Monthly Archives: July 2012

Why this week could see the end of the recent excellent GBPEUR levels…

Since the 2nd July 2011 the GBPEUR rate has been climbing. At this point over a year ago the rate fell to 1.1052. Despite the ongoing debt crisis the European Central Bank had raised interest rates to 1.5% and the Euro strengthened as Jean Claude Trichet and the ECB fulfilled their commitment to keep inflation low. ‘Price Stability’ was the key goal and a higher interest rate kept the Euro strong, particualrly against a pound bruised and battered from Quantitative Easing and the poor state of the UK economy.

The rate has improved significantly and now is an excellent time to buy Euros as we are close to a 4 year high. This major improvement is because we have seen three separate interest cuts of 0.25% by the ECB. Interest rate cuts generally weaken the currency concerned and this coupled with the ongoing uncertainty presented by the debt crisis has caused the rate movements we have seen.

Mario Draghi is the President of the ECB and so far has ruled quite decisively. Cutting interest rates three times in less than a year is a fairly bold step for the bank to take and is a complete reversal of policy from the Trichet years. Draghi’s decisive nature is important for he has the confidence of the markets. When he says he is going to do something he so far always has. Last week Mario signalled to the world the ECB was ‘prepared to do whatever it takes’ to save the Euro.

The next big event on the horizon is this Thursday when we have the ECB Interest Rate decision. This could be when Mario will announce some new measures designed to save the Euro. There are various options available but only a couple I would reasonably expect. You can read more on what Mario may do on our other blog here.

He is likely to announce something therefore. I think it is fair to say the measures will probably not go far enough and that any Euro strength may be shortlived. Nonetheless after many months of climbing could GBPEUR have reached a peak now? With the UK quite clearly back in recession and in the midst still of one of the worlds worst financial crises ever, things could easily deteriorate.

To make sure you do not get caught out by unfavourable movements we can keep you informed of all the events on the market which could shape your rate. We are market specialists, so for a free discussion of everything that is moving your rate you can call me on 01494 787 478, or if you prefer email jmw@currencies.co.uk

If you would also  like more information about anything contained in this post, please let me know as I will be happy to explain.

Thank you,

UK GDP figures causes GBP exchange rates to fall? Have we reached our peak against the Euro?

Yesterday the UK released it latest round of GDP figures, unfortunately for many the result was not overly positive. Figures came in at -0.7% fare worse than expected and highlighting the UK is in a deeper recession than initially thought. There are some arguing that the figures will have been impacted on by the the Jubilee weekend and the very poor weather the UK has been experiencing (excluding this week of course!). I personally think this may have had a slight impact and we could well see the figures revised upwards in the coming weeks, however it still shows the UK has an underlying problem and this will, in my opinion, curb any further dramatic gains against the Euro. I do feel of the two currencies (GBP and EUR) the pound is still a better bet and because of this I think the losses seen yesterday will be reversed, however I feel GBP/EUR rates are reaching a peak and will remain range bound between 1.26-29 meeting resistance at the 1.30 mark.

As a specialist foreign exchange broker we have multiple contracts available to maximise and protect your exchange. Should you have a requirement to buy or sell Euros it is important you get the right information to help make to most out of the market. Unfortunately a number of clients still think the best way to do this is through their bank however a number of problems can arise through this, culminating in the poor rates of exchange they tend to offer. Here at currencies.co.uk we actively help our clients by keeping them up to date with market trends and data that could affect their position. To discuss the service in more detail please contact Mike at mgv@currencies.co.uk

GBP Weakness – the time to sell euros?

Over the last few weeks regular readers will remember that we have been highlighting that even through GBPEUR reached a 4 year high, the UK Economy is not doing well.  We have seen nuggets of economic data  over the last few weeks that have lead us to this assumption and this was proven again by data that will be widely published by media today.  This the news that the UK GDP figures showed that the DOUBLE DIP  RECESSION is deeper than initially expected. It is only the UK and Italy who have re-entered a recession in Europe.  The statistics is not great reader for people with Pounds to sell as it shows the longest double dip for 50 years. (figures below may help.)

My thoughts and predictions on the markets however is that with the European crises as risky as it is I would imagine these losses will be eaten up. Meaning if you are selling euros I would move quickly, for buyers  of the euro I would hold out on the hope it will climb back up again.

