Monday, 30 March 2015

Sterling/Euro exchange rates & the General Election

Monday 30th March 2015
Exchange rates have been a little more stable in the last week, with the Pound/Euro rate remaining in a 2 cent range between 1.3550 and 1.3750 as the chart below illustrates: 



Interest Rates and Exchange Rates


In my last post, I pointed out the Bank of England’s chief economist had warned interest rates may need to be cut to combat zero inflation. Well on Friday the day after my post, the governor Mark Carney said precisely the opposite, which is that the next move in interest rates will likely be up. 

Interest rate speculation has been a major driver of Sterling strength of late, and the comments on Friday caused the Pound to recover. It should be noted though that 2 of the main decision makers within the BoE seem to be at odds with regards to which way the rate will go, which is only going to create more uncertainty. The fact remains that if the numbers continue to show inflation so low, a cut is more likely and this could weaken the Pound. 

General Election and Exchange Rates


For the next month, the main news will be the UK election. The Pound is likely to weaken against other currencies over the next month due to the election uncertainty, and as I outlined in a recent post, this is because the result is so uncertain. This is likely to push the Pound lower in the coming weeks. I personally don't think we'll see things back at €1.40 any time soon.

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What could affect exchange rates this week? 


Below I’ve listed the scheduled releases for the coming week that I think may affect exchange rates. Remember that other things such as election uncertainty could also change rates at any time without warning. To discuss your currency requirement in more detail, or have a chat about which direction the exchange rate may go, click here to send a free enquiry today. 

Tuesday 31st March 2015 – Today we have the latest UK GDP forges, which are expected to show monthly and annual growth at 0.5% and 2.7% respectively. If the numbers are worse than this then expect the Pound to fall against other currencies. GBP/EUR could also be affected today by the EU inflation and Unemployment numbers. For those watching GBP/USD then US Consumer confidence figures at 3pm is something to watch out for. 

Wednesday 1st April – Today the main events for the currency markets will be inflation numbers from Europe and the UK. This is important as it indicates future interest rate movements, and so often affects exchange rates. Construction and Manufacturing numbers from the USA could affect GBP/USD 

Thursday 2nd April – Nothing major from the UK today, but there is an ECB meeting that looks at the economy and financial markets. It’s basically an assessment for the EU economy so this could affect Pound/Euro rates. Most other data is from the USA – Unemployment Jobless figures and Factory orders. 

Friday 3rd April – Very quiet today as most markets are closed for Good Friday. The USA remains open however and we have some important releases; Unemployment and Non-Farm Payrolls. These numbers often move GBP/USD rates as the figures are often quite different to what’s expected. 

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