Showing posts from September, 2016

When to exchange Pounds into Euros?

This is a question we're asked all the time, as of course everyone wants to know if the Pound will go back up against the Euro. It's gone up a little bit today, after the Pound received a little boost after slightly better than expected data showing the UK deficit isn't as high as expected. The figure was expected to show -£30.5bn but was only -£28.6bn. I expect the gains to be limited however as the UK still has one of the largest deficits in the developed world. GDP was also 0.1% higher than expected, and while positive, is nothing to really shout about.

Regular readers will know that due to week end / month end flows and profit taking, it's likely that the Pound will start to tail off this afternoon as has been the recent trend. Many clients are fixing rates of exchange now due to the concerns that Sterling will fall further in the coming months. 

When should you exchange Pounds to Euros? 
While impossible to predict and forecast what will happen with the rate,…

Pound remains stable, Oil prices affecting commodity currencies

Sterling remains suck at just below €1.16 vs the Euro and a little below the $1.30 mark vs the US Dollar. Yesterday one of the Bank of England policy makers hinted that there may well be the case for a further increase in monetary stimulus, which has kept the Pound in check.

Tomorrow will be quite important for Sterling, as we see the latest Gross Domestic Product figures, services sector data, and deficit figures. The UK has a huge deficit, one of the largest in the western world, and if this widens further the Pound is likely to weaken further. I read forecasts this morning from a Senior Currency strategist at Rabobank saying that they expect GBP/EUR rates to fall to 1.13 and GBP/USD to $1.25. Ongoing Brexit concerns are weighing heavily on the Pound and while there is uncertainty on what the UK will look like next year, it's unlikely that the Pound will recover.

Elsewhere, Oil prices are affecting other currencies. The price of oil has been very low recently, but yesterday Opec…

Pound/Euro rates rise to €1.16

After a pretty poor few weeks for GBP/EUR rates that saw the pair drop to 3 year lows of €1.1480, yesterday saw a slight recovery. It wasn't anything to do with Sterling, as the Pound remains weak on concerns over 'Brexit'. The reason for the gain was a weakening of the single currency due to concerns over the health of Deutsche Bank. Here's how GBP/EUR has moved over the last 24 hours:

As you can see the rate climbed steadily throughout the day before levelling off around the €1.16 mark. There was a general feeling of unease about the banking sector in the EU that weakened the Euro and made it cheaper to buy. Shares in Deutsche Bank plummeted after a demand from the US that it provides $14bn as it mis-sold products. Conspiracy theorists will love this as it comes just a few weeks after the EU asked the US company apple to pay $14bn, and now the US is asking an EU company for the same amount! It does highlight concerns over the health of the EU banking sector however, …

Sterling/Euro remains under pressure due to 'Brexit' uncertainty

Sterling has been unable to recover the losses we have seen over the last week, and it remains stuck at around €1.15 vs the Euro, and $1.30 vs the US Dollar. It's a very quiet week in terms of data releases, so with not much else to go on, global investors are shunning the Pound due to continued uncertainty following the EU referendum.

It's starting to look more and more likely that there will be a 'hard' brexit, meaning that rather than try to negotiate remaining part of the single market, the government will give up access to it so that they can impose immigration restrictions. This would also hamper trade, and therefore the Pound is under continued selling pressure.

With the UK government back in action after the summer break, further developments about 'Brexit' could come at any time. If these developments stoke further fears and uncertainty then the Pound could fall further. Looking at recent trends though, and you will see that since the referendum GBP/…

To cut or not to cut? That is the question.

Sterling received a slight lift during trading yesterday, after there was doubt cast on whether the Bank of England will indeed have to cut interest rates before the end of the year as many had been expecting. Before we get into the details, let’s first look at why interest rates affect exchange rates.

Higher interest rates attract foreign investment increasing demand for a country’s currency. Conversely, lower interest rates make the country’s currency less attractive, reducing demand and weakening a currency. It’s a little more complicated than that as you have to factor in inflationary effects, but in simple terms, the prospect of lower interest rates weakens the Pound, which is what we’ve seen since the BoE recently cut interest rates.

There was much speculation that there would be another rate cut before the end of the year, however yesterday one of the BoE’s rate setters, Kristin Forbes, said the cut in August should be enough to stop the economy sliding towards a recession. It’s…

Central Banks, Interest Rates, & Exchange Rates..

The Federal Reserve left interest rates on hold as expected last night which has given the Pound a little support, but not much.  The Pound was at a 5 week low, but has steadied a little. The FED did hint that a further rate rise is on the way before the end of the year, but there tone was a little dovish. This also weakened the USD and pushed GBP/USD up towards the $1.31 mark.

