Monthly Archives: May 2012

Pound Euro – What if Greece is just the start?

On a relatively quiet week pound exchange rates have remained fairly flat with little movement compared to the the last 6 weeks. However I personally believe it is just the calm before the storm, I think the next few weeks will have some surprising news. Everyone with a currency position should reviews their situation with a specialist asap. From tomorrow onwards all eyes will again return to Greece and Spain with data expected to change exchange rates widely.

I think most specialists agree that it is the Spanish economy that will become the main story in the near future. Their Stock market is at a 20 year low, unemployment at record highs and their banking system is failing.  Market sentiment weakened further yesterday as their 10-year bonds climbed to their highest level so far this year on Tuesday, approaching the critical 7% threshold. It seems that the Bank of Spain is failing to convince investors that they will not need an international bailout.

A majority of the problems has been a result of their property bubble popping, the Bank of Spain estimates it may have up to €180 billion in bad debt which many think may be more than the Eurozone can raise.

As a result I would expect GBPEUR be range bound within 1.24-1.27 over the next 7 days. If you are looking at trading at either level contact us on 01494 787478 today and we can pro-actively help you try and catch your target, or email me direct at hse@currencies.co.uk.

Spanish bonds show real concerns

Governments around the world need to raise capital to pay bills and one of the largest ways they do this is by offering bonds. These bonds are similar to bonds offered by banks to members of the public however government bonds are of much larger volumes and are only purchased by banks, other countries and large institutions. To entice investment a return needs to be offered and this changes dramatically dependant on the situation and strength of that country.  In the past when this level breaches 6% countries have needed a bailout from the IMF, ECB and IMF. As a result when countries like Italy, Spain and Portugal have to offer a higher return, people get worried and the euro gets cheaper to buy.

Why is this important?

Well due to the concerns across the Spanish banking system their bonds have climbed to a record high. Bankia bank in Spain, the fourth largest bank in Spain, have requested a further bailout of €19 billion and the market has estimated it holds over €32 billion worth of bad debt. Spanish 10 year bonds climbed to their highest point since records started against Germany. A shocking 5.05% is the difference and it again makes everyone ask, how is Spain going to get back on the road to recovery? Why does it continue to get worse?

For information on how this could change markets and the data due this week keep reading… Also bear in mind that if you have a deadline to trade then the two bank holidays in a weeks’ time may prevent you trading anywhere in the UK but the currency markets will still be moving. Protect yourself by speaking to a currency specialist this week and ask for information about stop loss or limit orders during this period. Call on (+44) 1494 787 478. or email HSE@Currencies.co.uk

Spanish banks change GBPEUR – where will it go?

*****Breaking News*****

The EURO took another dive this afternoon back towards a 4 year low against sterling as news from Spain broke. Trading shared in the Spanish 4th largest bank, Bankia, where suspended in Madrid. This is the bank that got a supposed “bailout” from the Spanish of €15,000,000,000 only 2 weeks ago. I raise huge concerns about the future of the banking system in Spain, if a bank with that much investment in from the people that are planning improving matters fails, where will it stop.

If you have Euros and are worried about the future value of your funds, like many are, feel free to contact us on (+44)  1494 787 478.  We can lock in exchanges within hours to safeguard your funds against any further losses over the next few weeks. Or simply over the European Crises meeting taking place this weekend.

Topics in the market affecting where GBPEUR will go

There are a number of topics in the market regarding Europe that is ready to break, these include:

  • The Greek election,
  • Whether the Greek government can survive until then as money pours out of their banks,
  • Whether Greece stays in the euro,
  • The new French governments views on the creation of a Euro Bond,
  • The French option on the timescales of repaying debt, (Spain, Italy and Greek among others are asking for this to be relaxed),
  • The Spanish banking systems surviving the property bubble bursting,
  • And the list goes on …..

Each of these could have a fundamental change and will affect GBPEUR and potentially the future of the world’s second currency!

Plus, we are very unlikely to get any notice or warning of change. A statement will just be made and the world could change.

