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Showing posts from May, 2009

GBP to USD & EUR makes gains

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Last Week
The pound made some excellent overall gains against both the Euro and the US Dollar last week. Some analysts said a bigger-than-expected rise in UK retail sales on Thursday and strong demand was positive for the pound, while many remained wary of saying that the UK economy is recovering.

Bank of England Deputy Governor Charles Bean said on Thursday that the low-point in UK economic activity was not far off, but added that the strength of any recovery was uncertain and likely to be relatively low.

Given the amount of data from both the US and the Eurozone this week, if continued negative news is seen, then we could well see GBPUSD go through $1.60, however UK data later in the weak could stem any continued gains.

This Weeks Data
We have already had some data from Germany - GDP figures were as expected however the import price index was quite a bit worse than forecast. As Germany is the biggest economy in the EU, this has weakened the Euro and pushed the rate up slightly.

Other dat…

Sterling tumbles. GBP Outlook.

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After a steady increase for the pound against most currencies, yesterday saw a dramatic fall. Sterling has since recovered slightly, but lets take a quick look at what's caused the fall in the pounds value.

UK's Credit Rating
Yesterday Standard and Poors, a UK credit rating agency downgraded the UK's status from stable to negative. This is the first time this has happened since the ratings started over 30 years ago.

In real terms, this means it will be more expensive for the UK to borrow money, something the government has been doing in spades reccently. The higher cost of borrowing then means government spending is increased, and thus taxes also will have to rise. Reducing the debt we have is something that no-one knows how will be achieved at the moment, with the chancellor Alistair Darling clinging on to his optimistic growth forecasts as an answer. These forecasts are way off what the IMF and leading anaylsts say.

What this means for currency
The pound fell instantly again…

Newsflash - Sterling Plummets

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The gains were very shortlived, as we said may happen. Business investment data this morning has smashed the recent run of Sterling.

GBP/USD dropped from 1.5808 to 1.5529
GBP/EUR dropped from 1.1459 to 1.1280

Huges losses. This goes to show how short lived spikes may be. many of my clients who had their account open ready to use, made a quick decision this morning and bought at the best levels all year.

Those that have gambled have I'm afraid lost. Those that gambled but took protection with a Stop Loss Order at least limited their loss to manageable levels.

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Sterling Exchange rates continue to rise

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Sterling has continued it's strong rally, and this morning we have hit new highest rates against a basket of major currencies. The run against the dollar was particularly impressive. Let's take a look at each currency pair in turn.........

Sterling, and the UK economy
One of the reason for the gains, has been Sterling strength caused by yesterdays IMF comments on the UK economy. It was expected that their forecasts for growth were going to worsen from the already bleak outlook they had recently. however, it said that the governments response to the global financial crisis has been bold and wide-ranging.

The IMF is sticking to its forecast that UK GDP will decline by 4.1% this year, compared with the chancellor's forecast of about 3.5%. It also said however, that the speed and strength of the recovery was highly uncertain given the unprecedented nature of the crisis and the importance of confidence on the markets. So, for now the pound is in a great position. The unanswered qu…

Best Exchange Rates for 2009

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Sterling hit's year highs
Sterling rose against other major currencies yesterday, hitting its highest levels so far this year against the US Dollar and very close to the highest against the Euro. The reason for the gains was in part due to pessimism about the UK's economy, and in particular the financial sector started to ease.

Also, we had the Consumer Price and Retail Prices Index data yesterday. This showed that inflation fell to its lowest level in more than a year. The CPI rose by 0.2 percent on the month, bringing the annual rate down to 2.3 percent from 2.9 percent in March.

The pound dipped immediately after the data, then resumed its uptrend to hit the highs mentioned above. This is great news for any clients that need to purchase their foreign currency with Sterling, and it would we wise to consider taking advantage of these rates while they are here. Of course they may keep climbing, but we have various data for the UK today that could easilty reverse these gains.

UK Ec…

Sterling Gains - hits highest for 2009

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GBP/USD
Sterling has rallied this morning, and the rate for buying dollars is now at a 5 month high, in fact the highest we have seen all year. Since november last year, this currency pair has been trading between 1.35 and 1.55 - if the rate pushes a bit more and goes back through the 1.55 resistance level, then we could see the break last.

GBP/EUR
Again we have very good buying levels for the Euro. Purchasing €100k today compared to at the beginning of the year would be a staggering £11'000 cheaper, so the strength of the pound right now is something that clients who need to purchase Euros need to consider taking advantage of. Sterlings spike this morning has pushed the rate very close to the best we have seen all year, as confidence in the pound has seemed to return, but the question is for how long.

