Showing posts from November, 2015

Sterling/Euro remains near an 8 year high

Sterling/Euro rates remain supported due to weakness in the single currency, and despite a dip in the first part of this week, the pair remain around the €1.42 mark as the chart below shows. This is a great time to buy Euros, as even back in October the rate was as low as €1.33:

The reason for the exchange rate remaining high is the fact it's looking more and more likely that the European Central Bank will ease monetary policy again at their meeting next week, and this is keeping the Euro weak, and GBP/EUR rates close to an 8 year high. However the rate has climbed to these levels several times this year before dropping back away, so I would be surprised to see this pair go much higher.

If you need to buy or sell Euros in the coming months, then you can fix the current rate of exchange for a date in the future by lodging 10% of the total you want to convert. In this way you're protected against a drop in the rate, and it also allows you to budget effectively, for a property pu…

What could move Sterling exchange rates this week?

I'm often asked what actually moves exchange rates. It's various things and the main ones are: acts of terrorism/war, natural disasters, political events, and economic data. Of these 4 things, you can only really plan for the last 2; economic data and political events. The first 2 are of course impossible to foresee and usually catch the markets by surprise. This week we have the Autumn budget statement from the UK Chancellor George Osbourne (political events) and it could have an effect on the market, but in my experience it's usually a non-event. What he is going to say will be leaked in advance, so it's only if there us a surprise announcement that Sterling exchange rates could be affected.

This leaves us with economic data. It's always widely forecast in advance what various financial data releases will be, and these are priced into the exchange rate in advance. If however the actual figure is better or worse than expected, then we'll often see exchange ra…

Pound/Euro can't break through €1.43

This week has seen the Pound/Euro rate rise nicely, and it's close to an 8 year high. However try as it might, the pair can't seem to break through the €1.43 barrier. As you can see from the chart below, it's tested these levels several times but each time hits resistance:

It's a repeat of the trend we've seen throughout 2015. If you look at charts further back, you can see the rate has reached these levels about 5 times, but then drops back away to the mid €1.30's. It might go higher of course as there is really no way to predict which way it will go, but any clients looking to purchase Euros should consider past performance, and decide whether they want to fix a rate on some or all of the Euros they will need in the coming months.

This morning the rate returned to €1.43 due to comments by the European Central Bank president, where he hinted in a speech that further action is necessary to raise inflation. To me, this indicates they will pump more Euros into th…

Currency Markets remain focused on Central Bank Policy

The currency markets have seen limited reaction to the shocking terrorist attacks in Paris, and focus remains on central bank policy. Sterling/Euro rates still remain supported around the 8 year high, and at the time of writing sits at €1.4250. Against the US Dollar, it still looks like we'll drop below the $1.50 mark sooner or later, however at the moment GBP/USD sits at $1.52:

GBP/EUR so far this week:

 GBP/USD so far this week:

Limited currency market reaction to Paris attacks

Following the terrible attacks in Paris last Friday, the financial markets initially saw a flight to safety, with the Euro weakening as investors moved funds to other assets such as the US Dollar. Despite a little bit of risk aversion,  the fact there was a whole weekend to digest events before markets opened on Monday meant that the reaction was more muted than would have been the case had the terrorists attacked on a weekday. Analyst's see limited economic impact from the attacks other than tourism, an…

UK Jobs data keeps Sterling/Euro near 8 year high

Sterling/Euro rates continue to perform very well indeed, and are only just below the best they have been in 8 years. As you can see from the chart below, the rate remains supported above the €1.40 mark, and were given a boost yesterday by some decent UK Jobs figures. Here's how GBP/EUR has moved so far this week:

UK Jobs data keeps the Pound supported

UK unemployment is now at its lowest in 8 years, and this is why the Pound continues to perform well. Figures yesterday showed that the number of people out of work fell by over 100,000 in the last few months, bringing the figure the lowest it's been since 2008. The strong Pound reflects the strong jobs numbers, and that's why GBP/EUR rates are doing so well.

It's only briefly been higher than now back in the summer, and even then the spike was short lived. Within 2 months the rate had dropped off by 7%. There is no way to predict exchange rate movements of course, but given the Bank of England recent said interest rates …

What could affect exchange rates this week?