Don’t forget if you don’t have access to the full funds a FORWARD Contract might be the right thing for you. For more information please read my Last blog

Otherwise if you would like more information about when to time your transfer – feel free to contact me directly at hse@currencies.co.uk or Ring 0044 (0)1494 – 787 478 and ask for me Steve Eakins

GBPEUR Falls on UK GDP data

The Pound has suffered on the GBPEUR rate in this morning’s trade as UK GDP (Gross Domestic Product) came in much worse than expected. The data showed in the preliminary estimate of Q2 GDP a -0.7% contraction versus the 0.2% contraction from Q1. This was much worse than predicted and shows a worsening trend.

This has caused the pound to lose about a cent against the Euro and is presenting a good opportunity for anyone selling Euros to buy sterling. The current longer term outlook is still for the rate to continue towards the 1.30 mark due to the ongoing pressures in Europe although negative sterling events like today will clearly hamper this.

If you have any currency transfers to consider on GBPEUR or indeed any other currencies making sensible provisions could well save you money.

To speak with one of our team please call on 00 44 1494 787 478 or feel free to email on jmw@currencies.co.uk

What will move GBPEUR today? Key data and news to beware of!

The GBPEUR rate yesterday fell back below 1.28 yesterday which could perhaps be a sign that the peak has been reached on this rate. Touching nearly 1.29 on Friday as investors left the Euro, this could just be some profit taking although the USD was strengthening on the back of Eurozone and global slowdown worries.

French PMI came out slightly better than expected which has given the euro some support this morning. Shortly we have German PMI and then Eurozone PMI. PMI is a good indicator of how an economy is performing and can affect short term movements on a currency.

‘There is a Troika meeting in Greece today which could prove interesting…It sets a blueprint and template for how the other countries could be managed.’

There is a Troika meeting in Greece today which could prove interesting as there has not been too much new news on the Greek front and this is one of the most important areas for us to get a handle on how the ECB (European Central Bank), EU (European Union) and IMF (Internaitonal Monetart Fund) are responding and will respond to the current crisis. It sets a blueprint and template for how the other countries could be managed. The ‘Troika’ is the term for the ECB, EU and IMF leaders who are effectively the pay masters for this crisis. Their decisions will determine how much money is available and to what extent austerity measures are agreed and implemented.

I also read a report Germany’s credit rating is now on negative outlook, signalling a possible downgrade. This does not bde well for Germany and is another sign of this crisis deteriorating. I therefore feel that a move towards 1.30 is surely on the cards although with UK GDP taking centre stage tomorrow we may not see a hug amount of volatility on GBPEUR today.

If you are considering any currency transfers now or in the future I will be very happy to explain everything happening on the markets and how it affects you. Even if you only need to make a one of transaction I can help explain all of your options and what is driving your exchange rate.

Please feel free to make any comments, questions or suggestions below. You can also speak with me direct on jmw@currencies.co.uk or 01494 787 478.

Thank you,

Will the Euro gain strength?

Regular readers will be aware that the euro is falling significantly and the outlook show no signs of improving. As a result people with euros to sell are getting increasingly anxious. Many people that have euros are rushing to sell, cutting loses for the benefit of knowing that they can’t lose any more.

Q. So what do you do it you don’t have the euros yet?

A. Well the answer is a FORWARD CONTRACT.

This option allows you to lock in the exchange rate even if you don’t have the funds available, a deposit has to be available in any currency equal to 10% of the contract, but you can lock in rates before you lose anything more. This is a solution that many clients have been using recently and many have already saved money. For example when comparing selling €200,000 today and buying GBP 7 days ago you would have lost £2,100, 14 days ago you would have lost £3,500, and 3 weeks ago almost £6,000. Many can understand that it takes a long time to earn, pay tax and save this money and with rates continuing to fall it seems a very easy decision….

If you would like more information on how to utilise this option or to review your situation and timing to trade, feel free to contact me directly on email  hse@currencies.co.uk

GBPEUR rates hit 1.28! Will it continue?

The recent moves on GBPEUR have been quite exceptional and yesterday this run continued with the rate hitting over 1.28!

