Best Exchange Rates

Weekly News

The bank holiday has brought some sunshine to the UK at last, and the Pound has also been basking in good rates for those of you sending money abroad. The Euro in particular has been held at cheaper levels by the European Central Bank’s decision last week to cut interest rates in the single currency area, which as regular readers will know usually weakens a currency’s value. The Euro has not been cheaper since January.

In the USA, the Dollar was not affected too much by Friday’s better-than-expected employment figures, and rates for sending USD, as well as pegged currencies such as AED, remain around their best since February.

There have also been improvements in rates for sending South African Rand, Australian Dollars, and Canadian Dollars in the last week.

Focus this week moves to the Bank of England. The monthly policy announcement on Thursday is unlikely to bring much change to British monetary policy, but any further rumours of Quantitative Easing will be likely to bring grey clouds back to the UK economic outlook. The surprisingly good recent GDP figures are also subject to revision in the coming weeks, so the Pound is unlikely to be surging ahead just yet.

With all this in mind we think most exchange rates are good value at the moment for those of you sending money abroad. There is little other data out this week so we might expect a quiet week on the markets – as always though there is crystal ball and caution may be wise in the current climate.

If you would like to take advantage of any movements in your favour, simply call Simon Eastman (01923 725725)


Weekly Update

The Pound has moved higher, after last week’s GDP figures showed that the UK has not fallen back into recession – yet. Growth for the first quarter of 2013 came in at 0.3%, better than expectations and crucially a positive number, where a negative would have confirmed another period of recession.

We now have the best rates for sending Euros since January, and the cheapest USD rates since February, while rates for buying Australian, New Zealand and Canadian Dollars have all improved too.

While the Chancellor insisted the GDP figures showed the UK economy is getting back on track, this is far from certain, as there will be revisions to the GDP figures in the next couple of months which may raise the recession question again. Meanwhile the Bank of England is still expected to extend Quantitative Easing in the coming months (its next policy meeting is next week) which is likely to hurt sterling too.

This week we have a bank holiday in much of Europe on Wednesday, followed by the UK on Monday 6th. There is plenty of data out which could move exchange rates however, notably the main monthly labour market numbers from the USA on Friday, where we also have the trade balance (Thu) and personal expenditure (this afternoon).

In Europe, the monthly interest rate decision and press conference are always of interest, and are announced on Thursday.

With a lot going on as we approach the end of the month, there could be some volatility in rates. If you would like to take advantage of any movements in your favour, simply call Simon Eastman (01923 725725) or reply to this email and let Currency Index watch the markets for you. You can also place orders to buy and sell particular currencies if a pre-set rate is achieved in the market.

Our blog is also updated throughout the week with a daily outlook on the markets.


Currency News

After the Easter break, there are finally signs of spring in the UK, and the Pound is also looking relatively bright at the moment. With a lack of important data out last week, and the Cyprus situation out of the headlines for now, sterling fell back slightly against most currencies late last week but remains at much better levels then pre-Cyprus crisis particularly against the Euro. The Pound also still managed to end the week slightly up against the Canadian, Australian and New Zealand dollars.

The main economic release last week was the American non-farm payrolls, which is the main monthly jobs data in the States. The figures were disappointing, as analysts had expected 200,000 new jobs in March, whereas only 88,000 new positions were registered. The figures are notoriously volatile and usually affect the US Dollar, which weakened on Friday afternoon to its cheapest level against the Pound for around 6 weeks.

The Euro was also kept at cheaper levels by worse than expected retail sales on Friday. David Cameron this week is seeking to garner support for EU reform, and will tell Eurozone counterparts that British support for EU membership is at an all time low. The result of talks, and a possible referendum after the next election, will undoubtedly affect sterling’s value against the single currency in the medium term.

