Tuesday 18th March 2014
The Pound has fallen again today, dropping as low as €1.19 before settling at that level. There hasn't been any data of note from the UK today, so this is simply the market positioning itself ahead of tomorrows key day for the currency markets.
What will affect exchange rates in the next few days?
The next 24 hours will be key for exchange rates, so the following information is important if you need to buy or sell currency at the best exchange rates. Firstly I will look at the key events, and what effect they may have on the market. I will then give my view on what effect this could have on rates, specifically the Sterling/Euro exchange rate.
Later this afternoon at 17:45pm we have a speech by Bank of England governor Mark Carney. This could affect exchange rates depending on his comments. If he were to be very upbeat about the UK economy including growth forecasts, then we could see Sterling bounce back. What we're looking for is any hints that interest rates may have to rise, as this would strengthen the Pound. If however he does the opposite and indicates that a rate hike is some way off, then Sterling could fall.
Tomorrow morning at 09:30am we have 2 key releases. Firstly the Unemployment figures are released. If the number is 7.2% or higher, then expect the Pound to fall. If it's lower than this, then the Pound will likely rise in value.
At the same time, the BoE releases it's minutes which show how they voted, and what was discussed, in their recent meeting to hold interest rates. Much like Carney's speech, we're looking for hints as to their policy on interest rates and growth. Positive comments will cause Sterling to rise. We then have the Budget at 12.30pm. While this will generate the most headlines in the news, I think it will have little impact on exchange rates as I don't expect any surprises in terms of the UK economy.
So does this mean the Pound/Euro rate will go higher or lower?
Unfortunately it's impossible to predict which way the market will go. What I can do however is give my views on what's happening to help you make an informed decision on when to fix a rate.
My personal view is that we will see the rate recover tomorrow. It's dipped for several days in a row now, falling from recent highs of €1.22 down to €1.19. The UK economy is still fundamentally strong, so I think the figures tomorrow will support this view, and I expect rates to be sat back at €1.20 by the end of this week. We'll have to wait and see whether I'm right or not! I don't expect it to break through €1.20 for some time though, as it's a key resistance level.
Having a good knowledge of the market can save you thousands it you need to buy or sell currency at the best rate. If I had to convert Euros to Pounds I would want to move quickly to take advantage of the current rate - it's the best it's been all year.
If I was buying Euros, I would probably hold off to see what effect tomorrows data will have. I wouldn't want to risk losing out though, so I would do one of two things. I would either hedge my bets and secure half of my currency now, allowing me to take a risk on the other half. This reduces exposure to the market by 50%, but still allows you to take advantage of any rise.
Alternatively, I would place a Stop Loss order, which lets you place a limit below which your exchange rate is fixed - €1.18 for example. In this way you can still take advantage of any gains in the rate, but have a safety net should the market keep dropping.
Find out more about the rates and service I offer
I can help with market knowledge, various contract types, and can source exchange rates that are significantly better than the banks usually offer, sometimes by as much as 4% or 5%. If you need to convert currency, then it will do you no harm to contact me for a quote to compare.
If you have a currency transaction to perform and would like to find out how I can help you, get in touch in the following ways:
You can reach me between 08:30am and 17:30pm UK time.
Ask for Alastair Archbold, and quote ref ‘FERF’
Labels: Bank of England minutes, Best currency exchange, Foreign Currency, GBP/EUR, pound sterling forecast, Predictions, UK Budget Statement, UK unemployment