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The Pound Drops Over Fears Of Further QE

Sterling rates saw one of their worst days in recent weeks on Wednesday. Despite data showing that unemployment was down for the second month in a row, comments from the Bank Of England caused the value of sterling to drop slightly, but rapidly. BoE director Mervyn King forecast weaker growth in the UK economy than was originally predicted, from 1.2% to 0.8%, causing the value of sterling to drop away from the 3 1/2 year high that we’ve seen so far this week. Sir Mervyn indicated that he believed the Euro was ‘tearing itself apart’, and that if the Euro was to suffer a major crisis, Britain would be directly affected, saying – “”We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country’s history, the biggest fiscal deficit in our peacetime history, and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution. The idea that we could reasonably hope to sail serenely through this with growth close to the long-run average and inflation at 2% strikes me as wholly unrealistic”. This raises the possibility that in future months the BoE might decide to introduce further Quantitive Easing measures, which would likely weaken the pound further in the short term. It is worth noting that King’s comments yesterday caused the rate of Sterling vs Euro to drop even more sharply than the announcement that the UK is in recession, and was only stopped from dropping further by the positive employment data.

David Cameron seems to be starting to pay more attention to the issues in the Eurozone, saying in Prime Ministers Questions that if the Eurozone intends to survive, it must construct a ‘firewall’ to secure the weaker members of the single currency. The key ‘weaker member’ is, of course, Greece, and with the failure of their elections in the past week, it seems unlikely that the problems there will be resolved any time soon. With anti-austerity parties leading the way in polls, the ECB is worried about Greece being able to pay off their debts, which would cause it to drop out of the Euro, causing a ‘ripple’ effect across the continent, particularly effecting weaker economies like Italy or Spain. A G8 summit later this week is likely to feature Greece’s problems quite highly on the agenda.

The best news yesterday came for the US Dollar, which gained strength against both sterling and euro, with the pound falling 1% against the American currency. However, despite negative news for sterling yesterday, analysts see its ‘bullish’ run against the euro to continue. It remains to be seen if the UK currency will increase its strength against the Euro sooner, rather than later.

May 17, 2012 | Categories: Best Exchange Rates, Economic Data, Pound Weakness, Uncategorized | Leave A Comment »

BoE Inflation Report Halts Sterling Rally

Mervyn King delivered his inflation report this morning which followed the release of the unemployment figures showing less people were out of work and pay increases had slowed, all good news for the economy and the pound. The boost was short lived however as Sir Mervyn announced inflation is lkely to be above the 2% target for the next year and the growth of the UK economy is likely to be less than expected, being hampered by the growing Euro zone crisis.

This outlook is significantly different to their stance merely 3 months ago so could be the barrier to block the pounds rally currency buyers have been enjoying of late. We have seen a drop across the board since 10 am’s meeting and although I think these losses will be capped, it would be prudent to think that the pound may be under pressure going forward. Despite the likelihood the Euro will be under pressure going forward as the crisis develops the gains sterling can make may well have peaked. If you have a pound/euro exchange to make in the coming weeks or months it might be worth considering a forward purchase whereby you fix the rate now for delivery in the future. Contact me directly for more information or one of the experts at Currency Index to discuss.

May 16, 2012 | Categories: Best Exchange Rates, Buying Euros, Pound Weakness, Uncategorized | Leave A Comment »

Pound Euro Still Holding Strong

Last month unemployment was slightly improved, but while it is expected to be unchanged today, claimant counts are expected to be higher, which could signal a drop off from the highs we have seen for the Pound in the last few days. Against the US Dollar, expectations together with a bit of an overall sell off have already brought Sterling below the psychological level of 1.60, with concerns things could get worse:

“GBP/USD has reacted lower, breaking below the 2012 uptrend. Failure here leaves the market more vulnerable to a sell off to the 1.5830/1.5768 region”, wrote Commerzbank analyst Karen Jones.

Any Dollar buyers should probably think about securing now, before this potential drop is realised.

The Sterling to Euro rate is still holding close to the 3.5 year highs, due to the continuing concerns over what is happening all across Europe – highlighted further yesterday by the announcement that Greece will definitely face a new round of elections in the coming months, following the failure of the election 2 weeks ago to install a new government. However European GDP was static yesterday, showing the Eurozone has avoided going into an overall recession, as the UK has, and with CPI inflation data out this morning, it is entirely conceivable, with some more good data, we could see the Euro make some gains back against the Pound, especially if UK unemployment pans out as expected. I don’t expect this to be the beginning of a big slide, but if you are buying Euros and you want to be close to those highs, then now is the time.

May 16, 2012 | Categories: Best Exchange Rates, Economic Data, Pound Strength, Uncategorized | Leave A Comment »

Pound Up As Bank of England Confirms QE Not Extended

Sterling spent Thursday out-performing most of the major currencies again, with pound euro exchange rates reaching fresh highs, as mid market tested new resistance levels. The boost came after lunch when the Bank of England’s MPC (Monetary Policy Committee) released their decision about interest rates and Quantitative Easing. Some analysts were expecting another small injection of cash via QE following the realisation the UK had slipped back into recession which had been hampering sterling. The result of “no change” gave the pound a fresh boost and we saw the rally over the rest of the day’s trading.