We have very little important data out this week, although the ECB’s monthly report on Thursday will be of interest as their first monthly report since the Cypriot bailout. We also have the Federal Reserve minutes on Thursday evening, which may paint a better picture in the US and bring some dollar strength. Otherwise, we await next week’s Bank of England minutes and then UK GDP the week afterwards, to bring some clarity as to the direction the Pound will move in next.


Weekly Currency News.

It seems a week is a long time in the currency markets, and even longer for the Cypriot government. A week ago, a levy on all Cypriot bank accounts seemed to have been agreed, only for a u-turn and renegotiation resulting in this morning’s agreement that the island’s second largest bank, Laiki, will now be broken up and a tax on deposit holders with over €100,000 will be made instead. The deal came hours before the ECB’s deadline to cut funding to the island’s banks.

The Euro, which has been cheaper for the last week, has started to gain some value back and we could see exchange rates come down further as the dust settles on the new agreement. The Cypriot people will still have a say in the markets, with banks on the island due to re-open tomorrow – will we see protests and panic, or a reluctant acceptance that the bailout is going ahead?

Sterling is certainly vulnerable to falling back to levels seen a couple of weeks ago, although last week’s retail sales were better than expected, and the Bank of England minutes also revealed that the prospect of further Quantitative Easing is not getting nearer, with 6 of the committee’s 9 members still voting for no change. This was also good news for the struggling Pound.

The US Dollar has been out of the spotlight for the last couple of weeks, and has weakened a little, giving an improvement for rates if you are sending USD or pegged currencies such as the UAE Dirham abroad. Fed Chairman Ben Bernanke gives a speech tonight on current US monetary policy.

This week is shortened by the Easter break, with not much in the way of significant data due out. The revision to UK GDP, announced on Wednesday, is one exception, and UK mortgage approvals, released this morning, were slightly worse than expected.


Cypriot Crisis Inevitable….

Good article from Bloomberg regarding the Cypriot bank crisis, which has bought some respite to the pound against the single currency this week.

 

 


Cyprus Echoes Greece Crisis

Some respite at last for those of you buying Euros, which has come in the form of another bailout crisis, this time in Cyprus. The EU have imposed a levy on all Cypriot bank deposit holders, of up to 9.9%, as part of the terms of a €10bn bailout designed to prop up the Cypriot financial system.

In echoes of the Greek crisis of last year, there is unrest in Cyprus at the perceived unfairness of the levy, which will affect all deposits held in the country. President Anastasiades is fighting to amend the levy demand, and if a deal is not done then banks in Cyprus could be closed tomorrow to avoid mass withdrawals.

All this uncertainty and political wrangling has weakened the Euro over the weekend, giving us this morning the best rates for buying the single currency in over a month.

In the UK this week we have the Budget and Bank of England minutes both out on Wednesday, and even the most optimistic commentators will not be expecting sterling-positive news from either. So we could be seeing a window of opportunity today and tomorrow, for buying many currencies at slightly improved rates.

Retail sales and unemployment numbers in the UK will also be likely to affect the Pound.

For the US Dollar, rates have also improved over the weekend, and there is not a huge amount of data due out from across the pond. The Pound is also up against the Canadian Dollar, South African Rand, and Australian Dollar.

So while exchange rates for sending funds abroad are by no means at their best at the moment, it may be prudent to consider locking in to a rate now, given the recent negative sentiment in the UK and upcoming budget and Bank of England minutes. The minutes will show how many of the Bank’s committee voted for further Quantitative Easing earlier this month, and any sign of more QE in the pipeline is likely to undermine the Pound further.


Weekly Currency News

Last week’s most anticipated event, the Bank of England’s Quantitative Easing decision, went the right way – in theory – for those of you sending money abroad, with the committee voting to keep the current asset purchase scheme unchanged. Unfortunately the boost this gave to the Pound was short lived, and we soon saw the familiar theme of a weakening Pound continuing. We will find out next week how close the vote was, and whether more QE is expected in the coming months.

