Pound/Euro lower following Greek vote/ECB comments

Thursday 30th June 2011
Good morning. Following the passing of the Greek vote on austerity measures, the Euro has stabilised and this has pushed GBP/EUR rates down. Also comments from the ECB president this morning signal interest rates are going up in the EU next week, this is likely to push exchange rates to buy Euros even lower. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1095
• GBP/USD 1.6091
• GBP/AUD 1.4984
• GBP/NZD 1.9400
• GBP/CAD 1.5556
• GBP/CHF 1.3409
• GBP/ZAR 10.865
• GBP/JPY 129.29
• GBP/DKK 8.2737
• GBP/NOK 8.6317
• EUR/USD 1.4500

Greek vote on Austerity measures strengthens Euro

Yesterday the vote was narrowly won to push through austerity measures in return for financial aid. The package of tax rises and budget cuts worth about 28bn euros over five years, had been championed by Greek Prime Minister George Papandreou.

If it had been rejected, Greece could have run out of money within weeks. The EU and the International Monetary Fund have demanded that the measures are implemented before they extend further loans to Greece.

The markets have taken the news positively, with markets across Europe soaring yesterday, and the Euro also strengthening, making it more expensive to purchase and pushing GBP/EUR down.

ECB comments - rate rise expected next Thursday

Jean Claude Trichet, the president of the European Central Bank this morning has said 'strong vigilance' is needed on inflation. This is his code word for saying interest rates will rise, and so we now expect this to happen next Thursday. An interest rate rise strengthens a currency due to the higher return, and the comments have pushed GBP/EUR even lower this morning.

Should you buy Euros now or should you wait?

It's always impossible to predict what will happen to exchange rates, however with poor UK data showing the economy is struggling it's not likely the pound will strengthen in the coming weeks and months. Also with interest rates on the rise in the EU, and optimism following the Greek vote it could easily strengthen the Euro further.

To protect against possible drops in rates, you could consider fixing the rate for your Euros now with a Forward contract, even if you don't need the currency for some time. Contact us today to find out more about how these contracts work.

Today's Data

Unemployment data from Germany today is the main release from the Eurozone. The UK has little data out today, however there is a credit conditions report from the BoE. This studies the risk attitude towards UK banks, and can indicate economic growth (or lack thereof!). We also have jobless figures from the USA and Gross Domestic Product from Canada.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling hits 2 month low vs Euro

Wednesday 29th June 2011
Good morning. Sterling has hit a 2 month low vs the Euro this morning, as the single currency has gained significant support ahead of the Greek vote on austerity measures. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1116


• GBP/USD 1.6008


• GBP/AUD 1.5133


• GBP/NZD 1.9590


• GBP/CAD 1.5680


• GBP/CHF 1.3289


• GBP/ZAR 10.941


• GBP/JPY 129.65


• GBP/DKK 8.2875


• GBP/NOK 8.6686


• EUR/USD 1.4396

Sterling hits 8 week low vs Euro

The pound is at a 2 month low vs the Euro this morning, and the lowest in over a year against a currency basket. This is because the Bank of England have renewed the possibility of further Quantitative Easing and data showing very slow growth in the UK.

We saw figures yesterday showing that the economy only grew by 0.5% in the first quarter, and annual growth has also been revised down. The UK data added to the view that UK interest rates are likely to stay at their record low 0.5 percent well into next year. Also some BoE policymakers, speaking in parliamentary testimony, mentioned the possibility of more quantitative easing if the economy stayed fragile.

More Quantitative easing signals worries over the economy and Sterling has suffered as a result. Policymakers' opinions differed, however. David Miles said more asset purchases could be an option for the future, while BoE Deputy Governor Paul Tucker said there was not a uniform move towards more QE. The lack of consensus just goes to show how fragile things are at the moment.

Today's Data

UK data today is in the form of Consumer Credit, Mortgage Approvals, Consumer Confidence and Money Supply. Recent UK data has been very gloomy, and further poor data could push Sterling lower. From the Eurozone we have measures of economic, industrial and consumer confidence all of which could affect GBP/EUR rates.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling down against EUR & USD

Tuesday 28th June 2011
Good morning. Sterling has dropped to a 5 month low vs the US Dollar, after the US currency strengthened on it's safe haven status, following renewed concerns over the EU debt crisis. Sterling is also likely to remain under pressure in the coming weeks as the BoE consider further Quantitative Easing. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1172


• GBP/USD 1.5976


• GBP/AUD 1.5254


• GBP/NZD 1.9802


• GBP/CAD 1.5744


• GBP/CHF 1.3328


• GBP/ZAR 10.944


• GBP/JPY 129.10


• GBP/DKK 8.3310


• GBP/NOK 8.7510


• EUR/USD 1.4303

Pound down against Euro and US Dollar

As stated above, the US Dollar has strengthened on it's safe haven status, pushing rates to a 5 month low. Against the euro, sterling also lost ground with the common currency lifted by a bout of short-covering and signs of progress on a scheme to make private bondholders share the burden of any Greek debt solution.

