Monthly Archives: August 2011

Bad releases yesterday for GBP but gains still made against EUR

You would have expected Sterling to suffer against most majors including the Euro yesterday if you looked at it at face value. The BofE minutes were released showing even hawks Spencer Dale and Martin Weale retracted calls for a rate hike as rates were kept on hold, 9-0 against. Furthermore we saw a rise in unemployment to 7.9%.

Although Sterling lost in early morning before bouncing back in the afternoon, performing particularly well against the Dollar (due to a downgrade of US growth forecasts) and making modest gains against the Single Currency. My argument for these gains would be the dissapointing nature of the Merkel-Sarkozy meeting. The plan to set up a new European economic governing body is not by any means bad news, but as it is so long term it can only be interpreted as dissapointing as the short term threat of Sovereign debt was not addressed.

Although this has been spoken about numerous times there has not been a feasible solution mooted in my opinion. Whether or not the common Euro bond is the answer is debatable but certainly something I am in favour of, if France and Germany are truly serious about the long term viability of the serious currency.

Will there ever be a long term solution for the Euro? In my opinion it is more likely that both Merkel and Sarkozy will continue ‘wishy-washy’ policies, until pressure mounts once more and emergency plans such as bailouts will once again have to be called upon. Unfortunately it seems the political nature of positioning yourself away from necessary controversy lends its hand more to emergency short term action as opposed to long term prevention.

To put it frankly I can see more weakness from the Euro moving forward on this currency pair, even though the world’s best psycic now cannot see far enough in the future to when the UK are likely to raise interest rates. If you have a requirement and are unsure when to push forward, feel free to get in touch with the author directly jfm@currencies.co.uk.






The Eurozone bond, German GDP and UK Inflation – GBP/EUR rate

The Euro has gained over half a percent against Sterling today following statements from German businesses backing the development of a joined Euro zone bond. This has heaped pressure on Chancellor Merkel who has up until now defended her position against this bond.

Germany posted encouraging GDP figures in Q1 of 1.5% and these are expected to slow to a 0.5% growth in Q2 released tomorrow morning at 07.00. Do not be surprised if they outperform this expectation again and we see Germany lead the Euro back into 1.12 territory against Sterling.

We also have UK CPI released tomorrow. Mervyn King recently stated that the UK are likely to hold interest rates for some time and this has meant that GBP has only made marginal gains against a struggling Euro in the last few weeks. Inflation is expected to remain well above the BofE target of 2%, heightening from 4.2% to 4.3% year on year (YoY). In all I would expect this to be a bit of a non event, last months release saw some Sterling weakness after inflation actually detracted somewhat, even a better than expected figure is extremely unlikely to change MPC (Monetary Policy Committee) members’ minds considering neglible growth in the UK economy.

Jumping back from economic data to the Eurozone bond, I am, personally well in favour of a common Eurozone bond. As a Brit, whose own economy has heavy exposure to most of the zone I feel it will provide the security that the markets are missing at the moment. Not only will this calm the markets and stop some of the aggressive swings we are seeing at the moment, it is likely to provide a backbone to the FTSE and other European stock markets. The commitment that is currently lacking from Germany and France are essential to the survival of the zone. They certainly have put their money where there mouth is in terms of support for the bailouts but if they are in the Euro for the long term they need to put themselves in the same boat as some of these other economies and lend some of their economic strength as support for countries well and truly in crisis.

If I was speculating in the currency markets then I would be very hesitant to go near the euro without an existence of common Eurozone bonds. Perhaps the smart reader will try to make savings by taking advantage of spikes to purchase Euros before this happens. Merkel has met with Sarkozy today and it is rumoured that this is the hot topic of the day. If so then expect any news that develops overnight tonight and tomorrow to add further strength to the single currency.

GBPEUR Rate Drops

Recent movements on the GBPEUR rate have seriously hampered clients looking to buy euros and helped those selling euros. We have witnessed a drop of over 1% today and the rate had already taken a hit yesterday!