Central Banks, Central Banks, Central Banks.... 
Last night it was the US Central Bank that was the driver in exchange rates. Today, it's the UK and EU central banks. At 2pm the ECB president Mario Draghi gives a speech. Often his comments affect the Euro, and if he sings the praises of the EU economy and settles investor's nerves, then expect the Euro to gain strength pushing GBP/EUR lower.

Later at 6pm, it's the turn of the BoE governor Mark Carney to give a speech. We'll be looking for any hints at further rate cuts for the UK later in the year. If we get them, again the Pound is likely to re…

Sterling stable ahead of FED decision

The Pound has stabilised a little today helped by slightly better Public borrowing data. It hasn't helped a great deal however, and Sterling currently sits around the mid €1.16's vs the Euro and $1.30 vs the US Dollar. (view live graphs).

US FED Interest Rate Decision
Tonight at 6pm the USA will announce its rate decision, along with a policy statement and economic prediction. There has been rumours that the US will be raising interest rates again this year, but I don't think they will do it today. If however they hint at a cut perhaps in November, the US Dollar should gain strength pushing GBP/USD rates lower.

Although this event is over in the states, it could still move GBP/EUR rates. If investors expect higher rates over in the states, it makes the US Do

llar more attractive. These investors will then move funds to the Dollar in order to get a better return. If these investors are currently holding Euros, we will see the Euro weaken and the Dollar strengthen, which migh…

Sterling goes from bad to worse

In yesterday's post I said that there was nothing on the agenda that would move Sterling, other than continues concerns over 'Brexit' and this has proved to be the case. There have been no economic data releases of note today, however the Pound has been in decline all day, dipping into the €1.15's vs the Euro, and below the $1.30 mark vs the US Dollar. Here's how GBP/EUR has fared over the last few weeks:

As you can see, the rate has slipped by around 4 cents so far. The reason is simply the concerns, both political and economic, surrounding the UK's exit from the EU. In the month's following the vote, the UK economy seemed to be riding out the immediate shock pretty well, and certainly the disaster many were predicting didn't materialise, however the Pound is now starting to suffer. I mentioned yesterday that there were rumours that the UK would give up access to the single market in order to impose immigration restrictions. This is pushing the Pound l…

Could Pound fall further against the Euro?

Good afternoon.  The Pound hasn't started the week very well, starting the day in the mid €1.16's against the Euro, and sitting down at $1.30 vs the US Dollar. Sterling has made about a 0.5% gain so far today, but no significant gains are expected, due to the ongoing uncertainty due to the EU referendum. (Click here for live currency graphs).

There are also rumours that the chancellor Philip Hammond is going to give up access to the single market, in order to impose immigration restrictions. If true this means the government will put immigration ahead of EU market access, which won't do anything to ease investors' concerns and will only add to the uncertainty, which could seriously weaken the Pound further.

Hans Redeker, head of currency strategy at Morgan Stanley said that "Things look increasingly messy and with the UK government not defining a clear position concerning its exit strategy uncertainties will remain high. What matters for sterling is the medium-ter…

GBP/EUR rates flat as BoE take no action

Today's Bank of England announcement was a bit of a non-event, and didn't affect exchange rates too much. All 9 members of the Monetary Policy Committee (MPC) voted to keep interest rates on hold, and not to increase the Quantitative Easing measures. This was pretty much what the market was expecting.

The Pound/Euro rate did almost reach €1.18 earlier today when Retail Sales figures were much better than expected but the rate fell back away again when it became clear that while the BoE didn't act today, it's very likely they will do so before the end of the year. They said that they were still very likely to cut interest rates again to just above 0%, and also said that the effect of 'Brexit' on the economy is less severe than they expected a month ago, when they cut interest rates at their last meeting.

What does this all mean for exchange rates?
Today just really underlines what we already knew; that Britain's economy is proving to be pretty resilient and r…

Sterling/Euro rates fall after poor inflation figures

Sterling had a pretty rough ride yesterday, falling almost 2 cents against the Euro following the latest inflation figures, that came in lower than expected. Due to this, it increases the chance of the Bank of England cutting interest rates again before the end of the year, or increasing their QE stimulus measures. This would make the Pound less attractive, and it duly weakened throughout the day yesterday, as the chart below shows:

This morning however the Pound made a slight recovery, due to wage growth and unemployment in the UK coming in better than expected.