Despite this, euro zone peripheral bond yield spreads widened and kept investors edgy ahead of Tuesday's Greek parliamentary vote on new austerity measures that are a pre-condition for new bailout funds.

Sterling weak due to interest rates and possible Quantitative Easing

Investors have steadily pared back expectations of a rate hike by the Bank of England due to a run of dismal economic data. The BoE's dovish stance, outlined in policy meeting minutes published last week, contrasts with the position of the European Central Bank, which is thought likely to hike in July.

Money markets are not pricing in a BoE rate rise until July or August 2012, a marked change from the start of the year when they were pricing in at least three quarter-percentage-point rate hikes by end-2011.

Today's Data

Gross Domestic Product is the main UK release today, which is a broad measure of economic activity. From the Eurozone we have the Consumer Price Index from Germany. This is an inflationary measure and if high could increase the chance of an EU rate hike, pushing GBP/EUR lower. Consumer Confidence from the USA is the major release from across the pond.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Weekly GBP/EUR & GBP/USD update forecast

In this week’s Report:

• Bank of England minutes causes fall for Sterling
• Chance of further Quantitative Easing for the UK
• Greek debt keeps Euro weak, limiting GBP/EUR drop
• Round up of the week’s data that may affect rates

(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

Sterling finished last week over half a cent down against the euro from the start of the week but almost 1 cent better than the lowest point of trading midweek. Last weeks key UK data and indeed the biggest drop came following the minutes of the Bank of England meeting, held at the beginning of the month, which of course showed a 7-2 split in favour of keeping rates on hold.











However, with exit of Andrew Sentence from the committee and the addition of Ben Broadbent the minutes were interpreted as being particularly dovish. As a result, the money markets are now not pricing in a BoE rate rise until July or August 2012, while only a few months ago the expectation was for two rate rises by the end of this year.

Sterling’s performance was further muted by signs the Bank of England could yet be inclined to embark on another round of quantitative easing, and this has driven the pound lower this week with many investors forced to unwind more bullish positions.

Euro confidence was bolstered on Tuesday when Greece’s socialist premier ‘George Papandreau’ was given a vote of confidence by the Greek Government making way for a new wave of austerity measures which were subsequently agreed by the EU on Thursday. Mr Papendreau now needs to push these measures through his own parliament which will include a sale of $70 billion of state assets. Despite the dire straits Greece find itself in, the Euro held firm against Sterling as the events were interpreted as a scene of solidarity on behalf of the European community.

Adam Cole at RBC Capital Markets suggested that Sterling’s position is unlikely to change unless the market starts to point towards better growth figures in the form of Q3 GDP figures - If this happens then it may be enough to begin to mute the doves in the MPC and see Sterling make some headway against the single currency.

This however is not the case at the moment, and last week was yet another of Sterling being bullied around by the Euro on European data, and probable delays in interest rate rises in the UK. This week’s key UK data release is the final Q1 GDP figures. The market expects to see 0.5% growth, however keep in close contact with us if you are buying or selling Euros, as any deviation from this figure (especially negative) is likely to cause some volatility in the market. Discuss ‘Stops’ and ‘Limits’ as a way of maximising your position whilst at the same time protecting yourself from any potential drops in the market. If you haven’t already, make a free enquiry with us now by clicking here.

Pound vs US Dollar Forecast

Fed Chairman Ben Bernanke’s second ever press conference given last week seemed to rule out almost entirely the prospect of further policy stimulus, strengthening the US Dollar even as the US economy is going through a soft patch and the unemployment rate has been rising. This has pushed GBP/USD rates lower as the chart below clearly illustrates:











The Fed believes that the factors weighing on growth are very much temporary, including higher commodity prices constraining consumption and disruption from the Japanese earthquake to the supply chain that has hit industrial production. It also believes the pace of recovery will pick up later this year.

However, it did sound a note of warning about inflation saying that it had noted the pace of price increases recently and it would continue to "pay close attention to the evolution of inflation and inflation expectations." This was considered more "hawkish" than some had expected, however, like the Bank of England, the Fed thinks that inflation will eventually moderate when commodity prices fall.

However, while we think a floor has been put in for the dollar for now there are many reasons for scepticism that the greenback rally will continue... Firstly, the Fed could change its mind if the economic situation deteriorates, so we need to see how the data pans out over the next few months. Secondly, the US still faces a political wrangle to get Congress to agree to raise the debt ceiling so the US can avoid bankruptcy later this year. Although we think the debt ceiling will be extended, the US's massive $14 trillion debt load means that we are unconvinced at the extent the dollar can rally. With debts that big the US needs a weak currency to boost exports and to create a little bit of inflation; thus bringing down the size of the debt in real terms.

