The Week Ahead
The Euro made significant initial gains in Asian trading this morning, but both Sterling and the Dollar have managed to claw back around half a percent against the Euro, since the European markets have opened.
While this bailout is good news for Spain and is a clear indication of the support the Eurozone as a whole will give its members and therefore the currency itself, it does not hide the fact that the whole area is still in a dire situation. Hence the volatile reaction despite this good news.
This week has various pieces of economic data released, including UK house price info from RICS tonight, UK manufacturing and industrial production figures tomorrow, European industrial figures and US industrial and retails sale on Wednesday, ECB monthly report and European and US inflation figures on Thursday and UK trade balance and European employment data on Friday. There is also a further UK GDP estimate out tomorrow afternoon, which could be very interesting given the recent announcement that the UK recession is deeper than previously thought – deeper still or maybe a little improved – we shall see.
All in all a very busy week, so stay in touch with your dedicated account manager to keep abreast of the exchange rates relevant to you.
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Sterling Gains Against USD, But Remains Broadly Under Pressure
Yesterday Sterling remained under pressure as investors concerned about the extent the Eurozone crisis would drag on the UK. The European Central Bank held interest rates at their policy meeting yesterday and the subsequent press conference gave little insight to how to tackle the growing problems in Greece and Spain. Despite this, we lost two cents over the Bank Holiday weekend against the Euro and although over the day gained back some ground against the single currency, the pound is down further this morning.
Against the US dollar the pound made headway, gaining 0.6 percent over the day as investors priced in the chance of further economic stimulus Stateside following comments from Atlanta Federal Reserve President, Dennis Lockhart, that policymakers may need to consider further easing. The pressure remains on the pound though as we look towards the Bank of England’s announcement at lunchtime today where analysts are talking up the chance we will have a further injection of cash into the UK economy through QE. The talk is of a further £50 Billion of asset purchasing which if confirmed, would more than likely weaken off the pound across the board.
The Pound has made some small gains across a basket of currencies this morning ahead of the BoE meeting after the PMI figure posted better than expected at 53.3, which more importantly being above 50 shows growth in the sector. Will the rally continue or will sterling be stopped in its tracks come lunchtime….
GDP Revised Down
The pound was trading lower against most currencies as trading opened today ahead of a raft of UK data and continued to fall following the data releases. Total business investment actually came in above expectations at -3.3% month on month compared to the expected -5.4% and up 1.6% compared to -1.9% for the year on year figure. This did little to help sterling though as the GDP figures were revised down.
This was the final reading for Q4 2011, having had two previous readings in January and February. The expectation was for a final reading of -0.2% for QoQ and 0.7% growth for the YoY but in fact the revision came in at -0.3% for QoQ and 0.5% for the YoY.
This shows growth in the UK is slower than expected which will fuel the argument for further quantitative easing from the Bank of England in the coming months and is generally negative for the pound. The result for today is a half percentage point drop against the Euro and US dollar as well as losses against most other major currencies.
What we have seen though is good opportunities for selling Euros. The half percent gain equates to nearly £1000 extra when selling €200,000, a great addition in a short space of time!
Tomorrow could bring further turbulence as the Bank of England publish their credit report as well as money supply and mortgage lending figures are released.
If you have a currency requirement coming up i the near term and are worried about losing out on the rate, contact one of the brokers at Currency Index today for some friendly guidance.
PMI Data Weaker Than Expected
Pound to euro exchange rates dropped away from the 1.2 marker this morning as UK purchasing managers index came out lower than forecast. Although the figure was above 50 showing growth in the sector, the figure was down on last month and lower than expected for this month showing the sector is shrinking. The EU figure also came out lower than expected but the better than expected retail sales figures for the last month in the Eurozone has given the single currency the edge against sterling and the dollar. EU retail figures were expected to show a negative figure for both monthly and yearly levels but both came in better, with a 0.3% for the month and 0% flat rate for the year on year.
The rest of the week has a few key economic data releases which may affect your currency purchase:
Tuesday:
UK – Halifax house price index
EU – GDP
Thursday:
UK (12pm) and EU (12.45pm) – Interest rate and Asset purchase program decisions. The EU decision is followed by the ECB press conference at 1.30pm
Friday:
UK – Trade balance, Manufacturing and Industrial production, Producer price index, all at 9.30am. Later in the day the NIESR GDP estimate
All the above will likely move the pound to euro exchange rates, which way depends on how the figures look. If you have a requirement coming up in the near term keep in touch with us here at poundeuroexchange for updates and contact the author directly via sre@poundeuroexchange.co.uk or one of our team of experts.
