Buying Euros

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.

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.

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.

Merkel Comments Save Sterling In The Aftermath Of QE

On Wednesday, Sterling seemed to have a surprising level of good luck. Most analysts would have expected to see the value of the pound drop by a somewhat significant amount after The Bank Of England Monetary Policy Committee (MPC) revealed it had voted 7-2 in favour of increasing its quantitative easing (QE) programme by £50bn yesterday. However, the UK economy was helped significantly when it was announced that unemployment 65,000 to 2.58 million in the three months to May, bringing the national unemployment rate down to 8.1% from 8.3%. Despite us technically being in recession, the value of sterling continues to hold its own, and positive news such as this will only help the economy on the road to recovery.

Real signs of sterling’s comparative strength were shown yesterday, when the rates for seding Euro payments reached a 3 1/2 year high. Despite the Euro making some short-term gains on sterling after the BoE minutes yesterday, these gains were erased when German chancellor Angela Merkal stated that – “We have not yet shaped the European project so that we can be sure that everything will turn out well”. While it may seem like a minor comment to make, considering that Germany are effectively keeping the Euro running almost single handed, this somewhat negative statement appears to have worried investors, causing the value of the European currency to dip significantly. Any further hopes of a recovery for the day were crushed by the announcement that Spanish banks had 155.84bn euros of loans on their books in May that are at risk of not being repaid. Weakness in the Spanish banks only adds to Spain’s problems, and is beginning to fuel fears that they may end up in a similar situation to Greece. The Euro’s problems aren’t helped by the fact that Sicily is close to financial default, with the Italian Prime Minister calling for the governor to resign. Whilst comparatively small compared to the rest of the Eurozone problems, this shows just how far down the chain the problems reach.

Sterling seems to be holding its breath against the US Dollar for the time being, with no significant swings either way. Anyone looking to transfer sterling to dollars in the near future should note that investors appear to be unsure about the possibility of the US federal reserve introducing further quantitative easing. Analysts predict that it may come within the next few months, but Federal Reserve Chairman Ben Bernanke seems to be unwilling to give a clear answer concerning it.

Considering the rates we’re currently seeing, anyone looking to transfer sterling to euros should definitely consider giving their account manager at Currency Index a call, to see how we can assist you in achieving the best rates since 2008.

Merkel Sparks Euro Selling

The Euro fell to its weakest point since late 2008 against the Pound today following media reports by German Chancellor Angela Merkel on the euro project.

Merkel told her own party: “We have not yet shaped the European project so that we can be sure that everything will turn out well”.

This caused the euro to erase earlier gains which followed the Bank of England minutes which revealed a split over additional asset purchasing.

Central Bankers Moving Markets

Yesterday saw some very volatile moves on the currency markets brought about by the chairman of the Federal Reserve Ben Bernanke’s testimony in front of a Senate committee, during which he was asked some deep and probing questions about the US’s overall economic policy and more specifically the weapons they have left to combat their lowering growth, raising unemployment and lack of overall liquidity. His answers were obviously well received by the markets, as the Dollar strengthened significantly, causing Euro weakness as well and the Sterling rates against both moved by more than half a percent in less than half an hour. After the testimony had concluded things settled down a bit, and some of the gains/losses were pulled back, but not entirely.
Today sees the release of the Bank of England’s monthly policy statement minutes and also the UK’s unemployment figure. Could another central bank cause significant movements? It seems quite likely as we will get an indication of the bank’s policy towards further Quantitative Easing together with any indication as to whether they have considered following the Europeans in cutting interest rates – both of which would be weakening for the Pound. Unemployment has slightly improved in the last couple of months, so this could cause a bit of Sterling strength if the trend continues, but certainly don’t count on that given the recessionary UK economy.

Have you considered a forward contract for your upcoming currency requirement? We are just off 4.5 year highs against the Euro, with a very uncertain outlook – perfect for booking forward to protect yourself against adverse market movement. Give your Currency Index broker a call to discuss your options.

Minutes Show Surprise Split

The minutes from the most recent Bank of England meeting showed a unanimous decision to leave the interest rates as they are and and 7-2 split to increase asset purchase. Jobs data came out worse than expected at 6.1k increase in claims for job seekers compared to 5k and a decrease in average earnings.

Sterling Euro has dropped a quarter cent off the back but with recent trends this drop is likely to bounce back in my opinion.

Still trading levels near best in 4 years!