As a result rates these last few weeks have been increasing volatile with very large swings. It seems to be a race between Greece running out of money and the ECB (European Central Bank) relaxing their repayment schedule. Every reader of this should be aware of their risk in the market and be prepared for the worst while aiming for the best.

If you want any information on any of these topics please feel free to email me with your requirement and a contact number so I can call you to discuss your options going forward hse@currencies.co.uk If you would like to call I can be contacted on (+44)  1494 787 478 just ask for Steve Eakins.

Europe Moves another Step towards a Catastrophe

Here at GBP EURO Forecast we are currency specialists working for the UK’s top currency broker. Through this website you will find regular information on the currency market in simple terms, allowing you to make an educated decision as to when to complete a currency exchange.

Earlier today news was leaked by a number of ECB sources suggesting that each member state should plan for the worst of Greece was to leave. This is the first official real notification from the European Central Bank that Greece departing form the EU is a real possibility. As a result the euro weakened consistently to a 21 month low, meaning anyone with €200,000 to sell lost £1,900 in less than 2 minutes.   Fears were also intensified as the Greek Prime Minister, Lucas Papademos, said that Greece had no choice but to except a painful austerity program or face a damaging exit from the euro zone.

I think everyone can see that the stakes are high and it is greatly affecting the flow of investment and therefore currencies demand and price hour by hour. It is a political event that everyone with exposure should be very aware off as well as the risk of loss in the matter of minutes.

Tomorrow as mentioned a few days ago we have the UK GDP figures being released. These are widely expected to be revised up and I personally would be surprised not to see GBP stronger against the euro as a result in early trading tomorrow on the release at 9:30.

We also however have a European meeting taking place including the new parliamentary members to reopen discussion on a euro wide euro bond.  This has previously been squashed by the powerful Germans who would lose out if it was implemented. Initial conversations are taking place this evening and over the next few days. Many are not expecting any news other than a washy statement so I don’t expect it to have a huge effect on markets this week.

For more information on data this week and how this could change your position, feel free to contact me directly at hse@currencies.co.uk or on 01494-787-478

Tuesday 22/5/12: UK Inflation Rates Fall and IMF Warns UK to Cut Interest Rates

UK inflation figures were released this morning and showed a sharp fall from 3.5% to 3%, the lowest levels since February 2010. Retails figures also fell and this may well lead investors to question whether the BoE will now reconsider another round of Quantitative Easing over the coming months. If this is even mentioned as a possibility it could well halt GBP’s chances of further gains against the EUR and in the current climate, rumours are moving the markets just as much as fact.

At time of writing GBP/EUR rates were sitting at 1.2370, down 2 cents from the highs we were experiencing in the middle of last week. As I highlighted in previous blogs I feel Sterling has been overvalued against the euro and the strength we saw was due to the on-going fiscal problems in Europe and investors lack of confidence in the euro, rather than any real belief in our own currency. This means there was always an opportunity for levels to snap back as soon some news came out to dampen expectations on the UK economy, or some positive noises were made in Europe. In fact it was Mervyn King who last week announced that growth forecasts in the UK have been cut for 2012 and that signalled the start of the euro fight back.

We had seen GBP levels move beyond a three and a half year high against the single currency and it looked as if this strength was going to push levels back up toward 1.30 over the coming months, if not weeks. Whilst it’s impossible to say with certainty that they won’t reach that level, I feel expectations regarding the UK economy have now been sufficiently stifled and levels could well settle between 1.22-1.24 as the markets wait for further news on Greece and the short-term growth prospects in the UK and Europe.

If you have an upcoming currency requirement or would like to be kept up to date with the latest market movements, then please feel free to contact me directly at mtv@currencies.co.uk or on 01494 787 478.