Spanish borrowing costs rose one again above the 7% threshold seen as unsustainable and the outlook for the Euro which I suspect will remain together, looks to be further weakness.

When the debt crisis was only concerning Portugal, Ireland and Greece it was manageable due to their relatively low contribution to Eurozone growth (about 10%). And we always said that the real troubles would start once Italy and Spain were in the firing line which is what we have started to see in the last few weeks. This coupled with the Interest Rate cut has helped push the Euro to fresh lows against the pound, dollar, Aussie and Kiwi.

The outlook does not bode well and anyone buying Euros may at this stage do well to wait and hold out to see just how high it may go. Who is to say 1.30 is now out of the question?

This morning we have Public Sector Net Borrowing which is a good indication of the extent to which the UK government is sticking to it s deficit reduction measures. This can cause short term movements on sterling which if you are looking to trade soon, could provide the movement you are looking for.

If yo have any currency transactions to consider you can speak to me to be kept up to date with all the latest news and events moving your exchange rate. My email is jmw@currencies.co.uk and you can also call on 01494 787 478.

I look forward to speak with you and explaining how to get the very best exchange rates from the market.

 

 

 

UK Retail – GBP change

GBPEUR rates have stayed steady over the last 36 hours as little surprises from the market have resulted in little change. The real news of note is from the conversations had by the head of the FED over the last two
days, the general tone was negative which hit investor confidence resulting in GBP strength.

Today we have the retail figures for the UK being released at 9:30. This is of big importance and will drive prices across the board today. Why? Well Retail in the UK contributes almost 2/3 of the UK economy so
any change is seen as key to the overall health of the UK economy and therefore the strength of the pound.  Expectations are for a fall, mainly due to the weather over the last 45 days, with the wettest June in over 100 years. It is safe to say that many feel like Noah at the moment with so much rain but this is expected to result in weaker growth in the sector and as a result a weaker pound.  It you need to complete an exchange over the next few days, and are keen not to lose out, I would strongly suggest completing your trade in the very near future before this release.

There is another topic that have been on front of most papers but one we have not really discussed on the blog – the Olympics.  There have been a number of reports suggesting what gains this will make to the
UK economy and as a result the pound. The first signs of a positive boast from the Olympics probably came yesterday, with news that there has been a boom in job creation and a majority of which from London. The figures showed that unemployment across the united kingdom dropped down to 8.1%; a very positive number considering that a recession still plagues most high streets. Generally my thoughts is that any real gains from hosting the games and paying out the huge sums to host and build the Olympic village will come after the event, probably reflected in higher Retail figures and potentially GDP figures in 2 months’ time.  Not something I would suggest clients to consider will help in the near future.  To answer the question I have already been asked a lot “Will the added tourism and people buying pounds to spend over the event
strengthen GBP?” No, the additional demand is to respectively small to make any change.

If you want to review your situation and maximise your trade contact a specialist today – here we provide a pro-active, award winning service that regularly saves clients £1,000’s compared to the bank – Contact me directly if interested at hse@currencies.co.uk

GBP/EUR Hits Fresh 4 Year High – 1.2750 on the markets!

A new four year high was hit on GBP/EUR during Thursday’s trading, as levels touched 1.2769 on the Interbank. This is further proof that the ECB’s decision to cut interest rates has hit the single curreny harder than many anticipated. When you take into account the spiralling Spanish bonds and revelation by Italian leaders that they too will most likely require a finiancial bailout, it is no wonder investors are running for cover as the European debt saga rumbles on.

Euro sellers must be wondering if their luck is ever going to change and whilst it is true that the economic problems in Europe are far outweighing those on our shores, the pound in my opinion is overlued against the single currency because of this and therefore any turnaround in fortunes, however small, could make a big differnce in the markets.

Whilst I don’t believe investors will be fooled by cheap talk, there is an argument to be made that the problems in Europe could scarsely get any worse. The countries who are economically unstable have laid their cards out on the table so to speak and you do wonder whether a long-term fiscal solution is now what is needed, rather than any short-term fix.

Of course this is far from becoming fact and in truth the EUR is losing ground across the board. I do anticipate various spikes in the market, so if you do have euro’s to sell pleas efel fre to get in touch and I will keep you updated with the latest market information.