The US Dollar continued its resurgence through the week, with Friday in particular seeing gains for the greenback, when the main monthly employment figures came out much better than expected. The increasing value of USD has now given us the worst rates for buying dollars in nearly 3 years, with no sign of any imminent improvement.

Similarly the Canadian Dollar became more expensive as their unemployment figures were also better than expected, giving us the lowest GBP-CAD rates since 2010.

Against the Euro we saw more rangebound trading last week, with the trend for lower rates continuing showing a drop of 1.5c through the week. Eurozone retail sales came in better than expected, and GDP was on forecast, allowing the cost of a Euro to creep up through the week.

With data around the world showing improvement in other major economies, the Pound is struggling to find any momentum at all, with the budget coming up and continued fears over a third period of recession. The first estimate of Q1 GDP is announced on April 25th.

This week we have figures released through the week, including the NIESR GDP estimate for the UK tomorrow, and the European Central Bank monthly report on Thursday. The US monthly budget statement is tomorrow, with US inflation and retail sales also released this week, could we see continued increases in the cost of the greenback and the Euro?

Australian unemployment is released in the early hours of Thursday; with the Australian Dollar currently close to its all-time most expensive level against the Pound. Don’t forget that currency markets are trading 24 hours a day through the week, with Asian and American markets open when Europe is closed. As such it can be common to see significant movement overnight.


Weekly Update

March is now upon us, and already in the currency markets 2012 seems a long time ago. Last week saw fresh new lows for the Pound against the Euro (lowest since October 2011), US Dollar (June 2010), Canadian Dollar (July 2011) and Australian Dollar (February 2012).

Friday’s poor UK manufacturing figures were the latest in a long line of negative news releases for the UK and therefore sterling. This week, the Bank of England faces a dilemma in whether to increase Quantitative Easing, after 3 of the 9 committee members, including Sir Mervyn King, voted for an increase in February. If more funds are announced on Thursday, we could see the Pound fall further, which has happened at every previous QE extension. Sir Mervyn is also giving a speech on Wednesday morning, and has not been worried about talking the Pound down in any of his previous speeches either.

This morning’s UK construction industry figures were also worse than expected.

Abroad, we have the monthly Eurozone interest rate decision and accompanying press conference on Thursday too. The Eurozone, fresh from the shock Italian election result, will be hoping for some better news when Mario Draghi gives the monthly statement – but it is still unclear what the effects of a hung Italian parliament might be. The Italian election was one positive note last week, in that for those of you buying Euros, who had a brief improvement in rates.

In the USA, the main monthly labour market figures, known as non-farm payrolls, are released on Friday afternoon. The estimates can be wildly different to the final figures, and can drive volatility in the US currency. Canadian unemployment numbers are announced at the same time.

Looking further ahead, the UK budget on March 20th looks to be an awkward one for George Osborne, and continuing anxiety is likely to keep the Pound weak for now. With new Bank of England Governor Mark Carney not due to take office until July, and Mervyn King pushing for more QE, the next 3 months do not look rosy for sterling.


Moody’s Downgrading Sets The Tone

The big news over the weekend has of course been Moody’s downgrade of the UK’s credit rating from its prestigious AAA status – the first such move since 1978.

The Pound suffered immediately on Friday evening, losing over a cent against both the Euro and US Dollar, reaching 16-month lows against the single currency and the worst against the US dollar since summer 2010.

Will sterling fall further? Nobody knows of course, but Jim Rogers, a long-time investment partner of George Soros, told the BBC that he expected sterling “to continue to go down further in real terms”. With rates now nearly 8% lower than at the beginning of the year, it seems there are very few bets on a recovery in the short term.

Last week’s other news bringing exchange rates down, was the news that the Bank of England were closer to increasing their Quantitative Easing program in February, with outgoing Governor Mervyn King unexpectedly pushing for an increase in asset purchases. QE has always been detrimental to the Pound in the past, so if we see the policy being used again, it would be likely to hurt exchange rates further.

