Showing posts from May, 2017

How could the General Election affect Exchange Rates?

With just over a week to go until the UK General Election, in today’s report we’ll take a look at the possible outcomes and their potential effect on Sterling exchange rates.

Where things stand now 
A month ago Theresa May called the snap election, and indications were that she would win a landslide and this helped push the Pound to €1.20 vs the Euro and $1.30 vs the US Dollar. Since then however, her 14 point lead has been reduced to just 5, and this has weakened Sterling, pulling GBP/EUR back to €1.15. Due to the polls, there are now a range of outcomes that we could see next week, and we could see huge swings in exchange rates. Let’s have a look at each scenario along with my view on what effect it would have for the Pound.

Landslide victory for the Conservatives 
This is what markets thought would happen a month ago, and should the polls swing back in May’s favour and a landslide victory, it should push the Pound much higher. Why? A much bigger majority means she would not have t…

Pound/Euro and Pound/Dollar forecast May 2017

This morning UK GDP figures were released and were expected to come in at +0.3% and they came in just below at 0.2%. As the figure didn't impress or beat forecasts it has sent the Pound a little lower this morning. It's the continuation of the recent trend as the Pound has been weakening of late for several reasons. The conservatives lead in the polls has narrowed so political uncertainty has been pushing the Pound lower.

Also, as soon as the election is over on the 8th of June, all focus will shift to the Brexit negotiations. In the short term I think this will be negative for the Pound, especially while the 'divorce bill' that the UK will have to pay is agreed. I think that ultimately a good trade deal will be agreed and the Pound will bounce back to better levels, but this isn't likely until the end of 2017, and the short term forecast for the Pound is for it to weaken as negotiations begin.

US Dollar
GBP/USD rates have risen back to $1.30, the highest …

Why has the Pound fallen against the Euro?

It's not been a good start to the week for Pound/Euro rates, with the pair now trading in the €1.15's, 3% lower than it was just a few weeks ago:

Why has the Pound fallen against the Euro?
There are 2 reasons for the drop in the rate. The first reason is the UK general election. Polls over the weekend indicated that Theresa May's lead has halved to just 9 points, following their manifesto that has not gone down well due to the scrapping of free school meals and proposals to reduce state support for the elderly.

What the polls show is that nothing is certain, and if her lead can be halved in just a few days, who knows what could happen in the next few weeks. The prospect of Corbyn becoming Prime Minister and leading Brexit negotiations has not been welcomed by the market, and that's the reason for the drop in the value of the Pound.

The other reason is due to the Euro gaining strength and becoming more expensive to purchase. German Chancellor Angela Merkel blamed a weak …

Pound/Euro and Pound/Dollar Forecast 2017

Sterling has been given a boost this morning following the release of the latest Retail Sales figures. Markets had been expected a monthly  rise of 1% but the actual figure was more than double that, coming in at 2.3%. It's a very good barometer of the health of the UK economy, and as a result it's sent the Pound higher.

Rates have climbed back up to around the €1.17 mark but still about 3 cents lower than it was a few weeks ago. Rising inflation is to blame for the decline, as it's currently sitting at 2.7% and with no chance of the Bank of England raising interest rates, it's likely to get higher. Wage growth however is only around 2.4% so in real terms, people have less money to spend. This is one reason for the Pound/Euro rate falling, the other being a stronger Euro. Now that elections are out of the way in France and Holland, it's given the EU some much needed stability and the Euro has strengthened as a result, and become a little more expensive to…

GBP/USD up, GBP/EUR down

The Pound has fallen against the Euro this week, dropping to the €1.16's which is the lowest it has been in the last 4 weeks. This is mainly due to the US Dollar weakening, and the single currency gaining strength and becoming more expensive to purchase.

There have been doubts cast on whether the USA will raise interest rates this month, and that has weakened the USD, helping to push GBP/USD into the $1.29's. It's also helped to strengthen the Euro, as investors move funds from USD to EUR. The single currency is now more attractive now that political risks in Holland and France have dissipated.

