Monday 4th February 2013
Good morning. Well readers, I'm sorry to say I do not bear good news for anyone needing to purchase Euros in the near future. Rates last week continued their decline falling significantly. A month ago rates were at 1.23 - on Friday afternoon they were as low as 1.1475 - this was the biggest one day fall for the Pound since 2008.
Rates have recovered slightly this morning, back to €1.1550. Today I'll review why rates are falling, and what effect data this week could have on rates.
In this week’s Report:
- Pound/Euro continues to fall to 14 month low
- US GDP figures disappoint, but GBP/USD still low
- UK decision on QE and the latest GDP estimate this week
- Round up of the week’s other data that may affect rates
Sterling vs. Euro;
Sterling’s fortunes remained unchanged last week as it continued to fall against the single currency. Rates fell a further 2.0% over the course of the week, which now means we have seen a 7% decline since the turn of the year and at its lowest point the GBP/EUR cross hit 1.1470, the lowest we have seen the cross since October 2011. In this week’s euro report we will take a look at what caused the rates to fall and what is around the corner for the pound.
Although there was some positive data releases out of the euro-zone last week the recent drop in rates is still mainly down to sterling weakness. In recent weeks the UK has been under the microscope and with a black cloud hanging over the UK economy it is difficult to see where any positive moves may come from.
Ever since the Initial GDP estimate was released at the start of January sterling has been in free fall against the single currency. Even with poor French and German retail sales figures released last week, which came in much lower than forecast, the pound could not recover any of its recent losses.
Bank of England meet this week; more QE on the cards?
This week will see all eyes turn back to the Bank of England; policymakers will meet to discuss interest rates and quantitative easing for the first time since the official GDP figures (released on the 25th Jan) confirmed the UK economy contracted in the final quarter of 2012.
In their last meeting policymakers voted 8-1 in favour of not adding to their existing QE programme but that could all change this week. If the BoE opt for another round of QE it leaves the door open for rates to fall even further.
Further important figures for the UK this week
This week also sees the release of the GDP Estimate from the National Institute of Economic and Social Research (NIESR) which is an estimate of growth over the last three months (this will report will give us the first GDP estimate for Jan 2013), the report is seen as highly reliable and has the potential to influence the UK monetary policy. A negative reading could have severe consequences for the pound and will push us ever closer to the dreaded tripe dip recession.
Let's put this in perspective
With no signs of improvement it is more important than ever to have a good currency broker on your side, and to know your options. To put this year’s move into perspective, Purchasing €250,000.00 now compared to a month ago will cost you a staggering £15,000.00 more - that's just due to the decline in Sterling's value this year. It also highlights how important timing is when it comes to move your money.
With the seemingly perpetual decline in the GBP/EUR rate and no signs of it slowing down, now is the time to take stock of your currency requirements and consider your options. Get in touch with me today and take the time for a free consultation on what is available to you.
When you contact us, quote the reference 'AJABLOG'
Weekly Economic Data that may affect exchange rates
Monday – The UK releases its latest House Price Data today. In the Eurozone we have Inflation data and a measure of investor confidence. The only other data of note are some Factory Order figures from the United States.
Tuesday – Lots of measures of inflation are released today for the UK, Spain, Italy, France and Germany. Also in the Eurozone we see the latest Retail Sales figures, which are a good barometer of overall economic activity. Fairly quiet stateside today with Manufacturing PMI the only noteworthy release.
Wednesday – Nothing of note for the UK today, and the Eurozone is also very quiet with German Factory
Orders the only release of note. Other than that, we have employment data from New Zealand that could
affect the GBP/NZD rate.
Thursday – As usual today is the busiest day of the week. We’ll start in the UK: Bank of England decision on Interest Rates and Quantitative Easing, the latest GDP estimate, Trade Balance Numbers, Industrial Production and Manufacturing Production. Eurozone: European Council Meeting, French Trade Balance, German Industrial Production and some EU growth forecasts. We also see the ECB’s decision on interest rates. So much today that will affect GBP/EUR rates.
Friday – After yesterday’s flurry of UK data, today is very quiet. Nothing from the UK, some inflation and Trade balance figures from Germany, and we round of the week with Trade Balance numbers from the United States.
Getting the best exchange rates
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Labels: Pound/Euro forecast, Sterling Forecast, Sterling weakness, UK Economy