George Osborne will now be working on next month’s budget, which will not be an easy one for the coalition government.

This week is not busy in terms of news due out in the UK, except a few property market releases which can affect exchange rates. We also have the revision to Q4 GDP on Thursday; which should move the Pound if there is any significant revision to the initial -0.3% figure. Further drops in GDP would make a third period of recession in the UK more likely.

Overseas, we have a usual week of data releases due out, including Eurozone inflation on Thursday, and figures from Germany (Consumer confidence, inflation and unemployment) which could influence the Euro. In the States, GDP is on Thursday, and the same news from Canada on Friday.

At Currency Index we always try to remain optimistic but at the moment there seems to be nothing except doom and gloom for the Pound. If you are lucky enough to be bringing money back to the UK from a foreign currency this is obviously good news, but for those of you sending money abroad it is not an easy situation.


George Soros Down On Sterling

Moody’s downgrade included a warning that growth would “remain sluggish” over the next few years. The agency said the government’s debt reduction program faced significant “challenges”.

Jim Rogers, a long-time investment partner with George Soros, told the BBC that he expected sterling “to continue to go down further in real terms”.

He said he was “not optimistic” about the UK economy, but added that several economies, including Japan and the US, were also in “serious trouble”.


Currency News

Another volatile week for sterling finished on a negative footing, when retail sales figures came out on Friday. Official figures showed a fall in monthly high street activity in January, compared to analysts’ expectations of an increase. The data was far worse than expected and sent the Pound lower against a basket of currencies on Friday.

Rates for buying Euros are now at their lowest since mid-2011, and for buying US Dollars at their lowest for 9 months.

There could be worse to come however. Fears of a ‘triple dip’ recession are now very real, if recent figures are anything to go by, and if this quarter looks like showing a contraction then surely sterling could have further to fall. This is more true than last year, when the Euro and US Dollar were kept at cheaper levels by problems of their own which are now largely seen as over their worst stages.

Today we have a bank holiday in the USA but some figures out later in the week will be likely to influence the USD’s direction (and those of pegged currencies such as the UAE Dirham). Most of these are due out on Thursday afternoon, including unemployment claims and consumer inflation.

In the Eurozone, there is not much due out except German inflation (Wednesday) and GDP (Friday) so we could see the Pound dominating movements, with UK unemployment and the Bank of England Minutes both released on Wednesday. Any downturn in employment could be disastrous for sterling, given that one of the only lights at the end of the tunnel in the UK in recent months has been labour market figures.

We also have announcements or data in Australia, Canada and Switzerland, if you are buying or selling these currencies do let us know if you would like to be kept informed of any movements through the week.


Currency News

The Pound has been seeing some major volatility recently, particularly against the Euro where we saw a spread of over 3c between the highs and lows last week.

The Euro itself has been causing many of these waves, with ECB President Mario Draghi hinting on Thursday that the Euro was too strong, which reversed recent trends and saw the single currency become significantly cheaper, only to come back on Friday and this morning with rates back on the decline after the EU budget for the next 7 years was agreed by leaders in Brussels.

The EU budget has been reduced in real terms for the first time in the history of the Union, and markets seem to approve, with the single currency creeping back up in price again this morning. The main European data out this week comes on Thursday, when GDP figures and the ECB monthly report will be published.

Closer to home this week we have inflation figures tomorrow morning and the Bank of England quarterly report on Wednesday. Neither are rumoured to be sterling positive, and the Bank of England report in particular will contain all sorts of official forecasts for the economy, so can have an impact against sterling if it is downbeat.

In the USA we have retail sales (Tuesday) and industrial production (Friday) and more importantly the US monthly budget statement tomorrow evening. With central bank reports in the USA, UK and Eurozone this week we could be in for another volatile few days, with opportunities available to buy or sell your currency at preferential rates. Don’t miss out, and let us help you by discussing your requirements with your account manager at Currency Index.

