Monday, 6 February 2017

Pound/Euro remains subdued and could fall further this month

Sterling fell last week after the Bank of England said that while inflation is likely to rise, they won't be raising interest rates to counter it. There had been rumours of a hint of a rate hike towards the end of the year, but there was no hint from Carney. Also pushing the Pound lower on Friday after Services Sector PMI came in lower than forecast. Here's how GBP/EUR has moved over the last 3 months:


Will Pound/Euro rise or fall in the coming months?


Keeping GBP/EUR low is the fact the single currency gained some strength recently. This was due to one of Trump's advisor's stating the the Euro is grossly undervalued, and his comments caused the Euro to gain strength and become more expensive to buy. Over the weekend, the German finance minister also said the Euro is too low, and so there is the risk Germany may try to influence monetary policy with the ECB... if the Euro strengthens then GBP/EUR rates will drop further. With article 50 likely to be triggered next  month, there's lots in the mix that could cause Sterling/Euro rates to fall to €1.11/€1.12 where it was 3 months ago.

If you need to buy Euros and are worried about the rate falling away, then get in touch with us today to discuss how to protect yourself. For example, if you need €250,000.00 in 3 months time, you can lock in today's rate and only lodge 10% of the total you want to convert. The remaining 90% is due when you want us to transfer your Euros, and in this way you're protected against the rate falling, while allowing you to budget effectively. We are fully authorised by the FCA so your funds with us are protected at all times, in a segregated client account with Barclay's Bank in the UK.

What could move exchange rates this week?


Listed below are the main economic data releases that could affect exchange rates this week. The expected result will already have been priced into the market, however if the actual figure differs from forecasts the respective currency could be affected. Unscheduled political events may also affect rates. For a detailed analysis of what could move the particular currency pair you are interested in, get in touch for a free consultation.

Monday 6th February - it's a very quiet day with nothing of note from the UK or EU. GBP/EUR today will therefore be driven by any political statements or news about Brexit.

Tuesday 7th February - Australia releases it's interest rate decision today. I expect them to keep rates on hold at 1.5%, but any hints on future policy in their accompanying statement could move GBP/AUD. Elsewhere, US releases trade balance numbers, and the BRC release UK Retail Sales.

Wednesday 8th February - Housing Prices is the only data from the UK. There's nothing of any interest from the EU. New Zealand announces its interest rate decision today along with a policy statement and press conference. With inflation higher in New Zealand, I think they will leave rates on hold.

Thursday 9th February - Today Germany releases trade balance figures. As the EU's largest economy it could affect GBP/EUR rates. Elsewhere we have Jobless claims numbers from the USA and a speech by the RBA governor that could move GBP/AUD.

Friday 10th February - The most important day of the week for the Pound, as we will see Industrial and Manufacturing production figures, and a GPD growth estimate. GBP/EUR could also be in for a choppy day as in addition to the UK data, the EU are holding a summit to discuss problems and issues.

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