The last month has been incredibly volatile for Sterling/Euro exchange rates, with lows of €1.3350 and highs of €1.42. In real terms, this means a typical Euro purchase of €300k has differed in cost by over £13,000.00 which really illustrates how quickly things can change in the currency markets:

If you are buying or selling a property abroad and have a large volume of funds to convert, timing is everything. Simply hoping the rate will be favourable can be very costly and there are various ways you can protect yourself against rates moving against you. If for example you are purchasing overseas and have some time before you need to complete, then exchange rate movements could end up significantly increasing the total cost of your purchase. In this example, you could use a 'Forward Contract' to lock in the current rate of exchange for up to 2 years. This gives you a set cost in Sterling, protects you against the rate dropping, and allows you to budget effectively.

To discuss thi…

GBP/EUR & GBP/USD moves on jobs data

***update on jobs data***
This morning I posted about the US Non-Farms Payroll data. As I explained, the actual number is often very different from forecast. The forecast was for 180,000 new jobs to have been created, but the actual number was much higher; 271,000.00.

I’m posting this update as it’s a great example of how data can affect the rate, and the inverse correlation that we often see with GBP/EUR rates and GBP/USD rates. Look at what happened when the numbers were released:

As you can see, the strong jobs numbers strengthened the US Dollar and caused rates to drop by 1.5 cents. At the same time, the opposite happened to Pound/Euro rates, climbing 1 cent to get back to the €1.40 level. We often see this 'inverse correlation' with GBP/EUR and GBP/USD and it's a good example of what causes exchange rates to move.

Why did this happen? 

The jobs numbers mean the US economy is doing very well indeed. In turn, this means it’s now very likely indeed the USA will raise in…

GBP/EUR falls further, and US jobs data to affect GBP/USD

Sterling/Euro continues to fall

We saw a sharp fall in GBP/EUR rates yesterday as I outlined in my last post, and this morning rates have continued to fall. A quick look at the chart below shows you that we’ve dropped nearly 3 cents in 24 hours, meaning a €250,000.00 property abroad is costing you £4000.00 more than this time yesterday, really illustrating how quickly things can change in the currency markets: 

It’s clear now that most analysts think it will be 2 years until the UK raises interest rates, and due to the prolonged period of little return, investors are looking for more favourable places to deposit their funds. In real terms this means the Pound is being sold across the board, and this is the reason for the continued slide this morning. 

Rates are still much better than a few weeks ago however, and you can fix the current levels by using a ‘Forward Contract’, whereby you simply lodge 10% of the total you want to convert, and I can guarantee the current exchange rate for up …

Pound falls sharply after BoE's 'Super Thursday'

The Pound has fallen sharply today after various information released by the Bank of England’s ‘Super Thursday’. As you can see from the chart below Pound/Euro rates have fallen from €1.42 to €1.40. In today’s post I’ll explain why this has happened. 

Why has the Pound/Euro rate fallen so much?

In yesterday’s post I outlined why ‘Super Thursday’ was going to be such an important event and I cited 3 things to look out for: 

The minutes to the meetingthis showed that it was again only 1 member voted for a rate rise. There was speculation a few other members might vote, but this was not the case and the Pound weakened. 
The inflation report This showed "the outlook for global growth has weakened since August". It blamed emerging market economies for that weakness, saying growth in those regions had "slowed markedly". This also means UK growth forecasts are now lower, weakening Sterling. Mark Carney’s Speech – He said that the weakness of the global economy, particula…

Euro weakens further, pushing rates to €1.4125

Surprisingly, Pound/Euro rates have remained supported above the key €1.40 mark, and the European Central Bank (ECB) president yesterday evening hinted again that further stimulus may be required in the Eurozone to boost the economy, saying that the bank is "willing and able" to ease monetary policy further. This weakened the Euro and rates have now risen even further. Here’s how the Pound/Euro rate has moved since mid-October: 

As you can see, the rise is huge, and in real terms this means that converting £250,000.00 to Euros nets you almost €20,000.00 more than last month which is an extraordinary gain. 

'Super Thursday' is key for where GBP/EUR will go next

Tomorrow will be key for what happens next to Pound/Euro rates, as at 12pmthe Bank of England will publish its latest interest rate decision, the minutes of that meeting showing what was discussed and how the voting went, and the quarterly inflation report. For good measure, the BoE Governor Mark Carney will also…