Further afield we have rates for sending Japanese Yen continuing to improve, with the Yen currently at its cheapest against the Pound for over 3 years.

And finally, this week will be rounded off by UK retail sales on Friday morning, yet another measure of whether the UK economy is on the mend or heading for a triple dip recession – with the Pound sensitive to both.


Currency News

There has been no respite for sterling, after another poor week sent exchange rates lower again. The Euro, in particular, gained strength last week giving us the worst rates for buying the single currency since summer 2011. The GBP-EUR rate has now dropped over 6% since the start of the year, meaning €100,000 now costs around £5,000 more. Last week’s movement was largely attributed to better than expected PMI data, which showed more activity in the Eurozone economy than expected. This week for the Euro we have the monthly interest rate decision and press conference from the ECB on Thursday afternoon, and with the phrase ‘sovereign debt’ seemingly a thing of the past, we could see some more upbeat sentiment for the Euro.

For the US Dollar, and pegged currencies such as the UAE Dirham, last week was a little steadier, despite Friday’s slightly worse than expected US employment figures. This week is quiet for US data, with only Friday’s trade balance likely to cause any waves.

Closer to home the Bank of England will announce any changes to quantitative easing and interest rates on Thursday at midday. After recent comments it is thought unlikely that QE will be increased, which should be sterling positive although largely priced in to the market already.

We also have industrial and manufacturing figures on Thursday, as well as the independent GDP estimate. Will there be a change in fortunes for the Pound or will more bad news send it lower still? Thursday could give us some answers.

Looking further afield we have important figures out for the Australian Dollar this week, with interest rate statement, unemployment, and retail sales all due out.

Clearly the start of 2013 has been more volatile, and more negative for the Pound, than most people had anticipated. Don’t forget that rates are just as likely to fall further than improve – if you are waiting for an improvement in rates but also have a ‘worst case’ in mind, do let us know so we can tell you about Stop Loss orders. For the latest quotes and options for fixing your exchange rate now or in advance, do contact us for a chat.


The Pound Slides On Weak Growth

As we reach the end of January, the Pound seems to have gone out of fashion and be facing a slide in value. Last week’s disastrous GDP figures, showing a 0.3% contraction for October to December, came on top of awful retail sales for December and a general feeling that the UK economy is falling behind.

Of course, the Euro and US Dollar have seen quite the opposite effect, with the sovereign debt bailouts and ‘fiscal cliff’ crises now seemingly staying out of the headlines. This has given us the lowest rates for buying Euros since December 2011 and for buying Dollars since August 2012.

Rates have also fallen against other major currencies such as the Australian, New Zealand, and Canadian dollars, demonstrating that the Pound is weakening across the board.

This week there is little due out likely to improve sterling’s fortunes. The housing market will be in focus as we have mortgage approvals and house prices due out, but only the most optimistic analysts will be holding out for news to celebrate.

In the USA we have a week full of important data releases, including GDP, key monthly labour market figures, and consumer confidence, so the US Dollar could be one of the more volatile currencies this week, along with pegged rates such as the UAE Dirham.

Late in the week we also have Eurozone unemployment and German inflation which could influence the Euro.

With a poor outlook for rates on the horizon, for the latest quotes and options for fixing your exchange rate now or in advance, do contact us for a chat.


UK Inflation Rises Unexpectedly

Inflation in the UK went up in June by 0.2% to 2.6%, in a surprise rise. The increase was mainly put down to higher air fares and increased housing costs. The pound benefited slightly against a basket of currencies, with pound/euro rates increasing by less than quarter of a cent.

An expected drop in inflation was leading to speculation concerning further QE by the Bank of England so the pounds boost came as a rise in inflation quashed these fears, for now at least.

For the economy as a whole a rise in inflation is not good news as the cost of living has increased, squeezing families further still on household bills and leaving less for spending elsewhere of course needed to help growth. Upcoming retail sales this week will give an insight as to whether the inflation has knocked on to the high street spending.