The fresh problems which have arisen this week in the Eurozone with Spain, Greece and France all having issues are likely to weigh on the single currency going forward but we must also bear in mind that the UK is in recession and it will only take some poor data releases for the pound to be knocked off the pedestal it finds itself on at present. With this in mind it would be prudent for those with a currency requirement coming in the next few weeks to look at the various options available for maximising the exchange rate you purchase at. Get in touch with one of the team at Currency Index today to discuss your specific requirements for sending money overseas.

Today from the UK we have PPI (Producer Price Index) data at 9.30am which could weigh on sterling if the figures come out lower than expected. If you are sending money to Canada, later on across the pond we have Canadian unemployment figures at lunchtime and US PPI data, followed by a consumer confidence survey later in the day.

Another good week for sterling but what will next week bring?

May 11, 2012 | Categories: Best Exchange Rates, Buying Euros, Pound Strength, Uncategorized | Leave A Comment »

Bank Of England Interest Rate Decision Day

We saw a relatively interesting day yesterday, as sterling rates rose to a 3 ½ year high against the Euro. This mostly came off the back of the ECB announcement that they were holding off 1bn Euros of the latest instalment of the Greek bailout. This is likely to be the first of many problems caused by anti-austerity political groups gaining strength in the recent Greek elections. Currently, rates on the mid-market stand at 1.24 on the sterling-euro rate. Some small gains for sterling may have been caused by the Queen’s Speech, wherein new economic measures were introduced, including proposals to increase shareholder power, and further regulation cuts on business. These measures, the government claim, will boost economic growth by reducing regulatory burdens.

All eyes today will be fixed on the Bank Of England announcements later on today. Due to the nation officially entering recession, many analysts believe that the BoE will vote for further quantitive easing, which has the potential to weaken sterling’s position considerably. However, any major falls seem to be unlikely, owing to the fact that, despite Britain’s economic problems, they frankly pale in comparison to the concerns in the Eurozone.

Slightly further afield, the Reserve Bank Of India have introduced measures to boost the value of the rupee, asking exporters to convert 50% of their foreign exchange holdings into rupees. These measures seem to have had some short term success, boosting the value of the Indian currency against both the US dollar and sterling, and making money transfers to India more expensive. The US Dollar itself is at a two week high against sterling, with analysts waiting for news from today’s BOE figures, as well as today’s US jobless figures. This could either cause the sterling to regain its strength against the dollar, or cause it to lose even more ground.

May 10, 2012 | Categories: Best Exchange Rates, Buying Euros, Economic Data, Pound Strength, Uncategorized | Leave A Comment »

Pound Euro Remains At 3 Year High

Today is what you might call a lull before the storm. There is relatively little data out home or abroad, bar some German trade balance data out first thing this morning. The Pound is still pushing 3.5 year highs against the Euro and is much higher than recent times against most of the other major currencies, including the Dollar, where the 1.60 level is very much in focus.

The storm comes tomorrow, with a raft of data out in the UK, Eurozone, US and further afield. Firstly the UK will find out how industrial production and manufacturing production figures are progressing, together with our trade balance numbers. The big one comes at Midday when the Bank of England announce their monthly policy statement – while interest rates are 99% certain to be held, will there be more Quantitative Easing? Some analysts believe so, and if there is then the 3.5 year highs will almost certainly be a thing of the past.

In the Eurozone, the ECB give their monthly report first thing, which will give us some indication of whether they intend to try and prop up the Euro in light of the almost daily bad news coming out of Greece, Spain, Holland and seemingly the whole area. The US has some jobless figures out around lunchtime, which while not critical will give us some further information following the bad non-farm payroll data last week. There is also trade balance and budget figures from across the pond as well – so for anyone looking to make a payment in US Dollars lunchtime tomorrow might well be one to avoid, as recent US releases have been very variable and we are likely to see quite a bit of volatility.

Further afield we have Australian unemployment figures and New Zealand’s retail sales data – could the Pound’s resurgence against the Antipodean currencies continue?

May 9, 2012 | Categories: Best Exchange Rates, Buying Euros, Pound Strength, Uncategorized | Leave A Comment »

Political Turmoil In EU Weakens Euro Further

Despite yesterday being a Bank Holiday in the UK there was a lot of movement in the currency markets as investors lost confidence in the eurozone after Greek and French elections cast doubt on politicians’ commitment to austerity plans aimed at tackling the debt crisis.

The euro hit a 3 month low against the dollar and a 3 ½ year low against the pound and many traders felt that these losses could be extended over the coming days.

In Greece the failure of the two main parties supporting the country’s international bailout to secure a parliamentary majority threw into question the future of the programme and potentially Greece’s membership of the euro.

In France Socialist Francois Hollande, who has championed a longer time-frame for eliminating the deficit, ousted centre-right incumbent Nicolas Sarkozy in a result that could start a push-back against German-led austerity across the euro zone.

