Selling 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.

 

 


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.


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.


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.


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.


The Pound Extends Gains Against Flagging Euro

Yesterday the pound extended its gains against the single currency as investors continued to look for a safer haven compared to the debt ridden Eurozone currency and despite the UK’s problems the pound is seen as a better bet. Also helping the Euro’s decline were comments from German Finance minister Wolfgang Schaeuble, who said the mere perception of insolvency risk in Spain could cause contagion in the euro zone and a Spanish debt auction which had low demand and higher borrowing costs.

“This is just a return to the sentiment we all know is lurking in the background. People are looking to sell on rallies, there’s no real good news out there for the euro,” said Richard Wiltshire, chief FX broker at ETX Capital.

The pound has been doing well this week despite the Bank of England minutes on Wednesday which showed members talking about a possible interest rate cut in addition to increasing the asset purchase and lower than expected retails sales yesterday which came in at 0.1% compared to 0.6% growth for last month and 1.6% compared to 2.4% for yearly growth.

The view is that any rate cut in the UK is not likely to be on the cards for some months, at least until this current round of asset purchase finishes which is expected to take 4 months. Until that point investors are happy to buy up sterling as a safe bet compared to the ailing Euro so these best rates since 2008 are likely to stick around. With many people worried about the state of the Eurozone we at Currency Index are seeing an increase in the number of UK based people selling their overseas homes and repatriating the funds. This of course is proving costly with the ever weakening Euro but with a typical sale time of a couple of months those who sold on forward contracts have managed to save themselves considerable money. If you are in the same boat, having agreed a sale and you are concerned about the value of the Euro speak with a member of the team today about the options available to you.

Today is fairly quiet on the data front from the UK with just the key Public Sector Borrowing figure being released at 9.30am. Across the pond it’s all about Canada with Producer Price Index figures and Bank of Canada core PPI figures. Will they add to the recent strength of the loony? Those sending money to Canada have seen the pound drop by over 2.5% against the dollar in the past month so any reprieve would be gratefully received.


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.


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”)


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…


Focus On Barclays ‘Bad Boys’

Following the release of European and UK Services PMI data this morning and then European retail sales, the market’s focus will almost certainly shift to Whitehall and the Treasury Select Committee’s interrogation of Bob Diamond. Mr Diamond resigned yesterday following the announcement of the Libor fixing scandal and Barclays’ part in it. He was one of three senior management figures from Barclays to resign over this incident, and the markets will be keen to see how aware of his traders’ actions he was, and whether he was complicit in any way. Rumours abound that the Barclays’ men had conversations with members of the Bank of England who might have indicated that their traders subsequent behaviour would be acceptable, threaten to tarnish the whole of the UK’s finance industry. Mr Diamond can expect a very in depth grilling with the Treasury Committee, with them certain to take their seven pounds of flesh.

David Cameron also received a bit of a grilling by MPs yesterday on this subject, and any hopes of today’s Prime Ministers Questions going off without a hitch are sure to be slim. He probably wishes he had the time travelling technology of the Men in Black to go back and alter the events on the Barclays trading floor.

It is widely expected that around 18 further banks will be implicated in this scandal. Many of these are spread around the world, with 2 or 3 more UK banks expected to succumb to large FSA fines. So the whole situation looks set to continue for many months, with many more bankers likely to be revealed as enemies of the state.

How this will affect your potential currency purchase is hard to predict, but pressure on the UK’s largest single GDP producing sector can mean only negative things for the UK’s economic outlook, and will certainly require some Ali-esque ducking and weaving to come out the other side too unscathed. So make sure you keep in close touch with your Currency Index account manager.

In other news today is US Independence day, so not much happening on that side of the Atlantic, which could lead to some gains against an otherwise dormant US Dollar.


Diamonds are NOT forever…

This morning has seen the resignation of Barclays Bank Chief Executive Bob Diamond following the debacle announced last week that Barclays had been fixing the Libor interest rate to suit themselves. It seems one step forward two steps back when it comes to the UK Banking sector but one bit of good news is that the reported £11 million he was due to receive in payouts this year will now be left in the banking sector… so some other fool can play with that now!

After last week’s Euro Summit the initial reaction to the markets in general was positive and we saw the euro recover some of the losses we had seen earlier in the month against both the pound and dollar. Having said that, as seems to be the case time and time again when the dust has settled the underlying factor remains that the 12 bloc currency’s existence hangs very much in the balance and selling pressure again rose yesterday as more details of what the summit achieved were released and it’s clear that although everybody is keen for a resolution soon not all nations are singing from the same hymn sheet.