Sterling Winning…. But For How Long

New 3½ year highs were again seen yesterday for the GBP/EUR pairing as eurozone concerns continued to weigh on the 12 bloc currency. We have yet to see any sort of sustained rally but we do keep seeing further strength seemingly on a daily basis. With the Italian and Spanish banking sectors being the main concern, at least for now, it appears that any leaked reports of what may or may not happen are creating volatility in the markets and I suspect unless we see some concrete proof of how the problems are going to be resolved this pattern may continue.

Against the USD the pound also rose as weaker than expected US retail sales led to further speculation that the Fed may have to follow the BoE’s stance and add further QE but the question of when this will or will not happen remains very much in the air.

So in summary the pound has been winning the currency battle against its 2 most common pairs, the euro and the USD, but one important thing to remember is that this is all on the back of data and rumours coming from Europe and the States. The remainder of the week sees a string of UK data releases and we must remember that only a few months ago we slipped back into a recession and poor data will compound the fact that we are not much better off than our friends overseas so do not be surprised if the sterling strength we have seen in the past few days is quickly erased.

If you want to ensure that you do not fall victim to any negative movements then contact your broker here at Currency Index to discuss your requirements.

Pound/Euro Reaches Fresh Highs……

The exchange rates against the single currency have hit fresh highs today despite a downgrade of the UK’s growth expectations by the IMF.

Worries over the ability of the Eurozone to use new powers granted to help out struggling countries reared its head today as Germany set a deadline of September on the decision over whether to oppose the plans thus making investors think any decision would come anytime soon. With Italy and Spain’s souring interest costs and their obvious need for bailout funds to help ease pressures these delays are not helping investor confidence. The pound on the flip side is seen as relatively safe in comparison so the pound’s rally is likely to continue with some analyst thinking we may see 1.3 breached in the near term.

Those needing to bring funds back to the UK may find their return diminish over the next few months so it may be worth looking at fixing an exchange rate now for settlement at a later date (this is known as a “forward contract”)

Currency Report

This week sees important data out in the UK, which is likely to determine the short term fortunes of the Pound. Tomorrow sees key consumer inflation figures, Wednesday we have unemployment and the Bank of England minutes, Thursday is retail sales and on Friday the latest public sector borrowing figures.

The fragility of the UK economy has been reflected by falling exchange rates against most currencies in recent weeks, with the exception of the Euro which of course has its own well documented troubles. Any negative news for the UK economy is likely to push sterling lower, even against the Euro.

Rates for money transfers to the USA in Dollars (or for pegged currencies such as the UAE Dirham) fell last week to near their lowest this year. The Federal Reserve have made it clear they will only inject more money into the US economy in quite extreme circumstances, which has given the USD strength compared to the Pound where the Bank of England have extended Quantitative Easing more liberally. Ben Bernanke’s speech tomorrow afternoon will be keenly watched by anyone with an interest in US Dollar rates.

Today there is no important UK data due out, but Eurozone inflation and US retail sales may both affect their respective exchange rates. For a quote on your own transaction and our opinions on the market, contact us on 01923 725725.

Friday The 13th – Unlucky For Some?

Today is Friday the 13th and already it appears to be very unlucky for the Eurozone. Overnight the credit rating agency Moody’s downgraded Italy’s status to only 2 points above junk status. With today’s €5.25bn auction of medium and long term bonds due this is the last thing Italy needed and expectations are for the yield on 10 year bonds to move up to 6% – perilously close to the 7% level, which is considered to be where the cost of borrowing has become unsustainable. One analyst said “Italy’s near-term economic outlook has deteriorated, as manifest in both weaker growth and higher unemployment, which creates risk of failure to meet fiscal consolidation targets”.

Today is a very quiet day on the markets data-wise, with only CPI inflation data from Spain and Italy due this morning, and obviously the above mentioned bond auction. The Euro has been at 4 year lows against the Pound and also 2 year lows against the Dollar. With the Italian situation seemingly likely to put only more pressure on the Euro, those of you looking to sell Euros might be well advised to contact their Currency Index account manager to discuss your options and maybe consider a forward contract.