What next for the pound?
Today we do have some important measures of the UK economy. Namely the Consumer Price Index and Retail Price Index. This is a good measure of inflation in the UK…

Sterling GBP Euro EUR rate forecast

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Summary of recent exchange rate movements
Last week saw some interesting data releases that caused continues volatility in the currency markets. We first had an inflation report issued by the Bank of England earlier in the week, that showed the central bank expects inflation to fall to 0.5 % before rising to just above 1 % in two years time, while the economy will recover at a slower pace than previously thought. As I said in this blog, the forecast was much worse that the governments own forecasts, and so caused the pound to fall.

Then, we had the dire figures from the Eurozone - both the German and EU figures were much worse than expected, which caused the GBP/EUR to rise to the healthiest levels for Euro buyers we have seen in some time - we're still there right now, just above 1.13.

So, the week ended slightly up on the Euro, and despite some fairly big swings on the dollar through the week, actually ended up on Friday roughly where it started the week at.

Despite sterling's g…

GBP/EUR gains on weak German data

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Todays Economic Data
Let's take a look at what data releases we have today, and what this will mean for Sterling exchange rates:
We have already seen the German Gross Domestic Product data this morning. This was much worse than expected for both the monthly and yearly figures. In fact they were almost 1% worse than expected, showing that Germany, which is the largest economy in the EU, is in bigger trouble with the global recession than analysts had expected. The severity of the contraction has surprised economists, and also surprised the currency markets as we can see from the rise in rates this morning:

Here you can see the immediate effect on the pound to euro rate. The weaker than expected german data weakened the Euro making it cheaper to purchase, and so exchange rates have recovered. Yesterday there was little UK data released, however Sterling is still moving on reaction to the poor forecast for economic recovery from the Bank if England. Today is mainly EU and US data, and …

Pound falls after BoE report

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As mentioned in yesterdays post the main news for yesterday was the Bank of England quarterly inflation report, and the speech by the BoE governor Mervyn King :





The report was extremely gloomy, and quashed any hope of any early recovery for the UK economy. It would seem the recession is here to stay for the time being, and the news had a very negative effect on the pound.

It showed that the Bank of England expect inflation to drop to 0.5% before recovering to 1% within a few years. It also refused to rule out more extensions to the Quantitative Easing programme, and recovery will be much slower that originally thought.






The forecast here is significantly worse than the governments own forecasts, which as I have said before were very optimistic, and also the only thing the government are holding on to in terms of how the UK will repay the massive debt it is putting us in.

The effect for exchange rates was the pound falling across the board, and dropping well below the recent highs we have s…

Pound gains against EUR and USD.

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Sterling gained yesterday against most currencies, after the Manufacturing and Industrial Production data was much better than expected. At point point the pound hit a four month high against the dollar, however later in the day unemployment figures were released, showing that UK jobless claims are now at 2.2 million. This was higher than expected, and so halted the gains of the pound.

We weren't even expecting the unemployment figures to be released until today, however due to an accidental release of some other figures, the jobless claims were released which surprised the markets slightly.

"That led to the setback we're seeing," said Antje Praefcke who is a currency strategist at commerzbank. She continued "overall it has been a rather positive day for Sterling because of the better than expected data this morning [industrial and manufacturing production] and the dollar generally being under pressure because of a friendly stock market environment pushing the d…

Sterling GBP to USD, AUD, EUR Forecast

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Sterling Outlook
The pound dropped against most currencies including the Euro and US Dollar yesterday, there was also a decline in equities and other currencies like Sterling that are percieved to be higher risk. Another reason for the pounds continuing decline is last weeks unexpected Bank of England decision to expand its quantitative easing programme by an extra £50bn. Also, as mentioned in yesterdays report, on Wednesday this week we have the quarterly inflation report by the Bank of England tomorrow, and this is likely to be fairly negative.

In addition to the BoE's forecasts for growth & inflation tomorrow, the markets are very cautious ahead of todays data. We have UK industrial production data today, and also tomorrow some unemployment figures. Both of these are expected to be weak, and so in anticipation of a weakening of the pound, investors have moved funds to USD and EUR.

"People have taken the Band of England's decision to expand its quantitative easing …

Sterling Euro Outlook Forecast

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Last Weeks Currency Movements
Last week we saw interest rate announcements for both the UK and EU. They were as expected, but the main news that affected exchange rates was Quantitative Easing.

The Bank of England in a surprise announcements, said it will expand its Quantitative Easing programme - effectively printing yet more money to pump into the economy. It also warned that the timing and strength of a sustained economic recovery was highly uncertain.

