Showing posts from August, 2014

Pound up, Euro weakens, Dollar strengthens - forecast 2014

Tuesday 26th August 2014 
Good morning and welcome back after the long weekend we enjoyed in the UK, despite the dismal weather! The Pound/Euro rate however is anything but dismal, having recovered today when UK markets opened. This is more to do with weakness in the Euro that I shall explain in a moment, in addition to looking at why Pound/Dollar rates dropped. I will also outline what data released we’re looking at this week that could affect exchange rates. 

Sterling/Euro rates up, but not due to the Pound 
Over the weekend there was a meeting with the US and EU central bank chiefs in the United States. There were some interesting comments from the European Central Bank (ECB) president Mario Draghi that has caused the Euro to weaken. 

Unlike the UK, Europe is still struggling to grow and they are facing a problem of very low inflation. Usually you would lower interest rates to combat this, but rates in the EU are already at a low of 0.15% so they can’t cut it any further. So what I exp…

Pound rises on MPC vote, but gains likely to be limited

Wednesday 20th August 2014 
The Pound has recovered slightly this morning after 2 members of the Bank of England's Monetary Policy Committee (MPC) voted to raise interest rates in August, the first time in three years that policymakers have done so. In today’s post I’ll explain why this caused Pound/Euro rates to rise, and why I think any gains will be limited and that Euro buyers should consider fixing rates sooner rather than later. I’ll also give my views on the Pound/Dollar forecast. 

Bank of England Split on interest rates 
This morning’s data showing 2 of the 9 members voted for a rate hike shows division within the BoE. It is the first time there has been a split in over 3 years. (Interest rates have been unchanged since March 2009.) It also suggested an early interest rate rise was desirable as a way of anticipating inflationary pressures from wage rises. 

Despite the split vote, it doesn’t really change all that much because yesterday’s inflation figures showed the Bank remai…

Pound falls further after poor inflation numbers

Tuesday 19th August 2014 
The Pound has fallen further today, as this morning’s UK inflation figures were worse than expected. Inflation is a key indicator of when interest rates may rise. If the level of inflation gets higher than 2%, then this increases the case for the Bank of England to raise interest rates. 

We were expecting the figure to come in at 1.8%, however it was actually slightly lower than this at 1.6%. The lower number eases the pressure on the Bank of England to consider near-term interest rate rises and pushes the balance more in favour of a delay into next year. 

So that is what has caused the Pound to fall today, as the charts below shows. We are now sat at a 4 month low for Pound/Dollar rates, and a 3 month low for Pound/Euro exchange rates: 

What next for Pound/Euro & Pound/Dollar rates? 
Tomorrow morning we will see the recent minutes to the Bank of England’s decision to hold interest rates. These will show if any of the 9 members voted for a rate hike and what …

Pound recovers over interest rate confusion

Monday 18th August 2014 
Things can move very quickly in the currency markets, and the Pound has recovered some of its losses today. So what has caused the Pound to rise? Strangely it is exactly the same as what caused it to fall last week; comments from the Governor of the Bank of England, Mark Carney. In today’s report I’ll look at the mixed signals he is giving on interest rates, and why this is affecting exchange rates.

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Mark Carney continues to confuse the market over interest rates 
In my post last Wednesday, I explained that it was the expectation of interest rates going up in the UK that has been pushing the Pound higher and higher this year. Last week however Mark Carney hinted that rates would not be going up this year, and that is what caused the Pound to drop last week. (Higher interest …

Pound falls as interest rates set to remain low for rest of the year

Wednesday 13th August 2014 
As you can see from today's Pound/Euro graph below, Sterling has plummeted today by around 1% against other currencies on comments made by the Bank of England governor Mark Carney, effectively signalling that interest rates are to remain low for the rest of this year. In my post yesterday I warned that if he was dovish about the UK economy then exchange rates could fall, and this is exactly what we have seen happen today. Let’s take a closer look at what he said and why the Pound has fallen against the Euro. 