If you do have a currecny requirement of any variety then please feel fre to contact me directly at mtv@currencies.co.uk or on 01494 787 478.

Euro interest rates dropping??

GBPEUR rates continued to fall yesterday as rumours spread that the Europeans could lower their interest rate further in an effort to boost growth. As regular readers will know, Europe’s banking crisis seems to be
getting worse, not better, even after 4 years since the crash and following economical failure started.  Bond markets, which are a barometer of confidence in a countries outlook, have also been climbing in both Spain and Italy. It was down to these two factors that rates pushed to a fresh high in yesterday’s trading.

Today we see the release of CPI (consumer Price index) for the UK along with Retail figures. Both of which are expected to fall which as a result could give euro sellers an opportunity to take a better price as rates
continue to get worse for them. These come out within the hour so make sure you are in a position to take advantage if you are in that situation – Contact us today or email me at hse@currencies.co.uk

In other news, global growth again came under pressure recently as the World bank lowered expectations of growth globally. This was backed up by data coming out of the US saying their Retail figures dropped for
3 consecutive month, two thirds of US GDP is made up from household spending, there are yet more concerns of a recovery.

In summary if I was selling euros I would jump ship, if I was buying this week I would hold. Keep an eye out for the Bank of England minutes tomorrow along with a key meeting in Europe on Thursday.

For a more focussed strategy for your situation feel free to contact us and we can happily give you some pointers on when to potentially complete your exchange.

Call us on 01494 787 478 to talk this through if it is of interest.

1.27 on the markets! But for how long? Why this is a very important week on GBPEUR

The rate seems to just keep on giving for anyone buying Euros lately. The long list of woes concerning the Euro has not gone away and it is almost farcical the lack of action we have seen. Last week Italian borrowing costs shot up and the shockwaves from the ECB rate cut are still being felt. If you are selling Euros and are shocked at the way things have gone lately feel free to speak to me to find out why the rate is where it is.

This week we have a number of releases on the data front, the most important for me is the Bank of England Minutes on Wednesday. The economic conditions for the UK have clearly deteriorated in the last few weeks and many are questioning exactly what it is that QE is doing?

‘In the last few months we have seen these minutes provide the most amount of movement on the GBPEUR rate’

Interest Rates – Central Bank Interest rates affect a currency like a higher interest rate affects a bank account. A higher rate will encourage invesment into the currency concerned and strengthen it. A lower rate will encourage investors to leave that currency and invest elsewhere. Interest rates are also lowered to help stimulate an economy as it makes lending cheaper. Lowering rates is often bad for a currency since it shows that the economy is not performing well on its own.

Every month the Bank of England and the European Central Bank (as well all the other major central banks) meet separately to discuss whether or not to raise or lower rates. At the same meeting the Bank of England decide whether or not to embark on more QE. The announcement is always held at the start of the month with the minutes of the meeting two weeks later.  In the last few months we have seen these minutes provide the most amount of movement on the GBPEUR rate so this Wednesday 18th is where we could see the big movement of the week on the rate. And it is more than likely this will be sterling negative. To avoid disappointment on these 4 year highs for buying euros please speak to us as we can guarantee to beat the high street banks and other brokers.

If the last few months and years have taught us anything it is that the pound is far from stable and Mervyn King and the Bank of England will do what they can to keep the pound weak. Why is this? Well a weak pound is better for the UK’s exports  as it makes UK goods and services cheaper to overseas buyers. And since the UK relies heavily on exports for it’s economic strength and growth a weak pound would lend a hand to the struggling economy.

Also this week is Public Sector Net Borrowing (a sign of how much the government is borrwoing) plus UK Unemployment data. All in all a very busy week for the UK and following two straight weeks of losses for the Euro it could be time for the Euro to make back some gains against sterling.

If you have any currency requirements and would like more information about all of the events in the future that will affect your rate please feel free to speak with me, Jonathan directly on 01494 787 478 or email jmw@currencies.co.uk

 

Future EURO prices?

GBPEUR rates have continued to climb today as the risks that Italy will need a bailout intensify. Readers of the blogs here who read yesterday would have heard about the underlying issues with Italy as confidence falls, their borrowing costs rise. The easiest way to measure the markets confidence in a country is to watch the bond markets. This is where countries raise money by offering a return. They have to raise a certain amount each month and depending on the demand they have to offer a larger return. This return is the cost of their borrowing. To give an example a 10 year bond currently costs the UK 1.8%, Germany 1.5% and the US 1.2%. In Europe however it is a different pictures, Spain is paying over 7% and Italy over 6%.

