Showing posts from August, 2017

Pound/Euro drops to €1.0750

Pound/Euro rates have fallen further this morning after UK markets opened after the extended Bank Holiday weekend. Markets were reacting to the speech the ECB president Mario Draghi gave on Friday evening. He didn't make any mention of the negative aspects of the Euro gaining strength, which has led investors to believe that the ECB are on course to start ending their stimulus measures in the Autumn. This has helped strengthen the single currency further this morning, pulling the GBP/EUR rate to a new 8 year low of €1.0750.

As you can see from the chart above, over the last month or so Pound/Euro rates have now fallen from €1.14 to €1.0750, and predictions from some that the pair will reach parity before the end of the year are now looking more and more likely. In my view, the Pound is unlikely to strengthen until progress is made with UK/EU trade talks, and that's not likely to happen until well into 2018. In the short to medium term, the Euro  could continue to rise if econo…

GBP/EUR drops into the €1.08's

Sterling/Euro has fallen further today, dropping into the mid €1.08's. Again it's a story of the Euro strengthening and becoming more expensive. We had higher than expected PMI figures from Germany and the EU this morning, and also a speech by ECB president Mario Draghi that gave the Euro a further boost.  Later today we have EU confidence measures, which if better than expected would push GBP/EUR rates even lower.

Tomorrow we have UK GDP numbers and mortgage approvals, but these are unlikely to push the Pound higher. Yesterdays very good news about the UK borrowing figures did nothing to help Sterling, despite the fact the UK economy is performing very well. Concerns over Brexit and a resurgent Euro are combining to push rates lower and lower towards parity.

On Friday we have the annual symposium of Central bankers in the USA. If the ECB president Mario Draghi hints at ending EU stimulus this year, expect the Euro to gain even further and push GBP/EUR rates lower still.

If you …

Could Pound/Euro rates reach parity?

Pound/Euro rates fell briefly into the €1.08's today, before recovering a little after the UK's Public Sector Net Borrowing figures were better than expected, showing the UK accounts are now in surplus. While this helped Sterling a little, GBP/EUR rates still remain in the low €1.09's which is around the lowest it's been since 2009.

Later this morning there are German and EU sentiment measures that will give GBP/EUR further direction. In general however, it's a story of rates going lower and lower.

Much of the decline is due to the single currency gaining strength. Later this week there is the Jackson Hole Symposium in the USA, which is a meeting of central bankers. There is some speculation that the ECB president Mario Draghi may make remarks about ending stimulus in the Eurozone, which has been lending the Euro support and making it more expensive to purchase.

Could Pound/Euro rates reach parity?
Some major banks such as HSBC, UBS & Morgan Stanley are all pr…

UK Employment data gives Sterling a boost

This morning the Pound/Euro rate fell to €1.0930 however has now recovered back to around €1.10:

UK Employment figures help the Pound
As I mentioned in my report yesterday, this morning the UK released its latest employment data. The numbers were better than expected, helping to push Sterling higher against the Euro. Wage growth has picked up to above 2%, getting closer to the inflation number of 2.6% which is encouraging. Overall unemployment fell to 4.4%, the lowest since the 1970's which again is another positive indicator showing the underlying health of the UK economy is robust.

Sterling likely to remain low for some time
However, as regular readers will know, the Pound is under pressure due to uncertainty about our future relationship with the EU. In my view, the UK have tried to make progress with regards to citizen rights, the Irish border, and future customs arrangements, however the EU side seem unwilling to actually negotiate in these 'negotations' and this do…

Inflation numbers weaken Sterling

This morning UK inflation came in at 2.6%, slightly less than the expected 2.7%. This might not sound like much, but it significantly decreases the chance of the Bank of England raising interest rates this year. In turn, the lower return on offer for investors mean they are seeking other places rather than the Pound to place funds, which has weakened Sterling further.

GBP/EUR has dipped into the €1.09's again and GBP/USD is in the $1.29's. (View live charts here).