Pound this week

As many regular readers will know currency markets move for a number of reasons including political events, natural disasters, acts of terror and economic data releases. The first few we have to be very reactive for but, generally, economic data has set dates for their release and the market normally has a expectation of what to expect. These forecasts are normally priced into the market before the actual figures are announced so if they come out as expected there is often very little change to the price of the currency. However, if the real figures are significantly different the market reacts to this information creating a spike (or dip) in the market. Data releases could be about a wide range of things from the amount of new homes being built to unemployment or business confidence and each has a different effect on the currency market, there are around 30 of these reports each month for each country.

We tend to categorise these reports on a scale of 1 to 3; 3 being the most powerful and 1 being the least.  Many of the most significant pieces of date are released in the first week of the month but  there are certainly a few large announcements due this week that everyone with a currency exchange to make should be aware of:

Tuesday

  • UK Retail figures – Grade 3 – expected improvement
  • UK Consumer Price Index – Grade 3 – Expected improvement
  • UK Public Sector Net Borrowing – Grade 2 – expected fall

Wednesday

  • UK Bank of England minutes – information on Quantitative Easing

Thursday

  • UK GDP figures – Grade 3 – expected improvement

With this in mind I personally would expect GBPEUR to continue to be very volatile, especially with the Eurozone emergency meeting at the end of the week.

If you have been waiting for the elusive 1.25 to return I would imagine you are walking on a tight rope. To get up to date information on your situation from a currency expect feel free to contact us using the form on the page, calling directly on 01494 787478 or emailing me at hse@currencies.co.uk

The Single Currency Ends the Week on a High

The euro has continued its Friday fight back and at time of writing  was sitting at 1.2409 against GBP, up over a cent and a half from yesterday morning’s trading. As highlighted in yesterday’s blog, this spike is due to Thursday’a better than expected Spanish bond auctions, along with the BoE (Bank of England) cutting growth forecasts in the UK for 2012.

It must be remembered however that these are still extremely attractive buying opportunities and more proof that 1.30 on the currency pair is not a given over the coming months. It is also an ideal opportunity for euro sellers to lock in this rate of exchange using one of our forward contracts and eliminate the chance of further euro weakness over the coming weeks.

I do believe that Europe remains in a perilous position and the Greek parliamentary elections in June could well shape the short to medium-term future of the single currency, whilst on these shores it will be interesting to see whether last month’s GDP (Gross Domestic Products) are revised and the UK has in fact avoided the recession we are meant to have re-entered.

If you have an upcoming currency requirement or would like to be kept up to date with all the latest market movements then please feel free to contact me directly via mtv@currencies.co.uk or on 01494 787 478.

UK Growth Forecast Cut Plus Well Received Spanish Bond Auction Equal EUR Strength

Thursday has seen further euro strength, proving that Wednesday’s initial spike was no flash in the pan. I believe this has come about due to the Bank of England (BoE) inflation report yesterday, which warned of the risks to the UK from the on-going eurozone crisis and downgraded medium-term inflation forecasts. BoE governor Mervyn King also cut the growth forecast for this year from 1.2% to 0.8%. This could be seen as a potential justification for further Quantitative Easing and the markets have reacted to the news accordingly with consistent euro strength over the past 24 hours.

There was also cautious optimism over todays Spanish bond auction, where almost the full allotment of 2.5 billion EUR bonds were sold. This news brought some relief to a region beset by economic and fiscal deficiencies and offered hope to investors who were quickly losing all faith in the single currency.

It has also dampened expectations that 1.30 on GBP/EUR was a given and I now think we will see resistance at 1.25 as the markets wait for the next move, either in the UK or Europe. It has to be said however, that any further problems or default by Greece over the coming weeks will most likely see any recent euro strength wiped out.

If you have an upcoming currency requirement or would like to be kept up to date with the latest market movements then please feel free to contact me directly at mtv@currencies.co.uk or on 01494 787 478.