The BBC quoted a Treasury spokesperson stating “Inflation has halved since its peak in September, but any increase is disappointing.”

“The government knows how tough things are for families at the moment and that is why we have reduced income tax, and frozen both council tax and fuel duty.”

 

 

 


Will the Pound dive?

Yesterday’s trading saw a similar pattern to what we have seen over the past few months as European debt concerns continue to dictate which way the markets swing. The pound was down against the broadly stronger dollar as investors remain on the fence as to whether or not the ECB will actually, as many hope, support the faltering euro before it gets too late.

On the data front, mortgage approvals were down on the UK but this did little to dampen the GBP/EUR rate and many investors feel that until the eurozone crisis gets closer to a resolution the pound will continue to be used as a safe haven. However with the ECB potentially to re-start their bond purchasing this week we could well see a resurgence in the strength of the 12 bloc currency.

“It’s getting tougher for sterling  It’s holding up well against the euro, but things become a lot less certain towards the end of the week with quite a weight of expectations around the ECB,” Simon Smith, head of research at FxPro.

“If they do something more aggressive or bolder than before, that has potential to improve the euro at sterling’s expense.”

Therefore the week ahead is all geared to the BoE’s and ECB’s policy meetings which conclude on Thursday. If the ECB announce they are to resume their bond purchasing, don’t be surprised to see a euro rally and although we are unlikely to see any surprises from the BoE with a worsening UK economy a further rate cut or more quantitative easing could be seen later in the year.

On a more positive note to GB acquired their first team medal in the men’s gymnastics for 100 years which brought joy following Tom Daley’s disappointment. Not a 100 year high but just short of a 3½ year high still means we are at great levels to buy euros and waiting too long could see the pound dive if the ECB takes action and just like Tom Daley it may not be able to recover!!


Last week’s headlines concerned the shock 0.7% contraction in the UK economy from April to June, announced on Wednesday. The Pound took a tumble as the UK recession extended into a third quarter with a much worse figure than expected, becoming the worst contraction since 1955.

With talk of interest rate cuts and even more quantitative easing, the next few weeks could be tricky for the Pound.

Nonetheless, the well reported problems in the Eurozone continue, with no long term solution or major policy change now likely until September. Inspectors in Greece are close to agreeing the final terms of their bailout, but with Spain increasingly making the news for the wrong reasons, we could be about to enter a crucial phase of the Euro’s history. We would expect the Euro to remain weak, unless Spain avoids the need for a bailout, which could strengthen the single currency and bring exchange rates back down from their current excellent levels.

Finally in Europe, last week’s higher hopes of Eurozone/ECB action to keep debt costs down has filtered through to a lower cost for the Italian government on the bond markets this morning. Rates were 5.96%, lower than the previous auction which cost 6.19% on average. Is this a temporary blip, or does Mario Draghi have something planned to at least delay the current debt problems until the Eurozone leaders return from their August holidays?

Do speak to us at Currency Index if you have a transaction coming up. Just call Simon Eastman on 01923 725725 or reply to this email and we will help you run through your options.


Greece Agrees To Most Cuts, Eurozone Heads Towards Crunch Time

Leaders in Greece have agreed the majority of cuts imposed as conditions of their bailout package, as the ‘trioka’ of lenders (EU, ECB and IMF) are staying on in the country to conclude talks. They are due to visit again in September before a final decision on extra funds is made.

September will be a crunch month for the Eurozone, with a German court due to to make a ruling which could neuter the Eurozone rescue funds, Dutch elections which may lead to an anti-bailout Netherlands government, and Italy and Spain potentially requiring bailouts too. With many European policymakers taking their summer breaks in August, we are unlikely to see any major policy changes until September, by which time Spain could be in serious trouble, so the weak Euro is likely to remain for the coming weeks.