Pound Strength
Pound euro exchange rates had a rocky start to the month as a raft of data pushed the rates up and down in early trade.
An increase in the figures for the Nationwide house price index in the UK gave the pound a boost as trade started this morning with the figures coming in above expectations at 0.9% increase (compared to 0.4% forecast) for the year on year and 0.6% increase (compared to 0.2% forecast) for the month on month. House prices improving gives a positive light to the economy and therefore is positive for the pound.
We then had PMI for manufacturing data out in the EU and UK, the European figure coming out as forecast but the UK coming in under at 51.2 (compared to 51.8). Although a figure above 50 shows expansion in the sector which is a good thing the weaker figure in Britain and the stronger German and EU figures gave the Euro a chance to pull back some losses.
Finally EU unemployment data came out at 10am, which showed a higher percentage than was expected at 10.7% which has led the pound to regain the lead and push up against the single currency.
Pound to euro exchange rates currently sit at 1.196 and the trend is pushing up so the question is, will it hit 1.2 again?
I think we could see the headline rate reach 1.2 but whether it will push above depends on other factors. Positive US data later today and tomorrow could give investors the risk appetite to increase their holding in the perceived riskier sterling and as mentioned yesterday this is likely to be at the expense of the Euro. Of course further updates to come…..
For further discussion please contact me directly on sre@poundeuroexchange.co.uk
Pound Moves Up On CBI Data
Pound to euro exchange rates have had a volatile morning so far, dropping intitally as European trade opened. A slight pick up for sterling as mortgage approval figures came out better than expected at 38,100 compared to the forecast 36,200 but the rise didnt last long reversing pretty much straight away.
We have just had CBI industrial trend survey which came out much better than expected so again the pound is on a rally. Orders were expected to be down 14% but in fact were only negative by 3%. Pound to euro exchange rates now sit where they were at start of European trade.
We have a string of US data this afternoon so we could see some movement as traders digest the figures. Quite often pound euro rates are affect with the US data that comes out. Its known as the “currency see-saw” and involves GBP, EUR & USD. If the figures are US positive investors may decide to buy the dollar. Alternatively they may see that as a sign of general global economic positivity and sell dollars (seen as a safe bet currency) and put into one of the riskier GBP or EUR. Depending on investor sentiment at the time as to which one but I suspect it would be Euro at this time with sterling gaining ground against the dollar but not against the Euro. Confusing? It can be but there are experts on hand to try and help guide you through and maximise your return on any currency deal coming up. Contact me directly at sre@poundeuroexchange.co.uk or one of the friendly brokers at specialists Currency Index.
Euro Continues Rally
The Euro has continued to climb against the pound today despite the positive retail sales figures as traders believe the Greek bailout will be signed off over the weekend. The rates have dropped 60 points against sterling to just above 1.2 having peaked at 1.206 this morning following the retail figures. The Euro has also gained 70 points against the US dollar.
Rate Update
Pound euro exchange rates nearly one cent up on the days trade, although we are seeing resistance at the 1.2 mark as sterling struggles to push higher.
Sterling Positive After Inflation Report
Mervyn King today announced the inflation report, predicting that inflation in the UK would drop below the 2% target this year and possibly remain so through 2013 and 2104. He said GDP will remain weak going forward but should pick up as households real incomes recover, helped by further monetary stimulus.
Growth will remain slow and the one of the key factors to consider is the problems in Greece and the Euro zone as a whole. King suggested that one of the most important obstacles holding back recovery was a resoultion to the Greek debt problems.
Euro ministers are now due to hold a conference call to decide on Greece who have stated they have met all the requirements imposed to cut spending. Time will tell if the bailout is signed off!
What has this all meant for the markets… well for sterling its a positive having gained half a cent so far against the Euro which remains under pressure. Low inflationary forecast and the hint of further monetary stimulus by King may start to come into play if and when the Greek bailout is signed off though as to me that indicates further QE, which as we have seen tends to weigh negatively on the pound.
For further discussion contact me directly sre@poundeuroexchange.co.uk or get in touch with one of the brokers at specialists Currency Index to discuss your currency requirements.
UK Jobless Figures
The unemployment figures for the UK came out broadly in line with expectations, predicted to be 8.5% and coming in at 8.4% increase. Average earnings were up slightly more than expected at 2% (compared to 1.9%). More concerning was the more accurate “claimant count” which indicates how many new people are “signing on” which from an expectation of 3.3k came in over double that figure at 6.9k new claims.