The change overnight was that of their credit rating, similar to you and I, countries have a rating which is given by a agency called Moody’s. They downgraded Italia’s score last night by two notches, making it more expensive for Italy to borrow, making it more probable that they would need a bailout, weakening the euro, making it a lot cheaper for you guys buying euros.

So good news, buys of the euro are currently buying at a high not seen since September 2008. The next question we all ask is, will it get any higher?

This is a question no one can answer, my personal view is that the markets in the next week will do one of either two things. Either move up a little for sterling, as in GBPEUR maybe reaching 1.28, or going down a big bit, maybe down towards 1.23. Over that period there will be times better and worse and it is our job to help you time that best. If you would more information about how to maximise your transfer feel free to contact us using the normal number or email me directly with your contact details at hse@currencies.co.uk

GBPEUR at 4 year high, will it last?

GBPEUR has hit close to a 4 year high today but will it last? The economic challenges ahead for the UK will persist and anyone thinking it will be all plain sailing up to 1.30 or 1.40 would do well to remember just how far the rate has already come and look closely too at the economic conditions surrounding the pound. They are not good which is why sterling is dropping against many other currencies.

The Euro has weakened by over 14% in the last year against sterling as the Euro debt crisis has intensified. With more countries taking a bailout and the ECB (European Central Bank) responding with 3 separate interest rate cuts the future is not good for the Euro. I think that certainly in some form the Euro will remain but that there will soon need to be some major changes in the way the debt crisis is managed. We have already seen Germany prove they can be more accomodating in the way they approach the handling of the debt crisis, which is key to offering a tangible solution to the crisis. But will it be enough to satisfy the markets?

As Italy is grabbing headlines due to the fact it may also need a bailout we could be forgiven for thinking the rate is set to go only one way and I am sure we will continue to see pressure on the Euro. But is well worth remembering the problems the UK is still facing and being aware that sterling could easily plummet in the coming weeks and months. In 2010 we were in a very similar situation on the GBPEUR rate. There was concern over the debt crisis and investors had fled the Euro. The rate stood at 1.2350. By that October however the rate had fallen to 1.12!

This was all due to the fact the economic recovery in the UK was very weak and once progress was amde in Europe, attention turned back to the UK and we saw the market fall.

There is without doubt a fair chance the rate will continue to improve as pressure remains on the Euro, although with no new bad news in the press, it is reasonable to think we could have reached a plateau. Whilst the rate may not drop or crash we could easily see it drop a cent or two as investors take their profits on the favourable movements in the last week. Anyone buying Euros would I am sure be gutted to miss out on these 4 years highs and as we always say it is the greedy that often get their fingers burnt!

Exchange rates move every two seconds and things can quickly and unexpectedly turn. To make sure you do not lose out from a poor rate of exchange by your bank or broker why not speak to us here at gbpeuroforecast.co.uk? Working as currency brokers at one of the UK’s leading foreign exchange companies we can assist with all the information necessary to get you the very best deals. We can make sure you are aware of all the trends and themes on your exchange rate and let you know if it starts to move against you as well as offer the very best rates of exchange.

For more information about your GBPEUR forecasts and how it all works, please speak to me directly on jmw@currencies.co.uk or call 01494 787 478. I have never had any trouble getting my clients the very best deal and I look forward to hearing from you.

GBP/EUR Rates Hit 4 Year High

Thursday has seen a further spike in the market for GBP/EUR with a move towards 1.2650 on the Interbank. This represents the highest levels four years and with the Pound falling off against almost every other major currency, this represnts an excellent buying opportunity. Yesterday’s euro bond auctions have hampered the single currencies chances of a fightback and today Bank of England governor Mervyn King, who it has to be said is not one who views any economic situation with the glass half full, has confirmed that the eurozone crisis is his “biggest worry.” He accused EU leaders of not tackling the funadamntal issues in Europe and passing the buck to others.

