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Showing posts from March, 2009

Economic Data and Exchange Rates

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GBPEUR up, GBPUSD down.
The pound fell yesterday by 1% as the car industry in the U.S. faces problems, and also the banking sector concerns caused investors to become worried about risk. This benefited the US dollar, and weakened some other currencies which are perceived as higher risk.

Sterling is typically vulnerable to equity market falls and heightened level of percieved risk. This left it among the biggest losers of the major currencies as it failed to benefit from data showing an encouraging rise in UK mortgage approvals.

Having said that, Sterling Euro rates actually improved slightly as the Euro weakened. The pound is still very weak. A good example of this is the current house price situation in the UK.

House prices are falling ever faster in the UK, according to the Land Registry. Prices dropped by 2% in February, which means the annual rate of decline is now 16.5%. The average property is now worth £154,000 - a level not seen since 2004.

Below we have todays economic releases…

Sterling Euro Exchange Rate Forecast

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Last Weeks Trading Summary
Sterling fell to a 1 week low against the US dollar on Friday, after data showed the UK suffered the biggest contraction in economic growth since 1980 in Q4 2008.

The figures showed the economy contracted by 1.6 percent. This was unexpectedly revised down from the previous 1.5% fall, while the annual rate of decline was also revised down to 2%.

Sterling gained against the euro, however, which came under broad pressure after German finance minister Peer Steinbrueck said fiscal irresponsibility in Europe could put the euro's stability and credibility at risk. The weakening of the Euro on the back of this is what caused rates to rise slightly.

"Sterling is being caught in cross currents at the moment," Standard Chartered senior foreign exchange strategist Rob Minikin said. "It continues to be vulnerable, but it is difficult to assess how to play that vulnerability, whether it should be against the dollar or against the euro," he said.

So, har…

Sterling falls GBPEUR outlook

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Sterling falls
Sterling fell against the dollar and euro on Thursday after data showed UK retail sales were much weaker than expected in February.

"We saw a weakening on the back of the retail sales and the market is focused on the macro-economic deterioration and the fact the Bank of England is doing everything it can to support the economy," said Phyllis Papadavid, a currency strategist at Societe Generale.

Today we have GDP figures, which will probably affect Sterlings value one way or the other.

Elsewhere, news yesterday confirmed the New Zealand economy shrank at its fastest rate in 17 years in the last three months of 2008. Its gross domestic product (GDP) fell by 0.9%, the most since 1992, led by a drop in manufacturing, according to Statistics New Zealand. GDP shrank in all four quarters of 2008. The International Monetary Fund expects a further 2% decline in 2009.

However Sterlings decline yesterday cancelled out the Kiwi dollars decline, so we saw no rise in the exchang…

Sterling GBP to AUD NZD Forecast

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Good Morning. I've recieved a fair few questions recently regarding the antipodean currencies, namely the Australian Dollar (AUD ro Aussie Dollar) and New Zealand Dollar (NZD or Kiwi Dollar).

So, after a quick review of yesterdays trading, today we will take a closer look at what the future may hold for these currencies.

Yesterdays Trading
Sterling fell against the dollar and euro yesterday after a sharper than forecast fall in British retail sales highlighted a contracting economy. Sterling did breifly gain however, getting to $1.47 breifly after U.S. Treasury Secretary Timothy Geithner said he was open to a Chinese proposal to enlarge the use of International Monetary Fund Special Drawing Rights.

He added however that the dollar was likely to remain the world's currency for a long time.