The next key event for the Pound is tomorrow's UK employment numbers. Analysts expect unemployment to be at 4.5% and average earnings at 1.8%. The numbers will be key, as the BoE are holding off raising rates due to the fact that wage growth is lower than inflation, which in turn is squeezing consumers. If the numbers at 09:30am tomorrow are worse than expected, then it could send the Pound lower into the low €1.09's. If wage growth has picked up, it might give the Pound some support and send it back above t…

Will Pound/Euro rates fall further?

Sterling/Euro fell further last week, at one point dropping as low as €1.0960. The pair has recovered slightly and now sits at around the €1.10 mark, a 10 month low and close to the lowest we've seen Pound/Euro since 2009.

It was a story of Euro strength that caused the rate to fall last week. Poor economic data from the states last week weakened the US Dollar, and when the dollar weakens the Euro often gains in strength, which is what we saw last week that caused GBP/EUR to fall that low.

What next for Pound/Euro rates?
Tomorrow will be key for what happens next for Pound/Euro. At 09:30am we will see the latest Retail Sales figures. Given the rain and poor weather of late, it's likely these may come in low which could weaken Sterling further. We will also see the latest UK inflation numbers tomorrow. Inflation is expected to come in at about 2.7%. If it's lower than this, expect the Pound to fall further. If however inflation has risen, then it will increase the chances o…

Will Pound/Euro rates go back up?

Last week a gloomy Bank of England outlook pushed Pound/Euro rates into the €1.10's, and while the rate has steadied, it hasn't as yet managed to recover the losses. Many of our clients are asking if the rate will recover, and if not, how low could the rate drop?

Why is the Pound/Euro rate so low?
There are two main reasons for the GBP/EUR rate being so low. Firstly, the EU is now growing faster than the UK, and analysts predict that the ECB will scale back their stimulus programme in a few months. This has strengthened the Euro and made it more expensive. Here in the UK, Brexit negotiations have made little progress, and this uncertainty has meant both the IMF and BoE have lowered their growth forecasts. While the BoE have indicated interest rates will rise later this year, it's not likely to happen soon, and that's keeping the Pound under pressure.

Could it drop below €1.10?
With little economic data due from the UK over the next couple of days, there isn't much …

Why has Pound/Euro fallen into €1.10's?

Today's Bank of England's 'Super Thursday' has not been kind to the Pound. There was some speculation that they may hint at interest rate hikes later this year, to tighten monetary policy along with other major economies.

However, instead they left rates on hold at 0.25%, reduced the 2018 growth forecast, and Mark Carney was his usual pessimistic self. Also, only 2 of the 8 members voted for a rate hike, 1 less than at the last meeting, signalling a rate hike this year is now unlikely. The net result is clear to see on the chart below. (Correct at 13:10pm, for live graphs click here). 

In the last 3 months we've now seen the GBP/EUR pair drop from €1.18 to the €1.10's, and there are several reasons for this:

Euro gaining strength as EU economy improvesSterling weakening due to lower chance of interest rate hikeThe political mess caused by the electionBrexit Negotiations making little to no progress
The above 4 points are likely to continue in my view, so any c…

Pound/Euro and Pound/Dollar forecast

Pound/Euro forecast(View live graphs here)
For a few weeks now the GBP/EUR rate has been rather flat, stuck in a range between €1.11 and €1.12. It's currently at the upper end of that range thanks to some slightly better UK Manufacturing data this morning, coupled with worse than expected EU jobless numbers. In general however, it's been a story of Sterling weakness and Euro strength, which is keeping the pair subdued at around the lowest we've seen in 9 months.

In terms of forecasting which way this pair will move, the main event this week will be the Bank of England's 'Super Thursday' meeting in a few days. They will announce their decision on interest rates, Quantitative Easing, and release the minutes to their discussion to show how many of the 8 member committee voted for a hike in rates. In addition, they will release the quarterly inflation report.

Last time 3 members voted for a rate hike, but there's little chance of 4 or more voting the same way…