“The reaction in the foreign exchange market shows if it really comes to the point where it’s clear European politicians will step back from austerity measures that will be perceived as very negative by financial markets,” said Lutz Karpowitz, currency analyst at Commerzbank.

On Friday we had the all important US jobs figures which cast further doubt over the US economy’s recovery. Non farm payrolls data for the month of April showed only 115,000 jobs were added, well below the forecast of 170,000. The pound pushed on against the dollar and though the UK slipped into recession last week its seems investors are more concerned about issues in the eurozone and US so Sterling remains well bid across the board.

Today is fairly quiet in terms of economic data releases with German Industrial Production the only data of real note. Having said that there are a number of speakers throughout the day and its is often the analysis of these comments that can affect the currency markets so don’t be surprised if we have a volatile day in the markets.

May 8, 2012 | Categories: Best Exchange Rates, Buying Euros, Pound Strength, Uncategorized | Leave A Comment »

Sterling Rally Continues

Thursday saw sterling have another strong performing day making gains against a basket of currencies. Most notably was the mid-market pound to euro exchange rates climbing back above the 1.23 level, the best we have seen for nearly two years. This was driven by fresh concerns over debt and economic weakness in the single area forcing investors to hold a more risk averse stance and putting money into the seemingly “safe haven” pound. This was also the reason behind gains the pound made against the antipodean currencies (New Zealand and Australian dollars). The New Zealand dollar rate which overnight weakened off following poor unemployment data continued its slide well above the key resistance point of 2 to the pound, losing nearly 3 cents in 24 hours and opening this morning another cent and a half lower.

If you are looking at sending money to any of the EU countries or down under to Australia or New Zealand in the coming weeks now is a fantastic time to be looking at locking in the exchange rate. This can be done on a forward basis, using a small deposit to fix the rate – speak to one of the team for more information on this and how it can potentially save you thousands.

Today we have already had Halifax house price data out in the UK which has come in lower than expected. With the problems in the Eurozone, the single currency remains weak but the pound has lost a bit of ground against the US dollar. Despite this, mid-market trading is still well above the 1.6 mark and so still excellent for those sending money to the USA.

Elsewhere, we have PMI and retail sales data from the EU and later a raft of US employment data including average earnings and the key non-farm payrolls figure. This latter release tends to throw up some volatile trading dependent on the results coming in better or worse than expected so keep in touch at lunchtime (1.30pm) if you have a dollar requirement which may be affected.

Have a good weekend.

May 4, 2012 | Categories: Best Exchange Rates, Buying Euros, Uncategorized | Leave A Comment »

Sterling Hits 1.23

The past 24 hours were quite strong for sterling. There was some slight negativity in the market due to growth in construction sector slowing down, indicated by The Markit/CIPS construction purchasing managers’ index coming in at 55.8, down from March’s 21-month high of 56.7, contributing to the 0.2% contraction in the economy. However, the total figure is still positive overrall; as long as the number remains over 50, the sector is still in growth. The major problems are in the Eurozone, with unemployment figure in the region as a whole reaching a record high of 10.9%, with the largest increases in Spain, Greece and Cyprus.

There was, however, slightly positive news for Greece, as credit rating agency Standard & Poors upgraded the nations credit rating from “CCC” from “selective default” after the country completed the biggest debt restructuring in history earlier this year. The CBI business group yesterday anticipated that the UK economy would return to growth in the second half of 2012, with 0.7% and 0.5% growth anticipated for the 3rd and 4th quarters respectively, with faster growth expected next year. This has caused the sterling to euro exchange rate to be the best we’ve seen since June 2010. Today’s important data is the UK services PMI data, as well as the Nationwide HPI. In the Eurozone, we await the French Industrial data, as well as a possibly significant ECB press conference.

The Dow Jones reached a 4 year high in the United States, showing a slight increase in manufacturing, as well as a 0.3% increase in consumer spending. This has caused sterling to edge back slightly from the small gains it made against the Dollar yesterday. Important US data out today includes Weekly Initial Jobless Claims , Preliminary Nonfarm Productivity, Preliminary Unit Labor Costs and ISM Non-Manufacturing PMI.

May 3, 2012 | Categories: Buying Euros, Economic Data, Pound Strength | Leave A Comment »

Sterling Update

The last 24 hours have not seen an awful lot of movement for Sterling, with the Pound managing to hold its own against most of the major currencies, just off the summit of the recent 22 month highs.

We are now into May though and as is usual for the start of a month, a busy few days of data releases home and abroad is on the way. Today is no exception with purchasing manager index figures out for both Germany and the Eurozone as a whole, which should give some sign as to the performance of their manufacturing industries and also German unemployment figures as well. The PMI figures are expected to be a little lower than previous, with German unemployment not expected to change much at all. Watch out for movement on the Euro’s rate pairings if these consensuses prove to be incorrect.

In the UK we have some mortgage approvals data and consumer credit figures both out at 9.30am. The expectation for mortgage approvals is they could be slightly down, which could see Sterling drop off a little, so if you need to trade today then first thing could prove a better time to avoid this.

May 2, 2012 | Categories: Best Exchange Rates, Buying Euros, Economic Data, Pound Strength, Uncategorized | Leave A Comment »