Despite poor UK PMI data the pound gained against both the euro and dollar as eurozone fears again were the main market movers but the poor data did further increase the expectation that the BoE will increase quantitative easing when the MPC meets on Thursday this week. Though this has been priced into the market we are still likely to see some sterling weakness as the week progresses. Yesterday we saw the typical English summer weather wiping out most of the day’s play at Wimbledon and those of you needing to sell pounds for a foreign currency should note that typically an increase in quantitative easing this week will wipe out all gains that sterling has made over the last few weeks so it would be well worth contacting your currency broker here at Currency Index to ensure you’re not caught ‘out’.


Weekly Newsletter

Regular readers will be unsurprised that the Eurozone once again dominated currency headlines last week. The EU summit produced a surprise deal in the early hours of Friday morning, meaning emergency European funds can now be injected directly into ailing banks and bond markets, rather than passing through central governments. This was seen as a victory for Spain and Italy over Germany, and a step towards common banking policy in the Eurozone, a move which Chancellor Merkel had been reluctant to accept.

The result by Friday morning was that the Euro posted its biggest single day increase in price for 8 months, with the see-saw effect giving a weaker US Dollar and better exchange rates for money transfers to the USA.

Since Friday, the knee-jerk reaction has been replaced by a little more calm in the markets, although Euro rates are still below Thursday’s peak, and are falling slightly today.

The ‘commodity currencies’ also benefited last week, with exchagne rates for the Australian Dollar, New Zealand Dollar and South African Rand all falling (2%, 1.7% and 3.5% respectively).

Looking forward to this week, the main news for the Pound is likely to be Thursday’s monthly Bank of England meeting. Last month, the Bank voted narrowly not to extend Quantitative Easing, and speculation is rife that it will be extended this week, specially given lower inflation figures in June which will allow the Bank some more room to manoeuvre. QE has, in all previous rounds, hurt sterling and reduced exchagne rates significantly, so to avoid the risk of falling rates, do consider fixing your exchagne rate before Thursday’s announcement. The move may be priced in somewhat to the market already, but we will not know until after the event what the effect on rates will have been.

UK GDP was also revised further down last week, confirming the double-dip recession, and with growth possibly still negative for the second quarter of the year, prospects for significant improvement in exchange rates seem some way off.

Another story is the Conservatives’ decision to start a debate about a possible EU referendum in the UK – although a long way off, if this garners public support, what will the effect be on the Pound?

Do speak to us at Currency Index if you have a transaction coming up.


Euro Bosses Agree Support For Bond

Yesterday was a good day for those sending money to the Eurozone as the pound to euro exchange rates spent much of the day near month high levels. The Euro was under pressure, as it has been much of the week, following comments by a German official stating any kind of resolution at the EU summit in Brussels would not be a quick one. This sent investors into risk averse trading patterns with the US dollar being the main beneficiary gaining against the pound to a two week high. Thus, a typical “currency see-saw” scenario.

This was despite GDP data from the UK showing GDP for Q1 of this year as negative adding more fuel to the fire over whether the Bank of England will add to the QE program next week. The fact is markets have largely priced this in already so we are unlikely to see much change if this does happen next week.

We were expecting more of the same trading levels today, up until the EU summit came up trumps for the Eurozone. The leaders have agreed to give the support needed to Italy and Spain regarding their bonds which up to now have had spiralling levels of interest, making their borrowing costs unsustainable. Growth is the key for the zone and these new measures are designed to help ease pressure within the zone and helping to improve growth.

This was announced at 4am UK time, during Asian trading where we saw a big jump for the Euro across the board, gaining over 1% against the pound and the dollar. The pound has gained some of this back so we will see how the European markets and latterly the US markets take the news…. will it be felt enough is being done?

Today we have a raft of EU data on money supply and CPI while in the UK we have the financial stability report along with a speech by BoE governor Mervyn King. Will he talk the pound up or down? It’s usually the latter and with month end today which often brings profit taking so we could see some volatility towards the end of European trading at 4.30pm. all in all well worth keeping in touch with your broker at Currency Index if you have a transfer to make in the coming week.

While Germany were leading the talks in Brussels deciding on the future of Italy and Spain, over in Poland it was quite the opposite. If only Italy’s finance ministers played the finance game as well as their footballers the beautiful game, they would probably be in a lot better position as a country. At least for now the Azzurri are giving the Italians something to smile about with a 2-1 win over the Germans to go into Sunday’s Euro 2012 final against Spain, much to the dismay of Angela Merkel. Forza Italia!


Czech-ing Out The Currency Markets

Sterling however weakened against the US Dollar and gains were limited against the euro as speculation mounted that the Bank of England would increase their quantitative easing programme at next week’s MPC meeting.

