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Showing posts from July, 2014

Pound falls further against other currencies

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Thursday 31st July 2014 
As I said may happen in my recent post, the Pound has fallen further against the Euro and Dollar this week. Let’s take a look at what has been happening… 

Pound/Euro drops into the €1.25’s 
Looking back, the GBP/EUR rate has risen by more than 10% in the last year, however it now looks like the Pound’s year-long rise may have come as far as it can, at least in the short term. On the one hand many remain positive on Britain’s economic prospects however the feeling is growing that Sterling is “overvalued” and this may hamper efforts to re-balance the British economy. 

The IMF agree - this, the International Monetary Fund has warned the Chancellor that the pound is 5% to 10% overvalued. Wages are growing very slowly and although output is beginning to pick up, the recovery is still at an early stage and there is still a lot of slack in the economy. Another risk for the Pound is Scotland’s September vote on independence might pose to sterling. Morgan Stanley analysts …

Currency Exchange Rate Forecast 2014

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Tuesday 29th July 2014 
Good morning. It’s been a very quiet start to the week for the currency markets, with no data of note being released yesterday. Today is also quiet, so in today’s post I will give a quick round up of where exchange rates stand, and list the rest of the week’s economic data releases that I think could affect exchange rates. 

Pound/Euro 
The GBP/EUR rate cannot seem to sustain its highs. We have seen the rate climb into the €1.26’s before dropping back off. That’s exactly what we’ve seen happen again this morning. So why is the rate to buy Euros peaking and failing to climb higher? 

It’s because all the recent good news regarding the UK economy is no longer surprising the markets, and is now largely priced into the value of the Pound. I think in the short to medium term it’s unlikely we’ll see any more significant gains. In the medium to longer term however, if the EU needs to try and pump money into the economy then the Euro could weaken further and push rates highe…

Pound drops from new highs after Bank of England minutes

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Wednesday 23rd July 2014 
Since my last post on Monday, the Pound/Euro rate had been slowly creeping up until today, due to weakness in the Euro. In fact this morning rates touched a new high of €1.27, but as has been the case of late the gains were not to last… 

Bank of England minutes causes Pound to fall 
This morning at 09:30am the Bank of England released its recent minutes showing what was discussed and how they voted when interest rates were recently kept on hold. As you can see from the chart below, GBP/EUR edged up to €1.27 just before the announcement. This was because there might have been some of the 9 member committee that had voted for rates to rise. 


As it happened, all 9 members voted to keep rates on hold, signalling that rates are likely to remain at 0.5% for some time to come. Even though unemployment is dropping and the economy is growing, I think rates will not go up anytime soon until wage growth catches up. If they raise rates too quickly it could destabilise the r…

Pound falls slightly from recent highs due to Ukraine crisis

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Monday 21st July 2014
The Pound fell a little towards the end of last week, as worries about the tensions between Russia and the West in Ukraine meant that investors sought out safe haven currencies. When there is global uncertainty, it often causes ‘safe-haven’ currencies like the US Dollar to strengthen as international investors move out of riskier currencies, like the Pound. This is the main reason for the slip from the recent highs we have recently seen. 

Sterling has surged over the past year as Britain's economy has shown signs of a strengthening recovery, fuelling expectations that the BoE will hike interest rates before the year's end. In contrast the EU economy is faltering and they are likely to pursue stimulus measures which have weakened the Euro. 

Despite this, in recent months the Pound gets to levels in the €1.26’s against the Euro and the $1.71’s against the Dollar before dropping back away. Given Sterling can’t seem to sustain its gains, now is a good time to t…

Pound surges higher on inflation numbers

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Tuesday 15th July 2015 
Good morning. The Pound has surged higher this morning after figures showed that the rate of UK inflation rose sharply in June. The numbers were more than the market had forecast, and the inflation rate is now close to the Bank of England's 2% target. As you can see from this morning’s GBP/EUR graph, this caused rates to rise from 1.2530 up to 1.26 where it has levelled off. 