The Tour de France is currently winding its way through the French countryside and mountain regions, and not unlike the Eurozone crisis the Europeans are feeling the pressure of unprecidented occurances. For the first time ever we have a British leader and a Briton in second place, with the highest placed European being the Italian Vincenzo Nibali in third place. While today is unlikely to give the Italians anything to smile about economically, at least they can take some solice from Vincenzo’s performances so far, even if he is struggling to keep up with Wiggins and co…

Spanish Riots Add To Euro Woes

Earlier this week, BoE governor Mervyn King announced that, in his opinion, the Eurozone crisis is going to continue to negatively affect the world economy. Speaking on Tuesday, he said “there is a great black cloud of uncertainty hanging over businesses all around the world,” concerning the crisis, and that “until they know how this situation is going to be resolved” the world currencies, especially those with strong ties to the Euro would see weakness. For the short term however, sterling is doing very well against the European currency, with rates for transferring sterling to euros raising to a 3 1/2 year high, caused primarily by the European Central Bank lowering its deposit rates to zero.

Some positive news might have come from Spain yesterday, where Prime Minister Mariano Rajoy introduced new austerity measures, including raising sales tax from 18% to 21%, slashing the budget of local authorities, and cutting councillors by 30% in some areas. However, these measures were met with widespread anger by the Spanish populace, mostly caused by the announcements coinciding with a miner’s rally in Madrid, which eventually turned into a running battle with law enforcement, with the police being forced to use rubber bullets on miners using fireworks as improvised weapons. Public dissent to austerity measures, such as the ones seen in Spain, only serve to show the weakness of the Eurozone economy in the eyes of investors, and will probably add to the economic woes plaguing the region.

Despite austerity measures being seen as the only way to save the European economy, the International Labour Organisation yesterday claimed that the Eurozone could see the loss of 4.5 million more jobs in the next four years unless the region shifts away from austerity, and focuses towards job creation. Seeing as the unemployment rate in the Eurozone already stands at 11.1%, this is a significant drop. The disagreement in whether or not austerity is the answer only serves to highlight the key problem in the Euro crisis – nobody knows exactly how to fix it. This continues to make investors nervous, causing them to look towards ‘safer’ currencies.

Over in the United States, we saw a drop in the fortunes of the US dollar as it was stated that Federal Reserve officials are open to the possibility of a new round of asset purchases. However, it is believed that this will cause the US economy to get weaker before it gets stronger. This announcement caused the Dow Jones to drop 1% shortly after the announcement, although it recovered slightly in the hours that followed.

Some analysts believe that the Eurozone may weaken further in the upcoming weeks. However, anyone looking to transfer sterling to euros should remember that we are currently at a 3 ½ year high on the rates, and that the markets are dangerously volatile. Therefore, it would probably be a good idea to give Currency Index a call, to see how we can assist you in getting the best rates available.

Euro Continues To Slide Against Sterling

Yesterday we saw the Euro drop to fresh 3 and a half year lows against the pound as the markets returned their focus to the Euro zone debt crisis. Helping the cause were comments by Italy’s Prime Minister Mario Draghi who commented that Italy might need to tap into the EU fund pot for bond support just like Greece and Spain. This follows a late night EU minister meeting on Monday which failed to come up with any solutions to try and stem the soaring Italian and Spanish borrowing costs. Throw into the pot the upcoming German constitutional court ruling which may put a halt to the plans to dish out rescue funds and the Euro is looking pretty shaky.

A gloomy outlook for the Euro but we must remember the UK isn’t doing too well either. In the midst of recession, further QE just administered and Mervyn King the Bank of England governor doing his best to thwart the rise of the pound to Euro exchange rates by stating the British economy is showing little signs of recovery (such negative comments we have seen many times in the past as a strong Pound makes exports to Europe more expensive so anything to try and curb the rise is in the best interests of growth).

Against other currencies the pound didn’t fare as well after poor retail sales figures and housing data. The only reprieve was some better than expected production figures but on the whole the figures showed a fragile economy here in the UK. “Overall the news from the UK is very negative and sterling is still very vulnerable,” said Ian Stannard, head of European FX strategy at Morgan Stanley.

With this in mind, anyone looking to buy currency other than the hard hit Euro should bear this in mind and keep in touch with your broker to make sure you don’t miss any short lived buying opportunities the markets may throw up.

For anyone looking to send money to the Czech Republic it’s worth noting that over the past three months the pound has gained over 7 percent against the Krona! On a 2.5 million Krona property purchase this makes a staggering £6500 difference to the cost. Well worth a look at the potential investment opportunities there are with those kind of savings!