Analysts said the market had been knocked by Bank of England Governor Mervyn King's comments on Tuesday that the central bank may not need to buy as many gilts as planned if its 75 billion pou…

Exchange Rate Outlook for the pound GBP

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Yesterday we saw a broad rally in the pound across the board, after the 2 different measures of inflation, CPI and RPI showed a rise on one hand, and a fall on the other. (more on this below).
We also saw some surprise comments by Mervyn King, the governor of the Bank of England. All of this caused much uncertainty in the currency markets. Lets look first at the rates, then at the inflation measures and finish off with Mervyn's comments......
GBPEUR Sterling Euro





You can see here that over the last week, the announcement by the FED of more money being pumped into the economy, coupled with the inflation news yesterday, has cause the pound to first fall and then rise. In the last month we have seen rates fluctuation between 1.0550 and 1.13 - a 6.5% difference. To put this in real terms, on a €200k property purchase this means the cost in Sterling has differed by more than £12000.
On a quiet day for UK and EU data, eyes now turn to the UK GDP data released on Friday. Of course any mor…

Newsflash - Sterling gains

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So the RPI and CPI figures have been released, and they were much better than expected.

Even though the levels did not drop as much as expected, it did hit zero as I predicted, for the first time in 49 years.

RPI was the one we were keeping an eye on (the one which includes housing costs) - it fell to 0% in February on an annual basis from 0.1% in January. Bad news for the UK as it hasnt been at zero since 1961. However as it was expected to be below zero, the better figures have caused a surge in Sterling exchange rates this morning.

Watch out for GDP figures on Thursday. Today we could be seeing a short term spike for Sterling. For those of you that can act quickly, there are opportunities today to buy at much better levels than of late.

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Sterling Exchange Rates rise

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Sterling climbed broadly yesterday, hitting a 1 month high against the US Dollar, as investors risk appetite was boosted by higher stocks as the government plan in the US to pump money into the economy.

At the time of writing, GBPUSD is 1.4668 and GBPEUR has climbed up to 1.0778. Just last week it was as low as 1.0550. For live prices, see the prices screen in the sidebar of this blog.

UK Economic Recovery delayed
BoE policymaker David Blanchflower said yesterday that the UK's economy may not recover this year and also that unemployment is likely to keep rising. Pointing to the BoE's February Inflation Report forecast showing a sharp recovery at the end of this year, he commented: "There are plausible arguments to say this will not happen."

Blanchflower told a parliamentary event he expected there would be further big rises in unemployment and that the government should take action promptly to boost the labour market. Despite the gloomy outlook, as mentioned above Ste…

Weekly Sterling Exchange Rate Outlook

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Review of last week
Last week was an extremely volatile one for exchange rates, with huge swings seen in both pound rates for the Euro and the Dollar.

The most important day was Wenesday evening, when we saw the US announce a total of $1.2 trillion is to be created and injected into the econonmy, in a similar move to the UK's recent foray into Quantitative Easing.

The move was unexpected, and caused a big swing in rates. The news propped up the US stock markets, but the currency markets reacted with a severe weakening of the US dollar. Over the course of 2 days the GBPUSD rate jumped from 1.39 to 1.46. This is becuase as the dollar weakened as investors worried about the value being diluted due to more money being created.

The big sell off of dollars caused rates to climb as the currency became cheaper to purchase.

The GBP EUR rate moved the opposite way, dropping from over 1.10 down to 1.0550. It then recovered slightly to 1.0650. This morning it has climbed a bit further, jus…

Sterling Exchange Rate Outlook

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Sterling Euro GBP/EUR
Rates for pound euro dropped as low as 1.0550 yesterday morning, before recoving to 1.0630 this morning. The reason for the drop can be attributed to the FED announcement of pumping funds into the economy. This weakened the dollar, and generally when the dollar weakens investors move funds to the Euro which in turn strengthens the currency. We often see this, and its the reason rates for dollar shot up where rates for Euro dropped.
Sterling Dollar GBP/USD
As you can see from the chart, we saw a massive increase in serling dollar rates yesterday. In just a week we have seen rates go from 1.38 to 1.4550. Great opportunities to buy dollars at better levels. Buying $150k became £5600 cheaper in just a few days. Sterling actually rose to a 3 week high against the US dollar yesterday, reversing early drops as the dollar weakened broadly after the U.S. Federal Reserve's surprise move to buy long-term Treasuries.
The pound was little affected by weak UK economic data rel…

Sterling GBP Euro EUR Dollar USD Forecast

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US Dollar
Some dramatic movements in exchange rates yesterday and this morning. The US has announced yesterday evening that it will pump $1.2 Trillion dollars into the economy [more on this below], which instantly weakened the dollar and pushed rates up from 1.39 to 1.43. A huge movement, and a great opportunity for any clients looking to by US Dollars.







