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Showing posts from April, 2017

GBP/EUR falls as single currency strengthens

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Pound/Euro starts to fall
This morning the Pound/Euro rate looked like it was going to have another good run, touching €1.19 vs. the Euro. However economic figures released this morning have halted the decent run the pair had been having, pulling rates down to €1.18.

The catalyst for the drop was the release of the latest preliminary GDP figures from the UK. These were lower than expected indicating that the economy is not performing as well as thought. This started pulling the Pound lower. Half an hour later at 10am this morning, the EU released it's latest inflation figures. These were better than expected, and with inflation rising in the EU it's more and more likely that they will end their stimulus programme and start raising interest rates. Higher rates strengthen a currency due to the higher return on offer. The stronger Euro therefore became more expensive, pulling GBP/EUR lower as you can see from the chart below.  With the French elections a week away, it's like…

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We offer very competitive rates of exchange that are around 3% better than banks or other brokers may offer. On a typical transfer of…

Pound/Euro stable at €1.1850

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Sterling/Euro rates remain supported and have risen a little further today in to the mid €1.18's. The rate had dropped away following the French election result, but recent polling for the UK general election seems to support the view that Theresa May will win a huge majority. This has helped to strengthen the Pound a little further.

Today there was an ECB announcement and initially the president, Mario Draghi, caused the Euro to strengthen and the Pound/Euro rate dropped. He said that the EU economy has continued to improve and faces fewer dangers, and added that downside risks have diminished. GBP/EUR dropped to €1.18 as a result of his comments. However the rate quickly recovered back up to about €1.1850 again when he added that if the EU economy started to slow, they would continue and perhaps even increase their Quantitative Easing measures, which put things back to where they were. This shows how simple comments from leaders of central banks can have an immediate impact on…

Will Pound/Euro rates go up or down?

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GBP/EUR spent most of last week getting very close to €1.20 without managing to sustain a breakthrough; a trend we’ve seen on 6 separate occasions since last summer. It was never very likely that we would see rates breach this level due to it being such a key level of resistance. After the French election result we saw a relief rally in the markets, strengthening the Euro and pushing rates lower. This morning GBP/EUR sits in the mid to high €1.17’s.

If the result was as expected then why did it affect the rate so much? 
It wasn’t really much of a surprise. The polls said that Macron and Le Pen would get through with Le Pen getting knocked out in the second round and so far that’s exactly what happened. There had been fears the polls would be wrong, but as the result was exactly in line with what had been forecast, it caused the Euro to strengthen as a wave of relief swept across financial markets that have now cast aside any chance of Le Pen winning.

Given that rates to buy the Euro …

Pound/Euro falls after French Elections

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Pound/Euro rates fell sharply on Sunday following the first round of the French Elections. For once the pollsters seem to have got this right, with the result going exactly as expected. Le Pen and Macron will now face each other in the final round of voting in 2 weeks time.

As you can see from the chart below, as soon as markets in the far east opened, the rate dropped 2 cents from €1.1950 to €1.1750. This morning it's climbed back to around the €1.18 level:


Why has the Pound/Euro rate fallen?
There were fears that the polling would be wrong and that Le Pen might win the election. She's through the first round, but the reason the rate fell so much was because the result was as the polls had expected. This has eased market worries a little and means that if the polls are right, Le Pen won't win the next round. This strengthened the Euro significantly and made it more expensive to buy, pushing rates lower.

Will the rate recover?
We did warn last week that with rates touchin…

Will Pound/Euro rise above €1.20?

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The Pound has managed to hang on to the gains we saw earlier this week following Theresa May's snap election announcement on Tuesday. When there is such a large spike in exchange rates we often see a correction back down, however Sterling remains supported at €1.19+ against the Euro and $1.28+ against the Dollar, rates we haven't seen since last year.

Why has the Pound gained?
It's really down to the EU negotiations. If May wins the election, which she surely will by a huge majority, then it gives her a much stronger Mandate and a bigger majority in the Commons. This means she can make the compromises needed with the EU in order to make a smooth exit and get a better deal. (Before the election announcement, she's been having to capitulate to the 'Hard Brexiteers' in her own party.)

In other words, there is now much less chance of an extreme 'Hard Brexit' with no deal, and now there is a better chance of smoother negotiations with the 'EU 27'…

Sterling surges higher as Theresa May calls snap election

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This morning Theresa May has announced there will be a snap general election on the 8th of June. Earlier we knew she would be making an announcement and there were rumours that it could be a Royal issue or even her stepping aside due to health issues.

Due to the uncertainty, Sterling fell quite sharply by around 1%. The rumours of her calling a snap election proved to be correct, and once she made the announcement, the Pound bounced back and currently sits close to €1.19 vs the Euro, much higher now than when markets opened.

Why has the Pound risen on the election news?
I think it makes sense politically and certainly the currency markets have reacted positively with the Pound rising a cent. There were fears that due to the French and German elections, the Brexit negotiations would have been delayed and the crucial climax would have been overshadowed by the general election. She is taking the gamble that she will win a landslide majority, clearing the way to have a firm base and manda…

Best Exchange Rates GBP/EUR, GBP/USD, GBP/CAD, GBP/AUD, GBP/NZD

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Sterling had risen this morning following better than expected average earnings. This came in slightly above forecast, but crucially the number is not below the inflation figure of 2.3%. Regular readers will know that rising inflation may lead to an interest rate rise in the UK, which in turn would strengthen the Pound against other currencies. Inflation is above the 2% target which under normal conditions would mean the BoE raising rates. However, there were concerns that if wage growth did not keep pace with inflation, then the BoE would not be able to act.