We can expect another topsy turvy week with UK GDP figures due out, likely to confirm that the UK is in a double dip recession, and the build up to the EU summit where yet again ministers will try to come to an agreement of how to solve the worsening eurozone crisis. Cyprus were forced to seek help yesterday fearing they are going to be affected by the worsening problems within Europe, Spanish yield continued to rise and Moody’s downgraded 28 Spanish Banks so all in all a pretty bad day for the euro and although sterling gained the US dollar was the main winner gaining over ½ % against the poor performing euro.
Given that the Eurozone debt woes have not shown any signs of improvement, the results from the forthcoming EU summit might be disappointing. Analysts said the risk of disappointment is likely to exert more downward pressure on the euro.

“The risks facing the euro are greater than sterling. So I think sterling may outperform the euro, but it may underperform the dollar,” Jane Foley, senior currency strategist at Rabobank, said.

Today we have UK Public sector Net Borrowing figures out at 9.30am followed by the Inflation Report Hearing which will be accompanied by a speech from Mervyn King. This could well put some pressure on the pound as votes at this month’s MPC meeting showed that a call for further quantitative easing was very much a close run thing.

With England out of the Euros (no surprise there) focus has turned to Wimbledon, will we see the first British champion since Fred Perry ? I doubt it !!! There was however joy for Heather Watson yesterday when she became the first British women to win on centre court since 1985, beating world ranked 55 Czech opponent Iveta Benesova. Though Iveta Benoesova may not need too change to many pounds into Czech Koruna anybody who does have such a requirement should follow this link and get in touch with your broker at Currency Index.


Euro falls after initial Greek optimism

Yesterday saw another day in the currency markets where early euro optimism was quickly erased and the single bloc currency fell against a basket of currencies. Sterling reversed earlier losses against the euro as Spanish borrowing costs soared to levels seen as unsustainable, and likewise the dollar gained nearly 1 % against the ever fading euro.

The euro retreated as initial relief at pro-bailout parties winning in Greek elections, removing the immediate threat of the country leaving the single currency, was replaced by concern over the huge problems still facing the euro zone.

The euro has lost 3.5 percent against the pound this year as investors seeking to exit the euro zone piled into UK gilts in search of safer havens but with the possibility of the Bank of England increasing their QE policy next month there could well be a lot of volatility between the 3 major currency pairs over the coming weeks.

“Our safe-haven status is still rock solid, but sentiment is probably going to be negative ahead of the next MPC minutes,” said Kit Juckes, currency strategist at Societe Generale.

“I think there’s now a heightened expectation of more from the next meeting so I don’t think we’re going to turn sterling sentiment around in a hurry, and in that sense I think it’ll take a while to squeeze out all the shorts.”

Today we have UK CPI data and German ZEW data which will possibly give hints to the BoE’s next move and also just how much of a toll the eurozone crisis is having on their largest economy. Markets will also be keeping an eye out for any ‘action plans’ emerging from the G20 summit and also eyes will be kept firm on Spanish yields which yesterday rose above 7% with 7.5% being seen as an unsustainable level.

In the Euro 2012 last night we saw 2 of the pre-tournament favourites qualify for the last 8. World Champions Spain scraped a 1-0 win against Croatia and their government will be hoping that the country itself can scrape through the current woes in their banking sector. It was a ‘played 3 lost 3’ scenario for Ireland as they crashed out to Italy. Ireland have been in financial turmoil for years and though it was nice to see them enjoying some tournament football it seems the team like the country is struggling to keep up with Europe’s elite !!

If you dont want to become the Croatia or Ireland of the currency markets do contact your account manager to ensure you dont lose out on the good exchange rates we are currently seeing.


Greece to stay in the Euro and the Euros?

The results of Greek parliamentary elections look like a victory for the pro-bailout New Democracy party – with far reaching consequences for the global economy as Athens will now be likely to accept the austerity measures handed down by the EU, allowing the country to stay in the single currency.

In recent weeks it had looked like anti-austerity parties may have made more of an impression at the elections, which would have led to a likely unprecedented Greek exit from the single currency. Now, New Democracy should be able to build a majority coalition with the socialist Pasok, benefiting from a rule which gives the leading party 50 extra seats in the 300-seat chamber.

This could mean we see some strength for the Euro, giving lower exchange rates for sending payments from the UK to the single currency area. Stock markets around the world have risen on the news, and the Euro may not be far behind, once a coalition government is officially formed. The Pound has fallen 0.75c against the Euro since Friday night, and is stable against the US Dollar, against which rates have improved somewhat in the last week.

After Greece’s surprise victory over Russia kept them in the European Championships at the weekend, it looks like New Democracy’s surprise victory, may also keep Greece in the Euro – for the foreseeable future at least.

Elsewhere this week, we have no major data due until Wednesday, when the G20 meeting starts. Monthly UK consumer inflation on Wednesday will be important for the Pound, as will Thursday’s Bank of England minutes and unemployment rate.