Today will again be all about the Euro, with no UK data out today there are some releases from Italy and France this morning followed this afternoon by a 6 month bill auction in the US and a speech by one of the Fed’s key members. Tomorrow is a much busier figures day with Industrial and Manufacturing production figures along with a GDP estimate from the UK and import/export data from across the pond.

Quiet Day On The Currency Markets

Yesterday was a relatively quiet day in the markets with no UK data releases yet we did see the pound continue to hold firm against the euro. As investors continued to remain sceptical about the eurozone debt crisis the pound continued to be bought reaching highs not seen since October 2008, against the dollar the pound remained range bound following last week’s weak US Non-Farm payroll data.

We must not however be fooled into thinking that this is the start of a resurgent pound. All eyes will be on key manufacturing data out this morning which is likely to weigh on sterling and let’s not forget that last week the BoE injected a further £50 Billion into their quantitative easing programme which is usually seen as very negative for the pound. It will be interesting to see if the Fed minutes, released on Wednesday, give any clue to the US following the UK with further QE but the big question is what if any affect will this have on the markets.

For now it seems fairly clear that the markets are being dictated by the eurozone crisis and with Spanish yields rising above 7% (a level that is seen as being unsustainable) there could well be room for further euro weakness. On the other hand last night saw eurozone ministers agree to give Spain an extra year to cut their budget deficit and also agreed to lend them €30 Billion this month to help their troubled banking sector.

It is anybody’s guess as to how successful this latest move will be but for sure when the market makes up its mind there will be strong fluctuations so by speaking to your Currency Index account manager you can ensure you are kept up to date with any sudden movements.

Latest Currency News

Last week saw the extension of the Bank of England’s Quantitative Easing programme, as another £50bn was injected into the ailing UK economy to encourage lending and stimulate growth.

Unfortunately for the Pound, QE effectively dilutes sterling and tends to result in lower exchange rates for international payments. The exception was against the Euro, which weakened again after the European Central Bank cut interest rates to historic lows of 0.75% – giving us the best rates for buying Euros since October 2008.

While we don’t expect the Euro to strengthen significantly given the unresolved debt crisis, if you have Euros to buy then now might be a good time to look at securing your rates.

The effects of QE were however felt elsewhere. Rates against the US Dollar and UAE Dirham fell sharply towards the end of last week, and this morning are sitting at their lowest for a month. With the UK economy continuing to struggle, this trend may continue, and sterling has also lost ground recently against the New Zealand, Australian and Canadian dollars, and South African Rand.

This week there is not a huge amount of data due out, although there are some speeches from central bankers around the world. In the UK, the fallout from Barclays’ manipulation of interest rates is attracting headlines but has not yet affected exchange rates, although if other British banks become implicated as events unfold there could be bad news for the Pound, specially if the government sees fit to legislate against the City. Bank of England deputy governor Paul Tucker is appearing before MPs on the subject at 3.30pm today.

In Europe this morning, news that Spanish bond prices again breached the key 7% level, are another warning sign to European policymakers whose attempts to plug gaps in Eurozone debt financing are looking increasingly desperate. Euro exchange rates remain very sensitive to any further developments.

Best Euro Rates Since 2008

Last week brought good news for those of you looking to buy Euros, as we saw the best rates on the market since October 2008. This followed the European Central Bank’s decision to cut their headline interest rate on Thursday, to historic lows of 0.75%, weakening the single currency on foreign exchange markets.

The news came despite the Bank of England’s extension to Quantitative Easing, also announced on Thursday. Usually, we would expect the Pound to weaken after such a decision, but the announcement came as no surprise and was overshadowed by the ECB rate cut. Having said that, the Pound continued to fall on Thursday and Friday against most other currencies, including the US, New Zealand, Australian and Canadian Dollars and UAE Dirham.

The ‘commodoty currencies’ have all gained significant strength recently, giving worse rates for sending money to South Africa, New Zealand and Australia in particular. On the other hand, if you have assets in any of these countries to bring back to sterling, now could be a good time to consider fixing an exchange rate.

This week, we don’t have any major data due out in the UK, and now that Wimbledon and the British Grand Prix are also over, perhaps headlines will all be focussed overseas. Foreign exchange rates are still as unsettled as the British summer, so do let us know at Currency Index is you have a transfer that you would like us to help with in the coming weeks.

Pound Euro Hits 1.26

Following the Non Farm Payroll figures in the US the dollar has been on the up to the detriment of the Euro. Trading has just hit 1.26, but will it stay there…..