So whilst GBP/EUR rates scale these lofty heights you could be
forgiven for thinking this was a good time to be holding Sterling. Whilst it
may appear that way, we have actually seen the pound for the most part lose value against a basket of currencies. For this reason anyone who is waiting for GBP to continue its rapid rise against the euro should heed various warning signs.

UK economic data has been deteriorating for the past couple of
months and according to Mr King, we may only be halfway through the current economic crisis. This is a matter of considerable concern but even more worrying was the release of last week’s UK Construction PMI data, which showed the weakest figures in two and a half years. Poor construction data was blamed by many analysts as the reason behind the UK falling back into recession at the beginning of this year, so to me this is already a clear danger sign.

When you add last week’s confirmation that the UK economy will be
injected with a further 50 billion in Quantitative Easing (QE), with further
outlays likely to follow, it indicates the Pound could lose value very quickly
should any sense be made of the eurozone debacle.

I feel that GBP/EUR rates could well move away from the current
highs over the coming weeks and trading levels of 1.25 could quickly evaporate. If you have an upcoming currency requirement and would like to take advantage of this spike in the market, then please feel free to conatct me directly at mtv@currencies.co.uk or on 01494 787 478.

Euro slow steady steps to a recovery?

Over the last few days Europe has continued its slow steady steps to a recovery.  At the Financial meeting which is taking place in Brussels yesterday and today we have already had confirmation and details of the Spanish bailout.  Even though this has not been called a bailout if you look at what has happened it really is; banks have been given money, the country has had extensions in its repayment plan and extensions to hit its deficit budget.  Their next payment has been confirmed to be €30 billion at the end of the month.  The markets thoughts on this is that we have only started the bailout of Spain and in the past it has taken 2 or 3 attempts to get it right if you look at both Greece and Ireland.  Plus we have to consider that Italy is not far away either, bond markets showed this lack of confidence again yesterday as Spanish bonds go over 7% and over 6% in Italy.

So currently GBPEUR exchange rates are near a 4 year high and if I was buying I would probably hold out, if I was selling euros and buying pounds and I had not already done the trade I would have done it yesterday.  Currently it looks like the markets may only go one way.

Other members of the team here however have a different view, that is valued and you should consider.  Their argument is that we have actually seen sterling lose ground against most currencies other than the Euro. They highlight the recent date coming out of the UK as a warning that rates could swing dramatically in the other direction. Highlighted especially is the poor Construction figures which showed a 2 ½ year low plus  the comments by mervyn King, the governor of the Bank of England, that thinks we are only half way through the hard times, meaning the UK could continue to suffer for the next 2-4 years!

Either way, if you are looking at completing a transfer make sure you know what you are gambling. Sit down and do the maths working out how much each cent costs you and remember how long it takes to not just earn but save the potential loss.  If you are uncomfortable with the figure you end up with I would strongly suggest you look at avoiding the risk and buying your funds sooner rather than later. Alternatively you can easily change the parameters by changing half.

Markets are still moving over a 1% a day so timing will be key. Keep a watchful eye on the rates and if you need assistance or would like to put a professional strategy together contact us today for a brief chat as we have many options available inclusive of a forward contract, stop loss or limit order all of which are free and great tools to use in a volatile market. You can contact me directly by email at hse@currencies.co.uk and  will be happy to fully explain how these work.

1.26 on the Markets!!!

Thursday has seen a volaitle day on the markets for GBP/EUR, as we have seen Sterling surge to a four year high against the single currency. This followed yesterdays announcement by the European Central Bank (ECB) that they would be cutting interest rates by 0.25% to 0.75% and this seems to have sent shockwaves through the market. Investor confidence is once again being tested and the good feeling that seemed to be returning to the euro last week, has quickly subsided.

This spike was not entirely anticipated, due to the fact that the Bank of England announced that there would be a further round of monetary stimulus (Quantitative Easing or QE) to ease the burden on the stagnating economy. UK economic data has been poor over the past couple of weeks, with Construction PMI data particularly worrying as it has fallen below the 50 mark, which indicates economic contraction.

At present it seems though there is more concern with the implications of the ECB’s rate cut than the faltering UK economy but to me Sterling is very over valued and therfore could fall away very quickly. Personally I’m not convinced we are witnessing long-term GBP strength so those holding euro don’t panic yet and to those looking to buy euro you may want to consider your positions as the spike we are witnessing could dissapear as quicklya s it has arrived.