What did Mark Carney say in his speech? 
The Bank of England has halved its forecast for average wage growth, and the Bank's latest quarterly economic forecast also indicated that it believed the level of spare capacity in the UK economy has narrowed to around 1% of GDP. 

Mr Carney said there were still "a lot of uncertainties to contend with" given record participation in the jobs market, "remarkably weak" wage rises and a risi…

Pound/Euro recovers, but tomorrow is key for what happens next

Tuesday 12th August 2014 
Sterling has steadily recovered its recent losses today, clawing its way back to around €1.26 vs the Euro. This was in part due to an EU economic sentiment survey that was released this morning that showed there isn’t much optimism about the financial health of the EU economy. This caused the Euro to weaken off slightly and become cheaper to buy. 

That wasn’t the only reason though, as the Pound rose against most other currencies today including the US Dollar. I think this is purely Sterling recovering from the drops we saw at the end of last week due to geopolitical tensions in Ukraine and the Middle-East. The Chart below shows how the Pound/Euro rate has moved throughout today.

Bank of England and Unemployment figures on Wednesday - a very important day for exchange rates
Tomorrow at 09:30am we have some very important UK economic releases. The latest UK Unemployment figures are released, and as they are a good overall barometer of the health of the economy, th…

A busy week for exchange rates - what could happen to the Pound?

Monday 11th August 2014 
Good afternoon. Exchange rates have recovered slightly today after the drops we saw at the end of last week, caused by global uncertainty over the conflicts in Ukraine and the middle-east, as explained in my most recent post. Today has been quite quiet as there is little economic data for the markets to digest. 

This week however will be anything but quiet, I think today could be the calm before the storm as we have some significant data releases this week that could affect which way exchange rates move in the coming weeks. 

For the UK, we have unemployment figures, a Bank of England (BoE) report, the latest Gross Domestic Product (GDP) figures, and a speech by the BoE Governor Mark Carney. In recent speeches he has given mixed signals on when interest rates may start rising, even being accused of behaving like an unreliable boyfriend, and that had caused the Pound/Euro rate to go up or down. So his comments could well cause further volatility in exchange rates.…

Pound falls further as US Airstrikes begin in Iraq

Friday 8th August 2014 
The Pound has continued to fall today, partly due to further disappointing economic UK data, and also market uncertainty due to the airstrikes this afternoon in Iraq.

UK Data causes Pound to drop further 
UK Trade Balance figures were released at 09:30am this morning, and they were worse than expected causing the Pound to fall. I had warned recently that exports may be affected by the recent strength of the Pound, and it seems this is what has happened. Earlier this week I warned there could well be a further drop in the Pound. 

Yesterday the Bank of England and European Central Bank both kept policy as expected and there wasn’t much of an effect on exchange rates. 

In a few weeks we will see if any members of the BoE voted for a rate hike. If they did, the Pound may recover slightly. 

US Airstrikes cause jitters in the markets 
Yesterday president Obama authorised air strikes in Iraq, and it hasn’t taken long for them to start. In the last few hours American aircraft…

Pound/Euro & Pound Dollar forecast 2014

Wednesday 6th August 2014 
Good afternoon. The currency markets remain quite volatile, with Pound/Euro rates recovering slightly this week back to the €1.26 mark; however Pound/Dollar rates have fallen to around $1.68, quite a bit below the 5 year high we recently saw. Today I’ll cover what has been happening to exchange rates, including forecasts on where the GBP/EUR and GBP/USD rate may move in the coming weeks. 

As you can see from the chart below, the Pound/Euro rate recently hit a 2 year high of €1.27. Many thought the rate would continue to climb towards 1.30 however I warned that I thought the market had peaked, and the Pound/Euro rate was as high as it may go in the short term. 

Indeed over the course of the last month the rate has failed to improve, and has dipped several times due to poor UK economic data. There have been warnings from the IMF that the Pound is far overvalued, and UK economic figures are starting to disappoint. For much of 2014 the UK has been enjoy…