Tuesday 27th May 2014
The UK and US markets opened today after being closed yesterday for the Bank Holiday. Initially things looked good for the Pound, rising against both the Euro and US Dollar as soon as the market opened at 8am.
The reason for the initial gains was the Deputy BoE Governor Charlie Bean's comments at the weekend, where he said that the bank's plan to raise rates gradually means the first hike could come earlier than may otherwise have been the case. (Higher rates mean a higher return, and so the Pound gained a little strength.) The BoE governor Mark Carney speaks this evening, so any surprise comments from him could also have an effect on GBP/EUR rates, and is probably the most key event of the week in my opinion.
In stark contrast, the European Central Bank president Mario Draghi said on Sunday that "more pre-emptive action may be warranted to ward off deflation". This hints to the markets that they may well pursue some sort of stimulus measures, which if they do could weaken the Euro.
Pound falls after Mortgage Approvals
Data is thin on the ground today, so the only thing the market had to go on was this morning’s mortgage approval numbers. The figure was several thousand below what had been expected, and this took the steam out of Sterling’s run, lowering the value of the Pound by around 0.3%/0.4%.
What next for exchange rates?
Focus is still on what the central banks of the UK and EU will do in the coming months. As explained above, there is lots of speculation UK rates are going up at some point, and that the ECB may well do the opposite. This has been steadily priced into the market over recent months, and is the reason GBP/EUR rates are close to an 18 month high.
We will know more about any likely action in the coming weeks, and this is likely to move GBP/EUR rates from their currency position.
If you need to buy Euros, or indeed convert Euros back to Pounds, then the market at the moment is treading a very fine line, and could move either way in the next few weeks. If you have a currency transaction to perform, it would be advantageous to get in touch with me about which way the market is going, and the options you have available to ensure you get the best rate and not get caught out by adverse market movements.
It’s free to make an enquiry, doesn’t obligate you, and I can discuss your requirements and provide you a quote to compare with your bank or existing broker.
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Economic Data Releases this week that might affect exchange rates
Wednesday 28th May 2014
We are very light on UK data today, but the markets will be reacting to last night’s speech by Bank of England governor Mark Carney. In the Eurozone we have the latest German Unemployment figures, in addition to EU wide measure of Consumer Confidence and Economic sentiment so GBP/EUR could be affected.
Thursday 29th May 2014
The only UK data of note comes late in the day, with consumer confidence measures at midnight. The majority of the eco-stats being released today are from the United States: GDP figures, Jobless Claims, Home Sales and Consumer confidence. So there’s lots today that could well affect GBP/USD rates.
Friday 20th May 2014
Again nothing of note from Britain. The only EU data worth noting is Retail Sales from Germany. It’s a very good indication of their economy as a whole, and being the largest in the EU it can sometimes affect GBP/EUR rates. Busy day in the USA again today, Income & expenditure figures, Inflation data and consumer Sentiment.
Labels: Bank of England, currency forecast, European Central Bank, GBP/EUR, Interest Rats, Pound/Euro, UK Mortgage Approvals