Euro The opposite for GBPEUR I'm afraid - rates have plummeted following dreadful jobless data from the UK. This has severely weakened the pound, and rates are down into the 1.05's. Also the weakening of the US Dollar has had a knock on effect of weakening the Euro as often happens, which has contributed to the fall in GBPEUR rates:



US pumps $1.2 Trillion into economy
The US Federal Reserve says it will buy almost $1.2 tn dollars (£843 billion pounds) worth of debt to help boost lending and promote economic recovery. It said it would start buying long-term government debt and expand purchases of mortgage-related debt.

They follow th…

Sterling GBP US Dollar USD Forecast.

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Today we will look at UK and US data released that are likely to cause volatility in exchange rates. First, lets take a quick look at where the markets are this morning....

The euro hit its highest in over six weeks against a very weak pound yesterday, as investors tried to position for UK jobs data, minutes from the Bank of England's last policy meeting and the Fed's policy decision. Generally investors will move their funds in anticipation of data releases, in order to get the greatest yield. This is what causes rates to move before actual data releases.

At the time of writing, GBPEUR is 1.0715 and GBPUSD is 1.3945. For up to the second prices, see the live currency feed in the sidebar of this blog >>>>>

So, as today has so much economic data that's likely to cause a turbulent day, todays post will take a detailed look at the data releases and what this may mean for the currency markets.

UK Data
BoE Minutes
The most important release today is the Bank of England…

Sterling Exchange Rate Forecast GBP EUR

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Sterling rose on Monday, as gains in share prices and news that Barclays Bank may sell a fund management unit to beef up its capital - this boosted appetite for the UK currency.

The dollar fell broadly as rising global equity prices prompted investors to sell the highly liquid currency and buy assets that are perceived to be riskier.

However, Sterling's gains lost some momentum by late afternoon, as the dollar shed some losses.
"The dollar has recovered some of its losses against the whole range of currencies; cable [GBPUSD] has come down because the dollar has strengthened," said Robert Minikin, senior FX strategist at Standard Chartered.

So, a mixed day yesterday in what was fairly quiet in terms of data releases. Today is also fairly quiet, with data from US taking prominence, as outlined at the bottom of todays report. Why is the pound weak when the EU and US are in trouble? This is a question I am often asked by clients, as the world is in recession and most economies ar…

Exchange Rates GBP EUR USD CAD NZD AUD

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Sterling Exchange rates have increased slightly this morning, from the dramatic falls of last week, in which we saw the Bank of England enter unknown territory, pumping £2bn of newly created money into the economy.

Sterling to US Dollar is now back up above 1.40, with the Euro rate also up, over 1.09. Sterling rallied against the dollar late on Friday, lifted by brighter sentiment in EU stock markets, as investors became less risk averse.

The pound also advanced against the euro, but stayed close to recent six week lows, with the Euro benefiting from the Swiss central bank's decision the previous day to weaken its currency.

EU Stocks
European stock markets gained ground for a 4th consecutive session on Friday, with the financial sector leading the way as confidence grew that some large U.S. banks like Citi Group may not have to go down the road of nationalisation.

"There seems to be a slightly more positive feel to the market today, with people trying to digest the moves of this w…

Sterling Exchange Rate Forecast

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Sterling drops in volatile week.
Todays post will take a look at this past weeks events that have weighed heavily on the pound, and the outlook for where Sterling Exchange Rates may be headed. This week we lost 2% against the USD and 3% against the Euro. These are big drops that may be set to continue....

Swiss bank cause currency market volatility
Sterling fell against the stronger US Dollar yesterday and hit a new 6 week lows against the euro after the swiss National Bank (SNB) intervened in the currency markets.