Unemployment has now increased for the 8th consecutive month as businesses need to cut labour costs in order to survive the tough economic conditions.
Sterling down slightly against the Euro at 1.19 ahead of EU GDP figures at 10am and BoE Inflation Report at 10.30am
Quantitative Easing Press Release
The Bank of England’s £50bn extension to Quantitative Easing (QE) today is not good news for buyers of overseas property. Injecting more money into the economy has the effect of diluting sterling, and the Pound tends to suffer, giving us lower exchange rates for sending money abroad.
Sterling is particularly vulnerable at the moment, since the underlying UK economy is still weak – for example we saw negative growth in the last quarter of 2011. Exchange rates have been propped up by weakness in other economies, particularly in the Eurozone, where the single currency has been struggling as the sovereign debt crisis rolls on.
So while the recent problems in Europe and also in the USA have given overseas property buyers better exchange rates than they might expect, many clients are now locking in to their rates using forward contracts, to make sure they are not exposed to a depreciating Pound in the coming months. Currently, rates for buying Euros are nearly 8% better than in July 2011, and for US dollars, over 3% better than a month ago.
As a note of caution, a year ago when Euro rates were up at 1.20, the Pound quickly fell back, losing over 8% by the summer and giving overseas property buyers a serious headache. Fixing exchange rates in advance is easy with a reputable currency broker, and can save a small fortune.
We may well see more QE in the coming months if the Bank of England thinks it will help the economy, and that is not a recipe for a strong Pound as the year rolls on
Sterling Falls As QE Looms
Sterling fell against the the euro today as the expectation grows for a more aggressive stance on QE from the Bank of England tomorrow. BoE policymakers are expected to announce a further £50 billion asset purchase as their meeting ends tomorrow at noon, seeking to bolster the UK’s struggling economy. QE involves flooding the market with more pounds and generally we will a weaker pound.
While a £50 billion injection is broadly expected, a larger asset purchase programme could hurt sterling. On the other hand, if the BOE does not opt for more QE, it could give the pound a boost.
“We suspect that more aggressive easing by the BoE tomorrow could add to the upside risks for euro/sterling,” said Valentin Marinov, currency strategist at Citi. He added the euro appeared undervalued at present.
Analysts say that while sterling will take an additional 50 billion pounds within its stride, a larger easing would have a more significant impact. ”The reaction to QE will depend on the size, whether it is 50 billion or 75 billion,” said Kathleen Brooks, research director at FOREX.com.
So we wait for the announcement tomorrow at midday. The market may push lower in the morning so those unwilling to take the gamble might want to consider buying any Euros early in the days trade. Those looking to take a punt, keep an eye on the rates following 12 noon or keep in touch with your broker to get live analysis.
You can request information from one of our brokers by filling out the contact form or emailing sre@poundeuroexchange.co.uk
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GDP Down – The Pound Gains Against Euro
Today saw the release of worse-than-expected gross domestic product data showing the UK economy contracted by 0.2 percent in the final quarter of 2011 and signs that the Bank of England is preparing for another round of quantitative easing.
Despite this the pound recouped losses against the euro, after falling to within sight of a near four-week low in early London trade as market players positioned for a weak GDP number. Concerns about the European Central Bank having to write down its Greek bond holdings as part of a deal to avoid a disorderly default also weighed on the single currency.
Bank of England minutes from the last policy meeting, released at the same time, showed members voted unanimously to keep total asset purchases at 275 billion pounds, although the minutes also said a further expansion of asset purchasing was “likely” to be required.
Market players said sterling was oversold against the euro on some concerns of an even weaker GDP number. The fact that no BoE policymakers voted for an increase in QE this month – even though it is strongly expected in February – also lent some short-term support to the pound.
“There were a couple of calls of minus 0.7 percent from a couple of forecasters which maybe spooked people. There was definitely some chat of weaker numbers ahead (of the data) so I think that’s why we’ve seen a bit of a bounce, combined with the minutes not guaranteeing any extension of QE,” said Adrian Schmidt, currency strategist at Lloyds Bank.
There was little reaction in sterling to a CBI industrial trends survey that showed British factory orders shrank in January, though at a lower pace than forecast.
Sterling Falls As UK Debt Hits £1Trillion
Sterling fell to its lowest since late December against the euro this morning, weighed down by fears of economic weakness that may prompt further monetary easing from the Bank of England. Data showed British public borrowing was lower than expected in December, thanks to stronger tax receipts, but total outstanding debt rose above the 1 trillion pound mark for the first time on record. The euro was also supported by better-than-expected euro zone data and hopes of an eventual deal to restructure Greek debt, which prompted investors to trim some of the hefty short positions that have built up in the single currency.