UK Inflation report slows sterling gains

Earlier today Mervin King spoke at the Quarterly Inflation meeting. He warned that the Eurozone was “tearing itself apart” and the Eurozone “storm” was heading toward the UK with a large effect on the UK Economy. As a result we saw sterling lose a chunk of its strength against the Euro, the first time in days…

I personally think that the next big day for everyone with a transfer to make is the end of the next week when the Europeans meet. This is the first emergency meeting arranged following the new governments forming across Europe. It was called so that they could voice their thoughts on the change from Austerity to growth investment that many had been voted in on the promises off. I would expect that the new governments across the continent will either make large statements of change or have gone through their figures and reviewed their promises of change, probably finding out that they cant. There is a real risk to everyone with a currency transfer to make that it could be a bit of a flop with politicians slowly falling back off their promises. If we did see this the markets could come back
quickly. Plus next week we also have UK GDP figures, UK Public borrowing and Retail figures so I would be highly surprised if GBPEUR ended as high as they are now next week.

For more information on the future of the euro and how this could change how much money you get contact an expect, either call us directly on 01494-725353 or email me at hse@currencies.co.uk

German GDP Figures save Europe from Recession but the Single Currency Continues to Struggle

The eurozone narrowly avoided falling back into recession today, after recording zero growth for the first three months of 2012. These figures came in stronger than expected, primarily because the German economy grew by 0.5%. The final quarter of 2011 showed that the eurozone has contracted by 0.3% and many analysts were expecting further negative figures, following the downward spiral the EU seems to be engulfed in since the turn of the year.

The currency markets initially reacted positively to the news and the euro even managed to push back through 1.25. However, in line with recent market trends this spike was quickly eroded and at time of writing GBP had pushed back up towards 1.2550.

This just proves that quite frankly there is no investor confidence in the single currency or the EU region in general at present and any euro strength seems to be coming in these short spikes. Whilst I do feel Sterling is being over valued due to the well documented problems in Europe, I cannot say with any confidence that the EUR is on the verge of a consistent recovery against sterling.

For all those holding off for 1.30, it is worth considering how high our government will actually let GBP go against the EUR . We have to remember Europe is our largest trading partner (over 40% of exports) and any continued rise for sterling against the single currency will seriously hamper our ability to trade, as goods will be too expensive for economies already struggling with high unemployment and poor growth prospects. Personally, I feel they will talk down our economy in order to dampen expectation and hopefully keep the pound at a reasonable level against the euro, in order to not alienate the region our exports rely on the most.

If you have an upcoming currency transfer and would like to access our award winning rates of exchange, or you require any market information or analysis, then please feel free to contact me directly at mtv@currencies.co.uk or on 01494 787 478.

Sterling climbs to new high as Greek Government fails again

Today the GBPEUR rate hasclimbed over 1.25 for the first time in nearly 4 years.  This is after thenews that the Greek Government walked away from talks aimed at forming a coalition Government for the third time in as many days. They now have a number of days left to form a Government before another general election will be called. This election many experts are thinking will give the power to the people as to whether they stay in the euro or not, and could theoretically bring down the euro state.   It is this level of uncertainty that has resulted in both the euro being sold off and risk appetite being lost by investors.

Why is that important?

Well investors risk appetite has a massive effect on currencies with a large interest rate and there are many. The ZAR, AUD, NZD to name a few.  Investors put money into these currencies to earn well of the interest earned when their risk appetite is high, when not the money is pulled back and this European story is as big as it comes. Money has been flying back with a dramatic change to currency rates as we have been mentioning for the last few days. I personally would expect this uncertainty to continue with rates continuing to climb for most positions selling GBP other than the USD.  The Europeans next crunch meeting is the 24th and should be one for everyone with a currency transfer to be aware of.
If you want to speak to a currency specialist about your situation before this event feel free to contact
us here on 01494 787 478 or email me directly at hse@currencies.co.uk

GBP/EUR Rates Touching 1.25 = Great Buying Opportunities But Concerns Continue Over Benefit to UK Economy

GBP/EUR rates touched past 1.25 today before quickly retreating back to the mid 1.24’s at time of writing. The spike may well of come about following yesterday’s BOE (Bank of England) meeting, as I feel the markets were anticipating talk of another round of Quantitative Easing, which in the end never came about. This assumption may well of been based on the fact the UK is officially back in recession, although as written in my previous report, this figure could well be revised up in the coming months. This would surely give our economy and most likely Sterling a further boost.

