Tuesday, 12 August 2014

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, they could affect Sterling exchange rates. I expect the figure to come in around 0.7%. Any lower than this would likely cause exchange rates to go up, and vice versa. 

Of more importance will be the BoE Inflation report and following speech by the BoE governor Mark Carney. Regular readers of my blog will now that it is the rumour of interest rates going up in the UK that has been strengthening the Pound to 2 year highs against the Euro, however it’s still not clear if rates will go up later this year, or early next. (The rumour of higher interest rates tends to strengthen a currency due to the higher return on offer, making investors buy the Pound). 

We will be closely watching what Carney says tomorrow. Any hints of rates going up would cause the Pound to rise, however if he is quite negative about the economy saying that there are lots of factors to consider such as wage growth and house prices, then the market could take this as a sign rates won’t go up until 2015. If that’s the case, expect the exchange rate to drop. 

Fix an exchange rate now or wait to see if rates will improve? 


This is a question I’m asked many times each day, and the simple answer is nobody knows which direction exchange rates will take. Personally I think that we won't see much more than €1.26/€1.27 in the near term, and there are lots of risks to the downside that could move things down, such as the Scottish Independence vote which I talked about recently. What we can do however is look at recent trends, the things that are moving rates, and make an informed decision on when to fix your rate. 

Do you need to buy Euros perhaps for property overseas? Are you bringing your funds back to the UK after selling? Maybe you are a business that deals internationally and currently use your bank? 

Whatever your currency needs are, get in touch for a free quote on the rates I offer. I have over 9 years’ experience as a currency broker and can help you achieve exchange rates far better than banks and other financial institutions may offer. It costs nothing to make an enquiry and you could find the savings run into thousands of pounds.