Monday 17th December 2012
Good morning. As always for a Monday, today I'll take a look back at last weeks movements, and what may happen to exchange rates in the run up to Christmas. The Pound/Euro rate fell steadily last week, to it's lowest rate in nearly 7 months.
In this week’s Report:
- UK’s AAA Credit Rating under threat
- Pound/Euro rates continue to fall
- Sterling Dollar remains near 2 month high
- Round up of the week’s other data that may affect rates
Sterling vs. Euro;
Last week we saw sterling euro rates steadily decline on the back of several positive data releases from the Eurozone, coupled with negative data from the UK. In this week’s euro report we’ll look at what those releases mean and how they have affected the single currency and sterling.
The main driving force behind the movements was due to a newly agreed plan to make the European Central Bank (ECB) the Chief Regulator of European banks. This in turn paves the way for direct recapitalisation of struggling Eurozone banks using funds from the €500 billion European Stability Mechanism (ESM).
The news that the ECB will regulating struggling European banks coupled with the possibility that the UK could have its credit rating downgraded from its prestigious AAA all helped the single currency gain ground on a now floundering pound , making the 4 and a half year highs of 1.2860 seen only a few months back seem a distant memory.
Rates are now at their lowest in quite some time, and give or take a point, you have to go back to May to see rates significantly lower. This is great news for anybody looking to sell Euros, however anyone with a requirement to buy Euros should consider their options now to protect themselves against further falls in the rate.
The Christmas period is expected to be just as volatile as we expect more news from the EU summit that took place last week along with the typically reduced trading that happens at this time which makes the market more sensitive to any data releases.
If you are buying/selling Euros what should you do?
If you have a euro purchase in the near future a forward contract enables you to fix a rate of exchange today for anything up too two years into the future and remove and risk from the market, protecting you from any volatility and giving you one less worry over Christmas. Alternatively if you think rates will recover, consider a Stop Loss order.
A stop loss enables you to place a trigger at a pre-agreed level in the market to give you a ‘worse case’ scenario. In this way you can still hope rates recover, but have a 'safety net' should they fall.
This is also perfect for any euro sellers at the moment, who may well be riding the rates in the right direction, however should the UK not find its credit rating downgraded we can expect to see it regain some of the ground it has lost to the single currency over recent weeks.
Either way you look at the market it is a difficult time to gauge any future movements, reinforcing the importance if having a good currency broker on your side.
Why not contact me for a free consultation? In this way we can discuss all the options available to you, so you can make an informed decision on when to fix your rate and what type of contract to take.
Weekly Economic Data that may affect exchange rates
Monday – The only UK data of note today are the latest House Prices from Rightmove. IN the Eurozone, we have Trade Balance figures. In the USA there is a speech from the FED.
Tuesday – Lots from the UK today including Consumer Price Index, Producer Price Index, Retail Price Index and a Bank of England Quarterly Bulletin. There is nothing of note from the Eurozone or USA today.
Wednesday – Today we see the Bank of England minutes to the latest interest rate and QE decision. This could indicate future policy so will be closely watched by the markets. In the Eurozone we see Business Climate assessment from Germany, Industrial Orders from Italy, and EU wide construction output. In the States there are housing and Building numbers, and New Zealand releases its latest GDP numbers.
Thursday – Retail Sales numbers from the UK today are a good barometer of overall economic activity. In the EU we have German inflation data, Italian Retail Sales and Trade Balance numbers. Over in the states we see GDP numbers, Inflation data, Home Sales and the latest manufacturing figures.
Friday – We end the week with a host of UK data: Consumer Confidence, GDP numbers, Public Sector borrowing and business investment figures. In the EU we will see German confidence and Import Prices, Italian Consumer Confidence, and a French Business Climate assessment. In the USA we have inflation data, Personal income numbers, and a consumer sentiment survey.
Getting the best exchange rates
You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.
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Labels: Best Exchange Rates, Pound/Euro forecast, Stronger Euro, UK Credit Rating, Weekly Economic Data