Yesterday's moves really illustrates how quickly things can change in the currency markets. A client looking to purchase €300,000.00 to purchase a property overseas would have needed to shell out an extra £3000.00 to buy the same amount of Euros, which is a huge cost increase in just one day.

Tomorrow we have the latest UK Retail Sales figures, and an announcement from the Bank of England regarding interest rates and QE. …

What could move Pound/Euro rates this week?

Good morning. Last week was a largely negative one for GBP/EUR rates, falling from highs of €1.20 down to around the €1.18 mark, which is where we start the week. As explained in reports last week, the fall was due to a combination of negative UK data, and the single currency become more expensive to buy, due to a lack of stimulus by Europe's central bank.

What could affect rates this week?
Generally it's economic data releases that move exchange rates. As figures are releases showing how the UK and EU economies are faring, the value of the respective currency can be affected, moving exchange rates. Usually the expected result will already be largely priced into the market, however if the release differs from forecast, that's when we see movements in the rate.

This week is an important one for the Pound. Today is pretty quiet, but tomorrow we have inflationary measures for the UK. These are important as they can influence whether the Bank of England (BoE) will change inte…

GBP/EUR falls further into the €1.17's

Sterling/Euro exchange rates have taken another hit today, falling down to the €1.17's, but this time it's a strengthening Euro that has caused the drop. Here's this week's GBP/EUR graph:

European Central Bank (ECB) strengthens the Euro
Earlier, the ECB announced that interest rates will be left as they are for another month, and decided not to extend their QE stimulus programme, despite the low inflation rate of 0.2%. The markets had been expecting them to at least increase the QE, and the markets had priced in a 50% chance of them doing so. Because they didn't do anything, the Euro gained in strength, becoming more expensive to buy, and pushing GBP/EUR rates into the €1.17's.

Will the Pound go back up against the Euro?
Since the EU referendum, GBP/EUR has climbed up to the €1.20 level 4 or 5 times, and each and every time it slumps again. This is because it's a key level of resistance. Personally I think that there are still so many unknowns regarding wha…

Pound starts to fall on poor economic data

I've been warning for the last week or so that it was unlikely that Sterling's recent strong performance would last, and today we have seen the Pound fall back away from the recent 1 month high vs the Euro. The chart below shows how GBP/EUR has moved over the last 24 hours (see live charts here):

Why has the Pound/Euro rate dropped?
Over the last few weeks, we have seen very robust UK economic figures showing that the economy was performing surprisingly well following the fears that the EU referendum would have a negative impact on the economy. Things like Retail Sales & exports were much better than expected, and this is what had caused the Pound to get close to the €1.20 mark. However these positive figures were as a result of a weaker Pound, which of course is a positive for things like exports. We got to these levels a month or so ago, but within a few weeks rates has slipped down to €1.15.

We're now seeing a similar thing. This morning figures showed that House Pri…

Pound remains supported by robust economic data

Good morning. Sterling is still holding firm, and is currently sitting at a 1 month high vs the Euro, and nearly a 2 month high vs the US Dollar. As outlined in recent posts, it's mainly due to some surprisingly good economic data from the UK.  (Click here for live currency charts)

This continued this morning with the release of figures showing the UK's services industry showing the biggest one month gain since the survey started 20 years ago. This follows last weeks construction and manufacturing figures, and paints a pretty good picture of Britain's economy and shows things for the moment look pretty good. These figures show it's very unlikely that the UK will enter a recession, and also makes it unlikely the Bank of England will opt to cut interest rates again at their next meeting.

Could the Pound go higher still?
Sterling has now risen pretty consistently for the last few weeks, but the rally now seems to have run out of steam somewhat. The Pound was weak on expec…

GBP/EUR jumps to €1.19 - is now the time to buy Euros?

The Pound is really performing well at the moment. As we enter Autumn, Sterling has received another lift this morning in the shape of the latest Manufacturing figures. They came in at 53.3, and the expected number was only 49.00. (A number above 50 shows expansion, a number below 50 shows contraction.) The fact that this sector seems to be booming in the post-Brexit period is a surprise, and the Pound has shot up as a result. Here's how the rate has moved this morning:

This is the best that we've seen the GBP/EUR pair in over a month. So will the Pound go higher, or is this rally now over and rates will fall back away again? There's no way to predict this of course, but for those that need to buy Euros, this is a very welcome sight.

Do you need to buy Euros? Here are your options..
If I needed to buy Euros, I would consider the fact that in the last few weeks the rate has improved by 3.5%, and on a purchase of €300,000.00 it's a saving of over £9000.00. I would not w…