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

Do You Want To Buy Euros At 1.25?

Many people have been waiting to see if they can buy euros at 1.25 and the news yesterday of the Bank of England only extending the Quantitative Easing Program by £50bn whilst the ECB cut interest rates saw a huge surge in GBP EUR rates.

The movement was a great example of how a limit order can be useful with anyone looking to buy at 1.25 being filled (depending on the volume of their trade) but there are still warning signs for anyone looking to see the Euro drop even further.

Firstly, the news of more QE in the UK should be a warning shot across the bows for the prospects of UK growth in the near future.  If UK economic forecasts previously were correct then their should be no need for more QE.  Clearly Mervyn King has been worried by the outlook for the UK when he said last month that the situation had worsened since the May Quarterly Inflation Report, and in my view this is by no means the end of measures for the UK.  Personally I think the UK economy will continue to struggle with the banking sector once again under attack for shady practices- this is likely to damage tax revenue for the government if banks are posting less profits (it is the biggest driver for the City and the UK economy).

The other issue is that there is still the small prospect of an interest rate cut in the UK if QE doesn’t work and this is likely to hang over the pound like a dark cloud for the foreseeable future damaging sterling exchange rates.

If you do not wish to add to banking profits then why not save money on exchange rates by opening an account with Foreign Currency Direct Plc a company that is completely independent to UK banks?  Simply click here to register free http://www.currencies.co.uk/

The other problem for GBP EUR rates is that at the minute the Euro is clearly in the firing line with the debt crisis in Europe and how to tackle it still a huge impasse between Germany and most of the rest of Europe.  The recent rate cut has also massively damaged the short term price of the Euro.  However, with the immediate threat of a Euro break up from the Greek elections having been avoided last month, Europe has bought itself some time.  If European leaders can come to a greater level of cooperation in the weeks and months ahead then some of the downward pressure on the Euro could lift significantly and the focus switch back to the UK economic performance- something I think will likely be as good news for sterling exchange rates as Rupert Murdoch announcing he is taking over BT!

Data this week driving markets

Regular readers will be aware that we categorise events that affect the currency market into 4 types:

  1. Terrorist attacks,
  2. Acts of god,
  3. Political events,
  4. Economical events.

The first 2 we have to be extremely reactive to, the 3rd we can almost expect but mostly again we have to be reactive to, the last is where a majority of forecasts are made from. This is as economic data is scheduled and forecasts are normally made against the previous month and year.  In summary there are about 30 reports for each country and as they are normally reporting on the previous month, these are normally released at the beginning of the month.  Due to the volume that are released we categorise them into 3 types, in order of how powerful or influential they are on the market. For example an interest rate decision is graded 3, the post powerful, whereas house building numbers are graded 1 as it traditionally has a much smaller effect on exchange rates.

Currently as we are at the beginning of the month there is a lot of data due in the coming days, that will have an effect on every currency pairing. The key ones for most of our regular readers are:

  • Tuesday 5:30 – Australia interest rate decision – Grade 3

This is expected to stay the same however any change will affect a number of currencies in the region

  • Tuesday 9:30  – UK Mortgage approvals, construction figures, and Money supply – 4 reports Graded between 2 and 3

The overall forecast is for a contraction and as a result expect sterling weakness early tomorrow

  • Tuesday 10:00 – European Production Price Index – Graded 3

An expected fall that could weaken the Euro and potentially strengthen the dollar as a result

  • Tuesday 15:00 – USA Factory Orders – Grade 2

Expected to improve significantly and as a result the dollar could become more expensive to buy in tomorrow trading

  • Wednesday 10:00 – European Retail sales – Grade 3

Forecasted to improve so again, expect euro strength if the data comes out as expected

  • Thursday – KEY DAY – EUROPEAN AND UK INTEREST RATE DECISION

This is the major day in my opinion this week for everyone with exposure to the markets. Interest rate change is predicted along with confirmation of additional Quantitative easing

If you are looking at exchanging a more rare currency and would like more information, or would like to discuss these in more details feel free to contact me. I would be happy to help. Call on (+44)
1494 787 478
or email me directly at hse@currencies.co.uk