Why did inflation numbers cause the Pound to rise? 
As regular readers will know, it’s to do with interest rates. In fact that’s the reason behind the Pound’s gains in the last few months. The high inflation figures mean there is now more chance of a rise in UK interest rates, which have been held at a record low of 0.5% for a long time. 

"The news will further fuel expectations that the Bank of England will start raising interest rates sooner rather than later, with November looking the most likely month for the first hike," said Chris Williamson, chief economist at research fir…

Pound/Euro, Pound/Dollar, up or down in July 2014?

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Monday 14th July 2014 
The Pound has fallen further against both the Euro and the US Dollar today, pulling exchange rates down to €1.2530 and $1.7070 respectively. There has been no economic data of note today to explain the movements, and the reason for the fall is the market positioning itself ahead of Speeches by the heads of the 3 major central banks, the Bank of England (BoE), European Central Bank (ECB) and US Federal Reserve (FED). In today’s post I’ll take a look at why rates have fallen and what these speeches may mean for whether the Pound will go up or down against the Euro. 

Pound/Euro 
The rate had recently hit a 2 year high of €1.2680, however in the last week has slipped back away. This is partly due to a run a worse than expected UK economic data. Today rates fell further ahead of a speech by the ECB president Mario Draghi. The Euro has been weakening recently on speculation that the ECB may pursue some sort of stimulus, perhaps in the form of Quantitative Easing. 

This e…

Pound falls away from recent highs

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Tuesday 8th July 2014 
The Pound has fallen from its recent highs this morning, after figures showed Industrial and manufacturing production in the UK was much less than expected. 

Manufacturing output in the UK recorded a surprise fall of 1.3% in May, the biggest decline since January 2013. The figure from the Office for National Statistics (ONS) was much weaker than economists' forecasts of an increase of 0.4%, and as a result the Pound fell by around 0.5% against other currencies including the Euro. You can see the drop in the chart below when the figures were released at 09:30am; however rates have recovered back to €1.26 against the Euro, and $1.7120 vs the US Dollar. 


So why exactly did the Pound fall? 
Regular readers will know that it is speculation on UK interest rates that has been driving the Pound upwards recently. Today’s figures are a bit of a reality check for the UK after a few months of very positive data. The markets see today’s figures meaning there is now less cha…

Pound/Euro hits 2 year high - Best Euro Exchange Rates

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Friday 4th July 2014 
It’s been very quiet on the markets today due to the Independence Day holiday. There were developments yesterday however when we saw the Euro weaken after the European Central Bank (ECB) president Mario Draghi make comments about interest rates. 

ECB comments weaken Euro pushing GBP/EUR above €1.26 
European Central Bank (ECB) president Mario Draghi said yesterday that Eurozone interest rates will stay at 0.15% for an "extended period" of time. He also said that the ECB was "unanimous in its commitment" to using "unconventional instruments within its mandate". 

What does this mean? Well firstly low interest rates mean the EU is not an attractive place to hold funds. As a result investors sold Euros, weakening the single currency making it cheaper to buy, and as a result the Pound/Euro rate has broken the €1.26 level, and it’s now the best time to buy Euros for nearly 2 years. 

How to take advantage of the current rate 
Rates had been stuc…

GBP/EUR 2 year high / GBP/USD 6 year high - Best exchange rates

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Wednesday 2nd July 2014 
The Pound has surged higher this morning, after data showing UK House prices have seen their highest rise in over 10 years. This coupled with better than expected construction data has strengthened the Pound to a 2 year high against the Euro (€1.2560) and a 6 year high against the UD Dollar ($1.7170). 

UK House Prices cause Sterling to rise to record levels 
House prices across the UK soared by 11.8 per cent in the last year, the biggest annual rise for almost a decade. Britain's booming housing market shows little sign of cooling, with the average property hitting a new all-time high of £188,903. 

So why has this strengthened the Pound? It’s all to do with interest rates. Last week, the Bank of England moved to put curbs on riskier mortgage lending by announcing that loans of 4.5 times a borrower’s income or higher should account for no more than 15 per cent of new mortgages issued by lenders. 

The Bank also said that lenders should apply a new 'stress tes…