The recent high of 1.1555 has dropped to a low today of 1.1250!

This drop of 2.7% would mean that on a €200,000.00 transfer you would at today’s low be looking at £4692.53 extra cost compared to the high! If you were selling this would of course be reversed.

Why is this and what is going to happen? Well the recent riots have done little to boost investors low levels of confidence in the pound and this morning’s quarterly inflation report by the Bank of England lowered the UK’s growth forecasts. It seems poor times are set to remain for the pound and highlights just how important it is to be ready to move funds when the time is right.

As specialist currency brokers we write this blog for the benefit of our clients and members of the public alike who have interest in what is happening in the currency markets. If you have any FX requirements, not just for the pound and euro but any of the majors why not speak to us to find out if we can get you a better deal? We have won awards for our rates and levels of customer service and have never had trouble beating not only the banks but also other brokers.

Feel free to e-mail me direct on jmw@currencies.co.uk or call me on 01494 787 458. Please quote GBPEUR as a reference and ask to speak to me for preferential rates!

Domino effect of UK riots on economy and the Pound

Riots spread throughout the UK yesterday from North London to areas in South London, Bristol, Birmingham and Liverpool following the shooting of a notorious gangster in Tottenham. Even from my house in the home counties I left a lingering thought to the front door before falling asleep last night, was it locked? Definitely??

With these riots spreading to areas entirely anonymous to the North London shooting it suggests that there is an undercurrent of unrest in the UK with many pointing to a pent up anger from Osbourne’s austerity measures, so I suppose the question is that this being the third night of trouble – where is it going to stop?

You may be thinking by now, but what has this to do with currency? Well the effect on the UK economy could be huge. If these riots continue then there will be a domino effect that outreaches to almost all areas of the UK economy, think about it:

– Police and Hospital staff are being overworked unable to fulfil day to day duties.
– Business are being shut, along with infrastructure such as roads and public bus routes.
– Insurance payouts will be huge, and increasing day by day.
– London Tourism is likely to be muted, not only for last minute holidays towards the back end of this summer but also for people looking to book holidays for next year.
– Cameron, Osbourne, Johnson have only just returned from holiday. Having come home too late to nip this in the bud they are holding a Comittee Cobra meeting to deal with the trouble. This type of meeting is normally reserved for terrorist issues and not civil unrest highlighting how seriously they view the trouble.

All in all this doesn’t look like it will have a positive effect on the UK economy and could lead to preventing UK gains in the midst of Euro and US uncertainty. It had looked like the Great British Pound could usurp the US Dollar as the considered safe haven between the three and thus gains against most majors, but with riots and political uncertainty now looking rife throughout the entire UK rather than just a small section of London this possibility has been entirely undermined.

Sterling which may have otherwise been dominant against the struggling Euro this week may now be held back from our own uncertainty and issues that have spiralled wildly out of control. On the subject I hope everyone is well and safe in the UK, if you have any currency requirement or any questions on this issues and how they relate to currency and the strength of the Great British Pound then do not hesitate to email the author directly on jfm@currencies.co.uk.

Pound Euro forecast – Volatile markets at present just what will happen in the next few months?

The currency markets over the past few weeks have been unbelievably volatile and we have seen the stronger performers (JPY,CHF) over the past few days moving up to 4% in a day as central banks attempt to devalue their currency as the pure strength is really causing them high troubles.

Japan for instance is having a horrible time with exports now as the price against the USD has gone so far that the states are no longer buying in anywhere near as much as previously so companies, such as Toyota are struggling.

The Pound has also gained 7 cents against the New Zealand Dollar over the past week, 5 cents against the Australian Dollar and4 cents against the Canadian Dollar however just the two against the Euro.

I start to ask myself is this the time that the Pound is starting to puff out its chest and become one of the harder currencies  that investors are really looking at in the current market as a currency they can put their money into.