With GBP/EUR levels at a three and a half year high this is certainly a great time for those looking to buy euro and whilst it is tempting to wait for levels to continue to rise there are a couple of issues that need to be considered. At present we are seeing Sterling gain sharply on the single currency due in part to better economic data in the UK but more so because of the on-going, well documented problems in Europe, which seem to be over shadowing any of those on our shores. This means Sterling is being over valued and for this reason it has the ability to snap back to some extent and if we saw some sort of shift in momentum or public opinion on Europe, then a move back to 1.20 very quickly is not out of the question.

One of the other issues to consider is how much higher our government will actually let the Pound go, especially against the euro? We have to remember Europe is our largest trading partner (over 40% of our exports) and any continuing rise for Sterling against the single currency will seriously hamper our ability to trade, as goods will be too expensive for economies already struggling with high unemployment and poor growth prospects. Personally I feel they will talk down our economy in order to dampen expectation and hopefully keep the Pound at a reasonable level against the euro, in order not to alienate the region our exports rely on the most.

If you have an upcoming currency requirement or would like to be kept updated with the latest market information and trends, then please feel free to contact me directly at mtv@currencies.co.uk or on 01494 787 478.

PMI Service Data and Unemployment Predictions Keeps Pressure on UK Economy

Yesterday UK PMI (Purchasing Managers Index) Service figures were released and made for fairly grim reading. They showed a contraction down from 55.3 last month, to 53.3 this month. This set of data is considered key for the UK, as the services sector makes up two thirds of the UK’s economic output. This proves that whilst Europe does seem to be suffering on a grander scale, the UK still has a long way to go until it returns to economic stability.

There was further bad news as a report released by The National Institute of Economic and Social Research (NIESR), predicted that the current UK unemployment rate will rise from its current rate of 8.3% to almost 9% by the end of the year and could do “permanent damage to the UK’s productive capacity”. It also predicted growth would be close to Zero and if this ends up being the case, then I feel GBP will be handicapped against the single currency to some extent over the coming months.

However, these figures are not yet official and even if they were, 9% unemployment, whilst clearly a major concern, is dwarfed by Spain’s (24.1%) and Greece (21.7%) and in my opinion the threat of contagion within the Eurozone is the biggest fear factor amongst EU leaders and private investors alike.

A move through 1.24 within the coming weeks is not out of the question but any further negative data in the UK, coupled with a more structured European economic plan, could see rates snap back to the 1.20 region as quickly as they have moved beyond it.

If you have an upcoming currency requirement or have any queries about the markets then please feel free to contact me directly at mtv@currencies.co.uk or on 01494 787 478.

Spanish Double-Dip Recession a Boost for the Pound

Spain officially slipped back into recession yesterday as their most recent set of GDP figures announced that their economy had contracted by 0.3% in the first quarter of 2012.

In addition to this Spanish retail sales fell by 13% and unemployment hit a staggering 24.4%.

Spain’s second period of recession is the latest significant headache for the Eurozone following the PIIGS needing financial assistance throughout most of 2011 and Greece’s repeated bailout packages in the latter part of 2011 into 2012.

Unfortunately it doesn’t seem to be the end of the line for problems in Europe as I would expect to see similar issues later in the year for Italy, Ireland and Portugal.

The recent economic turmoil in the Eurozone has led to a purple patch for GBPEUR rates with us seeing a series of 20-month highs despite poor economic data also coming out of the UK.

For those of you needing to purchase Euros now or in the future this may be a good time to consider the merits of a forward contract – these allow you to lock in and secure rates for anything up to 2 years’ time while only having to put down a small percentage of the contract value as a deposit. This allows you to accurately budget for purchases and projects such as property purchases, renovations, school fees, weddings, business costs among many others.

For more information about this contract type or to discuss the best solution for your specific circumstances feel free to email me, Stephen Hughes, directly at sah@currencies.co.uk