds.

Lets look at each story in turn and what this means for the future value of Sterling, and therefore exchange rates:

UK economy worst since 1980
Britain's economy contracted at its fastest pace since in nearly 30 years in the last three months of 2008, official figures confirmed yesterday. Households also cut spending at the sharpest rate since 1991.

The Office for National Statistics (ONS) said its second estimate of GDP showed a shrinking of 1.5% in the last three months of 2008. The annual rate was revised down by 0.1 percentage points to a fall of 1.9%.

Analysts had expected a slight downward revision of the quarterly rate, however the ONS left this uncha…

UK GDP Figures & Sterling Exchange Rates

Bail Out Package for USA
US President Barack Obama has addressed a joint session of Congress for the first time, warning that the nation faces a "day of reckoning". Stressing the severity of the economic crisis, Mr Obama told law makers that the US would emerge stronger when it ended. "We will rebuild, we will recover," Mr Obama said, adding: "Now is the time to act boldly and wisely."
Republicans said Mr Obama's plans were "wasteful", saying they spent "money we do not have on things we do not need". The president has seen Congress pass a $787bn eonomic stimulus plan and is preparing to announce a budget. Keep a careful eye on this news, as any dramatic measures could have big consequences on the value of the US Dollar. If measures are taken that are seen as positive for the US economy, we could see the dollar gain strength, and exchange rates plummet. We are already well away from the days of $2 to the pound, with current levels ar…

GBP Sterling EUR Euro Exchange Rate Forecast

Sterling Strengthens (GBPEUR outlook)
Sterling extended its broad rally on Monday, accelerating gains against the euro in particular after the European Central Bank chief said the euro zone finance system, like others, was under "severe" strain.

Currency traders said Jean-Claude Trichet's remarks prompted macro hedge funds to sell euros against sterling, while the pound's upswing also gathered steam against the broadly weak yen.

A weaker EU economy means the currency (EUR) also weakens and therefore becomes cheaper to purchase. Levels are already 12% higher than at the beginning of January, making a €150k purchase over £17k cheaper.

Yesterdays news follows Sterlings gains on Friday against the euro on Friday thanks to a surprise rise in UK retail sales last month that suggested there's still life in the British consumer.

Given the expected poor performance of the UK economy for the coming year however, these levels may not last for long. Consider taking advantage of …

Exchange Rate Outlook for this week.

More Cash for UK Economy?
A government minister has suggested that plans to inject more cash into the economy could happen "quite soon". Treasury Secretary Stephen Timms told the BBC the government and the Bank of England were in talks regarding so-called quantitative easing.

Quantitative easing effectively allows the central bank to write cheques to banks in exchange for assets. The hope is that this would encourage banks to lend to consumers, who would spend more, helping economic recovery.

This method is seen as a way to help the economy, as the benefit from lowering interest rates is seen to be diminishing. As the world economy cools, and access to credit remains expensive or hard to obtain, UK policy makers have been looking of different ways to encourage the banks to lend again.

Earlier this month the central bank opted to lower interest rates to 1% from 1.5%, marking the fifth cut since October. But many analysts say cutting interest rates now will not be enough to get th…

Exchange Rate Outlook GBP EUR USD CAD

Todays UK Data
The only data of note for the UK today is monthly and annual retail sales figures. The retail Sales released by theOffice of National Statistics measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. This can then have an effect on the value of the pound, and therfore can cause volatility in exchnage rates. Get in touch today to find out how this may affect exchange rates.

USA and Canada
We also have Consumer Price Index data for both Canada and the United States. This is a good indicator of inflation in the two countries, and often has a big impact on exchange rates. If you have a requirement to purchase either CAD or USD then contact us to find out what this may mean for exchange rates.

UK Repossessions
A sharp increase in the number of people having their homes repossessed last year is expected to be revealed by figures released later…

Sterling Gains Strength

This morning we have seen Sterling gain strength against a basket of major currencies.

As you can see from the GBPEUR chart below, the exchange rate for this currency pair is now close to the highest in nearly 3 months.

The main reason for this is Euro weakness caused by bug budget deficits in some EU countries.
The European Commission has taken disciplinary steps to tackle swelling budget deficits in six EU countries. It said that France, Greece, Spain, Ireland, Latvia and Malta had breached EU rules by allowing their budget deficits to exceed 3% of GDP in 2008.
The global downturn has taken its toll on public finances as countries try to spend their way out of recession. The Commission said it would issue a deadline in March for the countries to reduce their deficits. As the global recession takes hold, it has provided an opportunity to secure Euros at much higher rates than available of late.
If you have a Euro requirement, consider fixing your rate sooner rather than later, as due …

Sterling GBP Euro EUR Exchange Rate Outlook

The main news today will be the UK Bank of England (BoE) minutes, details of which are outlined below. This often has a big impact on the currency markets, as it gives an insight into future UK interest rate movements, and therfore effects the value of the pound and can cause big movements in exchange rates.

UK Manufacturing
The government is being urged to give the same financial support to manufacturing during the recession as it has to failing UK banks. The Work Foundation think tank wants emergency state funding to help save jobs and companies.

It says the sector is "extremely important for jobs, exports and GDP", and will offer one of the best chances for growth in an upturn. The government has pumped billions of pounds into failing UK banks. If they do indeed do the same for manufacturing, then this is likely to be viewed as negative for the beleagured UK economy, and thus the pound.

The economy is in a very fragile state at the moment, and further bad news for the econo…

Sterling Euro Best Exchange Rates

UK Inflation Data

Lots of UK data due to be released this morning. We have both the CPI Consumer Price Index Data and RPI Retail Price Index Data. Both are a good indicator of how the UK economy is performing, and also the UK inflation level. The latest figures for the rate of inflation were expected to show that it has fallen yet again.

However, the figures have just been released and show UK inflation at 3%, higher than the expected 2.7% figure.

This has strengthened the pound slightly, as higher inflation figures usually mean a lower likihood of the Bank of England cutting interest rates again. The Bank of England has already cut interest rates to 1% in an attempt to stimulate demand and the economy.

Interest Rates
What do these mean for exchange rates? Well, when a country or economic zone cuts rates, it provides less return for investors and thus weakens the currency. So, interest rate cuts for the UK will likely weaken the pound, and bring exchange rates down.

The bank of England have…

Sterling GBP Euro EUR Exchange Rate Forecast

CBI warn of government overspend
The government will have to borrow £100bn more than anticipated during the recession, the Confederation of British Industries (CBI) says. The figure is among dire predictions it makes about the UK economy in 2009. Despite this gloomy forecast, Sterlig gas remained steady most of today. It could well be the markets wait for figures to back up this prediction.

The CBI says that the economy will contract by 3.3% this year, compared with its previous forecast in November that it would shrink by 1.7%. The CBI predicts there will be 2.9 million people unemployed by the end of 2009, topping three million in 2010.

This prediction which is worse than orginally forecast may well wiegh heavy on the pound. More government spending and higher unemployment may well result in a weakening of the pound, and thus lower exchange rates if you are buying foreign currency. If you have a requirement to purchase currency in the next 9 months, consider fixing your rate now to…