The news dragged the pound sterling well below the highs reached earlier in the week and has severely dented any hope of a sustained recover. As I said last week when GBPUSD and GBPEUR hit close to the highest rates all year, spikes like this are often very short lived, and that seems to have been the case here also.

Both the BoE and ECB decisions regarding QE were a surprise, but in the end the news was taken as a negative for sterling and a positive for the euro.

"With regard to the fallout from yesterday, the ECB was maybe just…

Sterling Weakens - Update

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As I expected, the BoE left rates on hold at 0.5% this morning, and the ECB also cut rates by the expected level to bring rates to a record low of 1%.

The big news however which we correctly predicted, is that the BoE announced further measures of Quantitative Easing today. It announced that it will inject an extra £50bn into the UK economy.

With little room for rate cuts the Bank has been pumping money into the banking system through quantitative easing. As I mentioned in my last post, analysts and investors fears are based on how this money will be repaid. The government aer simply answering this question with their crazy forecasts for UK growth, which most other institutions including the IMF think are extremely optimistic. The reality will probably be a crippled UK economy and huge tax rises in coming years to repay our defecit - the largest for any major nation.

Click here to read the BoE statement in full

The effect on exchange rates
The pound fell against both the Euro by over a ce…

Interest Rates and Exchange Rates

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Today we have interest rate announcements by both the European Central Bank and Bank of England. Also this afternoon we have lot's of US data, so expect volatility today for both EUR and USD. We'll take a quick look at where Sterling is this morning, and then look at what effects the interest rate decisions may have.

Yesterdays Trading
The pound fell broadly in the morning, caused by data from the Halifax that showed that house prices in the UK fell 1.7% last month. Economists had expected a fall of 1%. This caused the initial decline, only for the pound to recover later in the afternoon after stronger than forecast UK service sector data overtook the fears over the banking sector. This caused many investors to believe that the economy in the UK is starting to recover from the recession. The rise in the services index was the biggest in 10 years, even though the sector continued to contract.

We are now close to the best rates all year for both the Euro and US Dollar, so anyone…

Sterling gains, but may be short lived.

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The pounds gains yesterday
Sterling rose against bothe the Euro and Dollar yesterday, hitting a 4 month high against the dollar, and breaking through 1.13 on the Euro. The pound was buoyed by an improvement in risk appetite which also saw the FTSE rise.

"The stellar performance of sterling is largely as a result of the strong rally we are seeing in the FTSE. Whether the tone will last is very hard to say but Thursday's BoE meeting is key in terms of performance this week," said a strategist at RBC Capital Markets.

Gains may have been higher, but the currency markets are nervous about what the Bank of England will announce tomorrow in terms of more quantitative easing measures. Currently £75 bn has been created and pumped into the economy, and there are fears that this will be increased.

I expect the bank to announce it will go beyond the 75 billion - if they do then expect it to knock the value of Sterling and we may see falling rates.

Sterlings gains may also be short live…

Sterling GBP to Euro EUR May 2009

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Good Morning and welcome back to our regular readers after the Bank Holiday Weekend.

Although UK markets were closed yesterday, sterling fell against the dollar. This is probably caused by investor caution ahead of the Bank of England Interest Rate decision this week, not helped by the thin trade due to the Bank holiday.

With Thursday's BoE meeting looming, analysts said many are very wary of purchasing Sterling, and also the Prime Minister has come in for criticism from a senior Labour Party politician also which also has created unease within investors views of the UK political situation - again knocking the pound.

Currently rates have come back slightly, and against the US Dollar we are now over $1.50, and against the Euro we are at 1.1260, not too far away from 1.13.

Where rates will move this week?
This week is a very busy one for both UK and EU economic data. I'm expecting some big movements in GBPEUR rates. Today and tomorrow we have various inflationary measures for both z…

Sterling gains against Euro

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W have had the UK purchasing Managers Index this morning, which came out higher than expected. This has helped the pound rise to a 2 high against the Yen this morning, and has also been supported against the US Dollar - more evidence that the global economy has helped increase risk appetite for higher-yielding currencies. The pound to Euro rates have also broken through 1.12.

Trading will be very light today, as the European markets are closed due to the Labour Day holidays. UK financial markets are open today, but will shut on Monday for a public holiday - as will this blog!

In EU news, unemployment 20 million in March. Unemployment in the countries using the euro is at its highest level since 2005, according to the region's official statistics agency. In March an estimated 419,000 people lost their jobs across the 16 countries in the eurozone.

This of course has weakened the Euro, and as I have predicted all week, we have seen rates rise to 1.12. In Germany, which is the biggest e…