Analysts said upcoming British data and events could add to concerns about the prospect of more quantitative easing as austerity measures and the impact of the euro zone debt crisis hurt the economy. UK GDP data on tomorrow is expected to show the Britain’s economy contracted by 0.1 percent in the fourth quarter, which would add to fears that the economy is sliding back into recession.
Surveys showing a surprise upturn in the euro zone services sector helped lift the euro, raising hopes the region may yet escape recession. However, most analysts believe the scope for further euro gains will be limited due to concerns about the risks of the euro zone debt crisis deepening. One trader was quoted as saying ”We’ve had a wave of optimism towards the euro over the last couple of days and expectations that we’ll get this Greek deal before the end of the week,” but going on to add “We could see further gains over the short-term, but I think it remains vulnerable.”
The worry is that there were likely to be negatives ahead for sterling, with the market positioning for more QE from the Bank of England in February and a potentially weak GDP number on Wednesday. Analysts were also wary that a speech by BoE Governor Mervyn King later today and the release of minutes from the most recent BoE policy meeting tomorrow may add to the expectations for an increase in asset purchases next month. BoE policymaker Adam Posen said on Monday Britain’s economic outlook had improved slightly but more quantitative easing would probably still be needed.
The pound/euro exchange rates have been fairly buoyant of late with some good opportunities for euro buyers to lock into rates we havent seen for a year but with the continued fragility of the UK economy and continued efforts to resolve the Greek debt problem we may not see these levels continue over the coming months. Speak to specialists Currency Index to discuss the options available to whether you need Euros now or in a few months time, there is a solution to help.
Contact Simon on 0800 043 2623 or via email at simon.eastman@currencyindex.co.uk
Crunch Time For The Greeks
Today Eurozone finance ministers are meeting to decide what terms of a Greek debt restructuring they are willing to accept, as crunch time for the Greek bailout plan is looming. Ahead of next week’s EU summit, where the Eurozone’s stability pact is also due to be signed off, a deal must be agreed between EU leaders and Greece’s creditors, for a write-down of the value of their debt. An improved European stability mechanism is also due to be signed off next week.
Assuming the talks result in new treaties next week, we could be in for some Euro strength, giving those of you looking to buy Euros a window of opportunity this week to secure your rates at preferential levels. While there is no easy way of predicting the markets (and anything can happen in the current environment of uncertainty), it is worth noting that recent history shows how vulnerable sterling is to rates falling back:
- November 2008 (1.21) 1 month later fell 15.7% to 1.02
- June 2010 (1.2251) 1 month later fell 4.3% to 1.1721
- August 2010 (1.2250) 3 months later fell 8.7% to 1.1184
- Jan 2011 (1.2069) 4 months later fell 8.3% to 1.1057
This week we also have the Bank of England minutes on Wednesday morning, which will show whether any further quantitative easing was discussed this month. Markets would not be surprised to see further economic stimulus in February, given that inflation is now falling back, and this would be likely to lead to sterling weakness, so any clues from this month’s minutes could have an effect on exchange rates. Keep up to date with pound/euro exchange rates by speaking with one of the traders at Currency Index on 0800 043 2623
UK Consumer Confidence Hits The Pound
Today the pound dipped against a broadly stronger euro, although analysts expected any rally in the single currency to be limited given ongoing concerns about the Eurozone debt crisis.
A survey showed UK consumer confidence dropped close to its lowest level in seven years in December, adding to worries about a fragile economy and the risk the Bank of England may continue with further QE next month.
Spain sold 6.61 billion euros of government bonds, more than its announced target, in an auction that analysts said went well, supported by domestic banks and a pick-up in appetite for riskier assets. The auction result helped the euro climb to a session high staying well above its recent 16-month low but we expected it to struggle to test last week’s Euro high (1.194). Market analysts said the euro’s gains were likely to be limited as investors remain wary of any development that may cause the euro debt crisis to worsen significantly, with market players keeping a close watch on talks aimed at avoiding a messy Greek default.
With a mixed outlook on both sides of the coin, with the Greek issues causing Euro weakness and future BoE monetary policy affecting sterling we could see some volatility over coming weeks. If you have a Euro requirement coming up it may be worth your while getting in touch with Simon Eastman at specialist brokerage Currency Index to discuss the possible pitfalls coming up. Contact directly on 0800 043 2623 today.