The SNB purchased foreign currency in an attempt to weaken the Swiss franc. Traders said the SNB was bidding on euro/swiss franc, boosting the euro and seeing the franc posting its biggest ever one-day drop against the single currency. This has also affected Sterling Exchange rates.

The significant move up in euro/Swiss has helped euro/sterling to brush the topside, while better than expected U.S. retail sales have kept the Sterling Dollar GBPUSD rate low.

So while there aren&#…

Sterling GBP Euro EUR Dollar USD Exchange Rate Forecast

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Overview
Sterling fell yet again yesterday to new multi-week lows on both the Euro and Dollar, as renewed risk-taking boosted the euro and hurt the dollar, while concerns about the British economy and banking system also weighed on the UK currency, causing rates to continue their downward spiral.
Already in this mornings trading, the Sterling Euro GBPEUR rate is down to 1.0770 and Sterling US Dollar GBPUSD is down to 1.3760 - getting close now to the lowest rate in 24 years.
BoE Quantitative Easing The Bank of England's new venture into quantitative easing started yesterday, and was percieved as largely successful, though reaction in the currency market was very limited limited. The pound weakened against most currencies.
The BoE bought almost £2 billion pounds worth in gilts via a competitive auction. Banks offered to sell 10.5 billion pounds of the six gilts being targeted. The BoE has said it will spend a total of 75 billion pounds over the next three months buying mostly gilts. …

Quantitative Easing & Sterling Exchange Rate Outlook

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Exchange Rate review
In trading yesterday, Sterling fell sharply against the Euro, and rates hit a 6 week low, as more evidence of a deteriorating UK economy weighed on the pound. Rates at the time of writing are 1.0828 for GBPEUR.

Against the dollar, the pound recovered after steep falls took it to a six-week low on Monday, but analysts said this was the result of broad dollar weakness rather than independent sterling strength. Right now we have a rate of 1.3714 on GBPUSD.

So, a similar story then - the pound is weak and getting weaker while other major currencies remain stable. In my view this is due to the radical approach the UK government is taking to try and combat the downturn - quantitative easing which has only ever been tried in Japan, with little success.

Quantitative Easing
This measure starts in earnest today. The government recently created £75 billion pounds of new funds to inject into the UK economy, and today £2 billion of this will find its way into the system through au…

Sterling falls, GBP EUR USD Outlook Forecast Poor.

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Sterling falls Sterling fell to its lowest in over five weeks against the euro yesterday after surveys showed a fall in retail sales and also evidence that the housing market is still in a very dire state.
Against the dollar, which was a little weaker after strong gains on Monday, Sterling staged a tentative recovery but remained not far off a six-week low of $1.3741 hit yesterday. A fantastic opportunity to sell dollars, as we are getting close now to the best rates for 24 years. If you need to buy dollars however, the outlook remains poor as rates continue to fall. Further poor data expected today Investors were wary ahead of the release of UK industrial production data for January, which is expected to show another fall as the UK economy continues to buckle under the strain of the global financial crisis - we see these figures at 09:30am
"We are in a situation where sterling is perceived as a weak currency, with economic news regularly confirming a pessimistic view on the UK as an…

Sterling falls on Lloyds News

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Sterling falls
Sterling has fallen this morning, taking the GBPEUR rate to the lowest in a month. Also GBPUSD has dropped below $1.40 this morning, following the news over the weekend that the government has increased its stake in the Lloyds Banking Group, which has taken banking stocks down sharply.
Lloyds On Saturday morning it was announced that the taxpayer is taking a controlling share of 65% in Lloyds Banking Group, up from the previous 43%. The government has said new lending from Lloyds will jump to £28bn in the next two years, dwarfing similar figures from Northern Rock and RBS. Shares have already dropped 7% in early trading this morning.
It has also dragged the pound down, with exchange rates across the board falling including GBPEUR and GBPUSD. It could be that the strength we have recently seen in Sterling is now over, and with lots of economic data released later this week, we could see rates for the Euro head back towards parity if there is worse data than expected - not …