This week as we head to the end of July, we have an Italian bond auction at 10am, at the same time as some Eurozone consumer confidence figures. There is no major data due out elsewhere, so the Euro is again likely to dominate headlines and exchange rate movements.


Contraction Causes Negativity, Sterling Stands It’s Ground

Bad news for sterling yesterday, as figures showed that the UK economy contracted by 0.7 percent during the second quarter, its sharpest decline for three years, and more than three times the 0.2% fall anticipated by many economists – with most of the fall being attributed to a slowdown in the construction sector. However, the Office of National Statistics was quick to note that the contraction may have been exacerbated by the poor weather of the previous few months, as well as the extra bank holidays in June. This had led some to believe that the fall does not signal as much disaster for the UK economy as the figures state. Nonetheless, it has displayed the weakness in the economy, increasing the predictions for further QE, causing the rate for exchanging sterling to euros to fall away slightly from the 3 1/2 year highs we’ve been seeing.
However, the weakness in the Eurozone causes sterling rates against the European currency to remain strong, with many now looking closer at Spain’s worries. Many analysts now fear that Spain may require a full bailout in the near future, especially since the austerity measures introduced by the Spanish government have been incredibly unpopular with Spanish citizens. Both Spain and other EU countries realise something must be done about these concerns before the situation can get any worse, with both the French Finance Minister Pierre Moscovici and the Spanish Economy Minister Luis de Guindo saying in a joint statement – “The swift implementation of the financial assistance programme is essential to restore confidence and recreate conditions for growth”. However, Germany, seen over the entire crisis as being the economic powerhouse of Europe, seems to be having its own concerns, with ratings agency Moodys threatening to downgrade Germany’s credit rating. The problems in Greece seem to have taken a back seat, as German Economic Minister Philipp Roesler, saying: “If Greece no longer meets its requirements there can be no further payments…a Greek exit has long since lost its horror.”

The Euro did see a small increase against the US dollar on Wednesday, which, in turn, gave sterling a small boost against the American currency. However, these small gains were in turn reduced on the announcement of negative UK data.

Anyone concerned about the weakness of sterling caused by the latest releases, and how it may affect any currency requirements in the future, should call Currency Index for advice, and to ensure they get the best rate when the time comes to make a transfer.


UK Recession Deepens

This morning thew pound dropped across the board following the UK GDP revision for Q2 which was estimated to be a slight improvement from the first reading at -0.2% compared to -0.3% last month. Instead it came out at -0.7% which is a massive difference to expectations and shows growth is much worse than first thought. This most likely isn’t being helped by the issues in the Eurozone and the weak Euro making imports/exports more costly. Also the unusually wet summer and additional Bank Holiday have affected the retail sector adding to the UK’s woes.

Pound/euro exchange rates are down a cent as a result but we are still trading at levels not seen since 2008. The troubles in Europe are still there and not going to be resolved anytime soon. Those looking to sell Euros should not expect a sudden drop in rates and might look to book forward, fixing the rate for any upcoming repatriation from the Eurozone. Contact your broker today to discuss the options available.


Further Euro Chaos

 

Yesterday’s news was dominated by further developments in the Eurozone, with various releases showing that any hopes of a recovery in the short term are very farfetched.

The Spanish were forced to pay the second highest yield on short term debt since the Euro was established, which is just a continuation of the rising rates of the last few weeks, but critically they are now having to accept 7%+ repayment terms. They did manage to sell all the bonds they intended to, but at these rates the market’s are very uncertain as to the sustainability of this level of borrowing.

Further fears were also cast on Greece’s future in the Eurozone, with inspectors due to visit Athens from the EU, ECB and IMF. EU officials have said that the inspection is likely to conclude that Greece cannot keep to the terms of its bailout, with fears that if Greece did have to exit the Euro then the hit of almost €200 billion that the Eurozone would have to take, would almost certainly push Spain over the edge, and possibly Italy too.