If only the Bank of England were talking rate hikes we could see a substantial gain for Sterling in the next few months against the majority of majors but they still seem very wary of doing so, a big shame for those that buy supplies from overseas or are in the process of buying a property abroad.

Maybe we need to not kick ourselves when we are down so much, ok we do have problems in the U.K but in my view they are nowehere near as bad as our friends in Europe and allies across the pond in my opinion.

The next few weeks and months are going to be some of the most volatilie when it comes to currency I personally feel I will have ever seen – Apart from the GBP-AUD moving 20 cents in one day in October 2008!!

Be aware that if you have currency transfers to do you do not want to be in a position where you can be caught out, protect yourself from adverse market movements either with forward contracts, limit or stop orders.

Today is key for the pound and the Euro as we see key interest rate decisions for both the U.K and Europe and although no changes are expected all eyes will be on comments following the releases and surely the head of the ECB cannot continue to be confident and look at further interest rate hikes?? Who knows, we have been surprised many times before!

Do feel free to email me directly djw@currencies.co.uk should you wish to discuss any transfers you do have be it corporate or personal and being an expert in this field I will happily assist you in getting the best rate of exchange and putting together a plan for how to approach it.

Alternatively call me (Daniel Wright) directly on 01494 787 462 or fill in the enquiry form on the left hand side of this page.

BofE and ECB interest rate decisions tomorrow – non event?

Personally I think both interest rate decisions tomorrow are likely to be a relative non event – the ECB (European Central Bank) are very unlikely to raise rates (although admittedly there is a small outside chance) and the BofE (Bank of England) even less so.

However this doesn’t mean to say that the markets will be flat tomorrow – in fact far from it! The rates are particularly volatile at the moment considering the debt issues in Europe and the recently resolved issues in the US (at least for the meanwhile!) and this could be stoked by the hawkish Trichet. Trichet has a habbit of coming out with very aggressive comments in regards to fiscal policy and has led the call to raise interest rates (which has already happened twice in Europe this year). If Trichet states that they will take ‘strong vigilance’ towards inflation the markets will begin to price in another rate hike next month and the Euro is very likely to strengthen as a result.

Although I actually forecast that Trichet will adopt a ‘wait and see approach’, in which case rates are likely to remain fairly steady. Despite sovereign debt issues in Europe the interest rate in Europe is now 1% more than in the UK, if you had to ask any currency trader the two main data sets that share a correlation to strength / weakness with currency pairs they would most likely say Interest Rates and GDP and probably in that order.

This is a principle reason why GBP/EUR still remains at good levels for the Euro despite sovereign debt and this is due to the interest rate differential. It is a very difficult one to predict at the moment and the dealers on the trading floor are split near 50/50 to whether GBP/EUR will end up or down at the end of this year, which shows just how turbulent the times really are.

If you have a currency requirement then do not hesitate to get in touch to make sure you know all the options that are available to you that will help you to make the most of aggressive market movement. You can contact the author directly (James Matthews) on 01494 787 451.

GBPEUR breeches 1.15

GBPEUR has weakened again today as investors continue to baulk at the state of Eurozone debt levels. As discussed last week, it was not even a week and the wheels were falling off the recent ‘resolution’ in the crisis.

I cannot see how this will not continue to remain as a pressure on the exchange rate, particularly with the US debt ceiling issue now resolved. This has caused the dollar to gain about 2 cents, much of which will be investors returning to the dollar due to it’s safe haven status (at the euro’s expense).

The movement today has been close to a cent. The low is 1.1420, the high 1.1494. Do you have time to watch the rate all day? Would you benefit from the service of a specialist currency broker who can not only be your eyes and ears in the market but also secure award winning rate of exchange? Then speak to us!

For a free, no obligation discussion about your currency exchanges either fill in the contact form, call 00 44 1494 787 458 or email jmw@currencies.co.uk . Please ask for me Jonathan and quote GBPEURO forecast.

I look forward to hearing from you!