Friday 11th January 2013
Good afternoon. Things have not gone well for the Pound/Euro cross I'm afraid. It's been in general decline now for a few months, and this week saw further drops. Today alone it has dropped from 1.2280 to 1.2075 in the course of a few hours. This is not welcome news for those needing to buy Euros, however those converting the single currency back in to Sterling should consider taking advantage of the current highs.
All is not lost for those buying Euros however, as there are still ways you can protect yourself against further declines in the rate which I will go in to more detail about below.
In this week’s Report:
- Pound/Euro rates drop further due to strengthening Euro
- Dollar weakens, pushing GBP/USD rates higher
- UK GDP estimate indicates triple-dip recession
- Round up of the week’s other data that may affect rates
Sterling vs. Euro;
As I stated above, Pound/Euro rates have not been faring well so far in 2013. We have seen the rate drop steadily to the lowest since spring last year. In today’s Euro report we will look at what has caused the fall, and what may be in store for Pound/Euro rates in the coming months.
Despite the UK government resisting pumping more money into the economy via its QE program at its latest MPC meeting this week, the pound weakened significantly, hitting its lowest levels for nearly 9 months. Any news that could have helped sterling was over shadowed when the president of the ECB Mario Draghi in a TV interview said he was confident the Euro economy as a whole should slowly recover throughout 2013.
This news really gave the Euro a boost, giving the single currency some strength and making it more expensive to purchase. He did not however remove the possibility of further interest rate cuts in the future from the table.
UK headed back in to recession
The decline in the rate continued today, when we saw further woes for the pound with much weaker than expected industrial production and manufacturing data being released, as well as a GDP estimate coming in below forecast at negative 0.3%, indicating a contraction of the UK economy in the fourth quarter.
If the figure is confirmed by official data later this month, it will mean that the economy returned to growth for only a single quarter. It would also mean the economy saw zero growth for the whole of 2012. A triple-dip recession would likely weaken the Pound even further, so we might see raets drop even more.
With most data being released from the UK below forecast it also further outlines the threat of the UK losing its prized triple A rating and If Chancellor George Osborne continues to fall short of his targets, a downgrade could very much be on the cards which will hinder investors’ appetite for buying sterling as it indicates the UK could go into a triple dip recession.
If you are buying Euros
For those looking to buy Euros, serious consideration should be given to fixing your rate now. Even if the funds are not needed for some time, you can lock in today’s rates for up to 2 years, and only lodge a 10% margin of the total amount you want to convert. This will protect you against a further decline in the rate. Alternatively, you can place a Stop Loss order. This is where your currency is purchased automatically if it drops below a pre-agreed level. So if rates recover you can still take advantage of any gains, however should the market continue to fall, you have a worst case scenario. Find out more.
If you are selling Euros
For those selling Euros, it’s the best it’s been in some time. Despite the outlook for the euro looking better, the euro economy as a whole is still walking a very fine tightrope. Greece for example has reported the highest level of unemployment ever recorded in the EU taking over Spain as the highest with a rate of 26.8%. This means we could easily see the rates swing back in the other direction if we see any bad data from any of the euro countries and especially any further indications of a rate cut.
So things remain very uncertain, however you can have some control over the markets by knowing the options available to you, in order to make an informed decision on when to fix a rate and which type of contract to take. Take the time for a free consultation with us to discuss your requirements today.
To put these movements into perspective, in just the last week a property purchase of 200,000 Euros would have a difference of around £3500. This outlines the importance of staying in close contact with your account manager ensuring you are aware of the latest rate movements and news on the markets. If you have not already done so, follow the link to open a no obligations trading facility today.
Weekly Economic Data that may affect exchange rates
Monday – Data is mostly from Europe today, including German Wholesale prices in addition to Italian and EU wide Industrial Production. In the USA we have speeches by key FED members.
Tuesday – UK data today comprises of House Prices, Inflation numbers and Retail Sales. We also have inflation data from Germany and Italy. There is also EU wide Trade Balance figure released at 10am. Over in the states there are also a raft of inflation figures & Retail Sales numbers.
Wednesday – There is nothing of note from the UK today. In Europe we have EU wide inflation numbers. The
rest of today’s data is from the states: Consumer Price Index, Industrial Production and Housing Market data.
Thursday – Unusually for a Thursday, there are no UK releases today. The ECB gives its monthly report, and there are also some EU construction numbers. The USA has jobless numbers, and further afield we see inflation figures from New Zealand.
Friday – We end the week with UK Retail Sales, Italian Industrial Orders, and a US Consumer Sentiment survey.
Getting the best exchange rates
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Labels: Bank of England, Best Exchange Rates, currency forecast, ECB, Pound/Euro, UK recession