Even higher than expected inflation numbers this morning haven't helped the Pound go higher against the Euro, due to the fact that last week the BoE stated that even if inflation moves higher, they would not raise interest rates to combat this due to it being caused by a weak Pound. In fact, at the time of writing, since the figures were releases half an hour ago the Pound has b…

Super Thursday keeps lid on Sterling

For several weeks GBP/EUR rates have been fairly range-bound between the €1.18-€1.19 mark and have been unable to move higher. For it to do so, the market needed further information; this morning provided lots of new data however the end result was Sterling moving slightly lower.

Things got off to a bad start when the latest Industrial and Manufacturing production figures came in below forecast, sending the Pound slightly lower against the Euro and US Dollar. Then came the key BoE ‘Super Thursday’ releases. As expected they left interest rates on hold at 0.25%, with Kristin Forbes the only member to vote in favour of a rise in interest rates.

Other members were more cautious as they trimmed their UK growth forecast for 2017, saying that household spending is slowing more quickly than expected, adding that consumers were being squeezed between sluggish wage-growth and rising inflation. While inflation is still expected to remain above their 2% target, they pointed out that this is pure…

Will Pound/Euro exchange rate improve?

Sterling remains at pretty good levels against our 2 most commonly traded currencies, the Euro and the US Dollar. Since the announcement of the UK general election the Pound has risen by around 5%. This is because the likelihood is that May will win a huge majority. If she does, then it means she has more scope to strike compromises with the EU, as she won't have to pander to the Eurosceptic back-benchers as she currently has to do due to her slim majority.

At the time of writing GBP/EUR is at €1.1920 and GBP/USD $1.2970. Both pairs are likely to encounter resistance at the key levels of €1.20 and $1.30 respectively.

Will the Pound go up or down this week?
The UK election is now largely priced into rates already, much as we saw with the French elections last weekend. For the Pound to move higher we need new information, and we're going to see lots of this tomorrow. So whether Sterling is able to go higher largely depends on what happens tomorrow with the Bank of England's …

Pound/Euro exchange rate forecast

French Election win for Macron
As expected, Macron won the French election yesterday defeating Marine Le Pen. It looks as though the currency markets had the result fully priced in to exchange rates, as there wasn't much reaction to the news.

Initially there was a slight strengthening of the Euro against other currencies, but it didn't last long and this morning GBP/EUR rates are settled back at around the €1.1850 mark. Against the US Dollar, the Pound is just below $1.30. It's a classic case of 'Buy the rumour, sell the fact'.

Since Theresa May called the snap election we have seen the Pound gain by around 3% against the USD, EUR and other currencies, as a strong majority will give her a much stronger hand and increase the chances she can make compromises with the EU when negotiations start in June.

I don't really think there's much chance of the Pound getting that much higher however because when it does look like it's going to rise, it's stopped …

Should you buy Euros now, or wait?

Over the last 6 weeks, the GBP/EUR exchange rate has risen from €1.14 to highs of €1.20, before settling back down at the current level of around €1.1850. That's a very healthy rise, and close to the best levels we've seen since the referendum last June.

Clients that need to buy Euros (for a property purchase in the Eurozone for example) are very keen to know whether to fix a rate now while it's better than it has been, or hang on in the hope that it might go higher. In today's post we'll first take a look at why the rate has risen, and then I'll give my view on whether the Pound will go up down against the Euro in the next 6 months to help you to decide when to fix a rate. 

What caused Pound/Euro rates to rise?
There are several reasons for the gains we've seen recently. Firstly, the Pound has been strengthening due to the fact the economy continues to perform well, UK unemployment is low, and inflation has risen which increases the chance of an interest …

What could move exchange rates this week?

The Pound has steadied somewhat since last week, still just above €1.18 vs the Euro but unable to go much higher. Poor GDP figures on Friday slowed Sterling's progress, and now that Brexit negotiations are almost underway, caution has returned to the markets.

We've seen a taste of what is to come this weekend, when EU commission president Juncker leaked details of a recent meeting to the German press. Hopefully the next 2 years won't involve similar negotiation tactics and the 2 sides can actually strike a deal that works for both the EU and the UK, as both sides could very easily end up losers.

Will Pound/Euro go much higher? I personally don't think so. The final round of the French elections this Sunday could give the Euro a boost should Macron win as the polls expect. If you need to buy Euros, click here to get a free quote.

What could move exchange rates this week?
Politics, Brexit negotiations, and polls for the French and UK elections will continue to drive Pound…