Tuesday, 8 September 2015

Sterling rises against Euro and US Dollar

Tuesday 8th September 2015 
Sterling has continued to gain against both the Euro and Dollar today, and as you can see from the charts below, we’ve seen rates rise steadily since the lows of last week: 

  GBP/EUR
   
    GBP/USD

Why has the Pound gained against the Euro and Dollar? 

Only a week ago, a raft of quite poor data from the UK had poured cold water on the idea that the Bank of England (BoE) would be able to raise interest rates any time soon, and due to this the Pound had weakened against other currencies. The BoE’s governor Mark Carney also said that the slowdown in the Chinese economy could affect UK inflation, further denting the Pound. 

Despite this however, this week we have seen the Pound fighting back. According to Reuters, the main reason for today’s GBP gains was an agreement from a Japanese insurance firm to buy a British insurer in a cash deal for £3.5bn. This huge demand for the Pound is what drove it up against other currencies. Even against the Euro, we saw the Pound rise by 1.5 cents, despite strong EU GDP data and Trade Balance data from Germany that would normally have caused the Euro to gain strength and cause rates to drop. 

What next for Sterling exchange rates? 

Looking forwards, in my view the next 2 days will be very important indeed for Sterling. Tomorrow we have Industrial and Manufacturing production data for the UK along with a GDP estimate. If these are better than forecast then the Pound may gain further. 

Of more importance though will be Thursday’s Bank of England announcements where the BoE's 9 member Monetary Policy Committee will meet and release minutes from the meeting. Last month just one MPC member voted in favour of an immediate rate hike, and there may well be further clues as to when the UK may begin raising rates. If 1 or more of the members vote for higher rates, then expect the Pound to make further gains. However if the minutes suggest that a rate hike is a long way off, with all 9 members voting to keep the status quo, then the Pound is likely to drop back away wiping out the gains we’ve seen this week against the Euro. 

Remember that EU data was very strong today, if it wasn’t for the huge Sterling purchase by the Japanese earlier today as I mentioned above, then Pound/Euro would actually have fallen today. 

Do you need to buy or sell Euros at the best rate? 

A typical purchase of €250,000 to buy a property abroad has differed in cost by over £11,500.00 in the last month alone, which really illustrates how important it is to get your timing right when fixing your rate of exchange. If you need to convert currency and would like to discuss the market and ways to protect you against market fluctuations, I am happy to speak to any potential clients that would like a quotation to compare what I can offer with their bank or existing currency broker. On average the rates I can provide are 2 to 3% better than available elsewhere which can mean huge savings when converting a large sum.