This mornings figures mean there is a slightly higher chance of a BoE rate hike, and that's why the Pound has risen slightly. The spike was limited however, reinforcing my view that I think for the moment Sterling has peaked and is unlikely rise much further against other currencies. The Bank of England  are unlikely to act in the short term, as they want to keep the ship steady as we enter EU negotiations. Raising rates cou…

Has Sterling now peaked against the Euro?

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I mentioned in yesterday's post that today could move the Pound higher if UK inflation numbers were higher than forecast, and that's what we've just seen.

A short while ago we saw the PPI come in at 3.6%, and it has sent the Pound a little higher. However CPI and RPI was a touch below forecast, so gains for Sterling have been limited. House price data was also slightly lower, so while the Pound has risen slightly it's not by much and GBP/EUR remains in the low €1.17's. 

Will Pound/Euro rates move higher or have we hit the peak?
I think this reduces the chances of an interest rate hike in the UK any time in the next few months and therefore there's not much that I can see that will move the Pound higher in the short to medium term.

GBP/EUR rates have reached these level 5 or 6 times in the last 3 months and each and every time we've seen it drop back away again. We've been hovering around these levels  for a week or two and the Pound doesn't seem t…

Will the Pound go up or down this week?

The Pound remains relatively well supported against the Euro and US Dollar this morning. We start the week with GBP/EUR at €1.1700 and GBP/USD at $1.24. The coming week has lots of economic data releases that will affect exchange rates, and whether rates will go up or down will depend on how the below releases come against forecasts.

In this morning's report we'll take a look ahead to the main releases I think will affect exchange rates. If you need to make a currency transfer and would like to find out what exchange rate we can offer, get in touch today for a free quote.

What could move exchange rates this week?
Monday 10th April - It's a quiet start to the week with nothing of note from the UK. Pound/Euro rates however could be moves by a measure of EU consumer confidence released at 09:30am. Over the the USA this evening we have a speech by FED chair Janet Yellen. Any hints on when the next interest rate rise will happen could move GBP/USD.

Tuesday 11th April - Today is p…

Poor economic figures push Sterling lower

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A raft of economic data was released earlier this morning, and it has weakened the Pound, ending the decent run of strength for Sterling over the course of the last week. The numbers were all worse than expected, showing that perhaps cracks are starting to appear in the economy.

Manufacturing and Industrial production figures showed a contraction when they were expected to show growth. Trade balance numbers were worse than the last reading, and House prices didn't grow as fast as predicted. Not a particularly good snapshot of the economy! There is a GDP estimate due to be released at 1pm though, and I think this will be a decent reading so the Pound might recover it's losses this afternoon. The last reading showed growth at 0.6%.

Sterling has fallen by about half a cent against the Euro and US Dollar, as a result of the figures but is still holding up relatively well. At the time of writing GBP/EUR is currently at 1.1680 and only a month ago it was in the €1.13's so it&#…

Sterling moves higher on Services data

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The Pound has risen this morning after better than expected UK Services Data. The number was better than the last release, and also beat analysts forecasts coming in at 55.00 showing expansion in the sector. Services dominate the UK economy, contributing about 78% of total GDP, and so it also has a big impact on the value of the Pound. The better result has sent Sterling higher against both the Euro and US Dollar.

Brexit takes back seat, for now
It again demonstrates that for the moment, Brexit has taken a back seat in terms of what is driving exchange rates, with the traditional economic data coming back into focus. The UK economy continues to perform robustly and many in the market think the Pound is undervalued and will bounce back. I tend to agree that the Pound has been unfairly punished since the referendum result, however it will probably be some time before we see GBP/EUR rates back to €1.30. Once Brexit negotiations begin in earnest the market will start to be moved by politi…

Pound/Euro remains at 1 month high

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The Pound is still doing pretty well following the triggering of Article 50 last week. Now that the process has started, it's a classic case of 'sell the rumour, buy the fact'. Sterling had been weakened significantly during the last 9 months, and now that the Brexit process has started, investors seemingly decided that they would not punish the Pound further.

Sterling/Euro sits around the €1.17 mark which is around a 1 month high, and only a few percent below the best levels since the referendum. Sterling/Dollar also rose to around $1.25 before slipping away a little.

What could move exchange rates in the coming days?
With negotiations unlikely to start for a month or two, focus has now turned back to economic data, which is what normally moves the rate in the absence of any political surprises. The Pound's gains have been kept in check following slightly worse than expected Manufacturing and Production figures in the last few days. The next main news from Britain wi…

Brexit, Currency and biased thinking

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The debate surrounding Brexit is largely informed by confirmation bias, which is a tendency to search for, and interpret information, in a way that confirms one's pre-existing beliefs. Those that voted Remain may bury themselves in the pages of the Guardian, BBC or Independent that give warnings of economic doom and nurture the idea that the whole thing can be undone. It cannot.

Equally those that voted to leave may ignore the pitfalls of leaving the EU, including information and evidence that leaving the EU will be bad for the economy, viewing Brexit through rose tinted glasses, the Telegraph, Express or Daily Mail. Again, any good news is seen as defying ‘Project Fear’ when actually, the true cost and effects of Brexit on the economy are unknown, and will remain so for some time.

The reality is that there will be both positives and negatives; whether the positives will outweigh the negatives remain to be seen, and we have a few years to wait before we know what the UK economy, a…