On top of this, the ratings agency Moody’s decided to lower its outlook for Germany, Holland and Luxembourg from stable to negative, and warned that the ratings of the triple-A European countries could come under threat if Greece were to leave the Euro, and that support for Spain and Italy needs to be increased.

So all in all a very gloomy outlook for the Euro, but is the UK in a much better position? We are still in the grip of recession and cannot ignore the ramifications of the Eurozone crisis on our own economy. While Ed Balls often points the finger at the government, accusing them of causing the recession, the effect on our imports and exports and overall economy from the Eurozone problems cannot be ignored. This morning’s GDP data release will provide a clue as to whether growth is starting to improve, but with the consensus amongst investors being a minor improvement from -0.3% to -0.2%, the markets are unlikely to be overwhelmed with excitement.

In these unprecedented times, make sure you stay in close contact with your CI account manager, to keep abreast of what is happening and to discuss options such as forward contracts and limit orders, which in a volatile market can save a fortune on an upcoming currency requirement.


Sterling Falls Back

Yesterday was a struggle for the pound as it was affected by the worsening situation in the eurozone. Though it fell marginally against the single bloc currency it hit weekly lows against the Dollar as a mixture of a strong USD/EUR rate and expectation of weak UK data later this week weighed on the pound.

The recovery from 3½ year lows against the pound was little in the way of relief for the euro as Spanish borrowing costs again reached new highs. This was largely on the back of 6 more regions in Spain requesting government financial aid and at the moment it is very hard to see any light at the end of a very gloomy eurozone tunnel.

Some strategists said sterling could see further weakness if preliminary second quarter UK GDP figures on Wednesday show a 0.2 percent quarter-on-quarter slide as expected, which would extend the country’s recession into a third quarter.

“We’ve seen some closing of short positions in euro/sterling ahead of the figures but we may well see cable (dollar/sterling) fall further as traders are potentially positioning for a worse than expected number,” said FxPro’s Derks.

There are mixed opinions as to where sterling will go next as it is clear that the UK is still in the doldrums and worse than expected GDP figures could see the pound fall away drastically from these recent highs so any requirements you may have in the near future are well worth discussing with your account manager here at Currency Index.


The Week Ahead

This week’s economic data likely to affect exchange rates is as follows. Monday 23rd 0230 – Australian producer inflation 1500 – Eurozone consumer confidence Tuesday 24th 0930 – UK mortgage approvals 1330 – Canadian retail sales 2345 – New Zealand trade balace Wednesday 25th 0230 – Australian consumer inflation 0930 – UK GDP 2200 – New Zealand interest rate decision Thursday 26th 0700 – German consumer confidence 1330 – US durable goods orders Friday 27th 0700 – UK house prices 1300 – German consumer inflation 1330 – US GDP


Sterling Holds Levels Despite Mixed Data

Last week saw the Pound hit a new post-2008 high against the Euro, amid Spanish bond auction prices rising again and the lack of any coherent plan to solve the Eurozone debt crisis. Sterling also had a reasonable week against the US dollar (up 1c) and South African Rand (up R0.2), but fell against the Australian and New Zealand dollars. With mixed data in the UK (unemployment fell, but the Bank of England minutes, inflation figures and retail sales were sterling-negative), perhaps a mixed behaviour for exchange rates was to be expected.

This week, the most significant UK data is Wednesday’s GDP revision. The ongoing Libor scandal may also be in the headlines, but as Britain gets ready for the Olympics, there is little else due out that is likely to directly affect the Pound. Could this be the peak for some exchange rate pairs? Much will depend on sentiment around the world and particularly in Europe, where events are really driving foreign exchange markets everywhere.

Eurozone consumer confidence is published at 3pm today, and could provide further opportunities to buy your Euros at unexpectedly good rates. For the latest views and news, whichever currency you are buying or selling, contact your currency broker here for a quote at any time.