Friday 16th December 2011
Good morning. It was a slightly calmer day in the markets yesterday, with the Pound remaining around the 10 month high against the Euro hit on Wednesday. The Pound also recovered slightly against the US Dollar. UK retail sales helped boost the Pound a little, as analysts said the underlying trend was surprisingly robust as previous months were revised higher. Below you can see how the Pound fared against the Euro and US Dollar during trading yesterday:
~Currency movements on Thursday 15/12/11~
Taking stock of the recent Pound vs Euro gains
So as we know, Sterling/Euro rates have risen this week to their highest in 10 months. But will rates continue to rise? Should you buy your Euros now or wait?
It's crucial to remember that this weeks gains for the Pound have been driven by negative sentiment towards the euro due to the escalating debt crisis. There has been no real good economic news from the UK.
Analysts said sterling's recent gains versus the euro mostly reflected euro zone debt worries after a European Union summit last week offered no hope the crisis will be resolved soon. This lack of a resolution has meant investors worried about further depreciation of the single currency moving funds out of the Euro, weakening it further.
Indeed, many of my clients this week have been converting Euros to the safe haven Swiss Franc or to Sterling. If you are considering doing the same, contact me now to find out about our commercial exchange rates.
I've been asked many times this week whether rates will continue to rise. While it's impossible to predict this, my view and indeed many analysts view is that it may struggle to get much higher, as GBP/EUR rates will face resistance at this level. This is where limit orders usually by large corporate firms are filled at certain levels, flooding the market and bringing rates back down.
"The 1.20 level in sterling/euro is a big level of resistance. A lot of orders from UK importers come in around there," said Lee McDarby, head of dealing for corporate and institutional treasury at Investec.
What else are the analysts saying? Will Pound/Euro go up or down?
There are widley contrasting forecasts coming out at the moment. Some have predicted more gains for sterling versus the euro in the coming weeks due to the safety of government bonds. However others think otherwise.
But Jane Foley who is a senior currency strategist at Rabobank, said although sterling was benefiting from some safe haven flows out of the euro zone, investors were likely to be unsettled by poor UK fundamentals, meaning any upside could be limited. Also political events in the UK could play their part. If there is any sign of dissent in the coalition after last weeks EU veto by David Cameron, this could pull the Pound back down. Political uncertainty is not good for a currency.
What you should do if you want to achieve the best exchange rates
Everybody’s requirement is different, as are peoples attitude to risk. Therefore the best course of action may differ depending on your requirements and risk appetite. Why not take the time to have a free consultation on your requirement. I can explain all the different options available to you in order for you to make an informed decision on what to do.
And don't forget, whatever course of action you take, our exchange rates are up to 5% better than banks and other financial institutions, and on large volumes this difference could save you a fortune.
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