On Friday, Cable (GBP/USD) went below $1.60 for the first time in 3 months; could this be the beginning of the much speculated rally, or just a temporary trough? Could the Greenback realise its current potential by rising further against a weak pound? If you are buying or selling USD it is an important time to be keeping abreast of what's happening in the markets. Click here to send us an enquiry, and have a free consultation.

Weekly Economic Data that may affect exchange rates

Monday – From the UK today we have Nationwide Housing Prices, which is an indicator of the health of the UK housing market. From the EU we have Retail Sales from Germany, the largest economy in the EU. It’s considered a barometer of EU consumer confidence. From the USA we have Personal Expenditure data, which is a significant indicator of inflation and could affect future interest rates.

Tuesday – Gross Domestic Product is the main UK release today, which is a broad measure of economic activity. From the Eurozone we have the Consumer Price Index from Germany. This is an inflationary measure and if high could increase the chance of an EU rate hike, pushing GBP/EUR lower. Consumer Confidence from the USA is the major release from across the pond.

Wednesday – UK data today is in the form of Consumer Credit, Mortgage Approvals, Consumer Confidence and Money Supply. Recent UK data has been very gloomy, and further poor data could push Sterling lower. From the Eurozone we have measures of economic, industrial and consumer confidence all of which could affect GBP/EUR rates.

Thursday – Unemployment data from Germany today is the main release from the Eurozone. The UK has little data out today, however there is a credit conditions report from the BoE. This studies the risk attitude towards UK banks, and can indicate economic growth (or lack thereof!). We also have jobless figures from the USA and Gross Domestic Product from Canada.

Friday – We end the week with a raft of inflation data from the UK and EUR, in the shape of the Purchasing Managers Index. This can indicate where interest rates may move in the coming months, and given the interest rate differential has been a big driver in GBP/EUR rates of late; markets will be paying close attention to the figures. From the USA we have some Manufacturing and Construction data.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Sterling falls to 8 month low vs currency basket

Friday 24th June 2011
Good morning. Sterling has fallen to a 3 month low vs the US Dollar, and an 8 month low vs a basket of currencies, due to the fact the Bank of England may pursue more Quantitative Easing. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1235


• GBP/USD 1.5958


• GBP/AUD 1.5182


• GBP/NZD 1.9653


• GBP/CAD 1.5648


• GBP/CHF 1.3380


• GBP/ZAR 10.958


• GBP/JPY 128.55


• GBP/DKK 8.3792


• GBP/NOK 8.7508


• EUR/USD 1.4203

Sterling continues to fall on QE fears

A darker economic outlook from the BoE as outlined in this weeks MPC minutes prompted a sell-off in the pound. This is on speculation that ongoing economic weakness would keep the BoE from raising rates until well into 2012. Sterling also came under pressure as investors cut exposure to riskier assets after Federal Reserve Chairman Ben Bernanke cut the Fed's U.S. growth forecast and on persistent uncertainty about Greece's debt crisis.

"Risk-off sentiment and the increased possibility of more QE in the UK is encouraging sterling lower against the dollar," said Jeremy Stretch, currency strategist at CIBC

Despite Sterling weakness GBP/EUR rates rise

Sterling gained against the euro, however, as the single currency suffered broadly due to concerns about how the Greek debt crisis could be resolved . The GBP/EUR rate gained by around 0.8%, however most of this recovery has already been wiped out this morning.

What do the analysts say?

Analysts said sterling has more room to fall as short-term markets are not pricing in a BoE rate rise until July or August 2012 . Only a few months ago markets had been pricing in around two rate rises by the end of this year.

Societe Generale currency strategist Peter Frank said the pound would be hyper-sensitive to any signs of more weakness in the economy, and that more dismal economic figures could push it down to around $1.5350 against the US Dollar, and as low as €1.08 against the Euro.

Today's Data

There is no UK data of note today. The main data are EU Retail sales and German confidence measures. From the US we have release regards GDP and durable goods orders , both of which could cause volatility for both GBP/USD and GBP/EUR.

On Monday morning, we'll have a detailed outlook of both Pound vs Euro, Pound vs US Dollar, and the prospects for Sterling for the coming months. Enjoy your weekend.

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Sterlng falls sharply on BoE minutes

Thursday 23rd June 2011
Good morning. Sterling had a very poor day yesterday, falling broadly against other currencies after the Bank of England minutes showed there may be further Quantitative Easing and no chance of an interest rate hike any time soon. Today we will look at why the Pound has fallen so much against the Euro, and the prospects for the coming weeks. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1226


• GBP/USD 1.6025


• GBP/AUD 1.5208


• GBP/NZD 1.9660


• GBP/CAD 1.5590


• GBP/ZAR 10.856


• GBP/JPY 129.01


• GBP/DKK 8.3720


• GBP/NOK 8.7629


• EUR/USD 1.4270

Sterling falls on Bank of England minutes

Yesterday the minutes to the recent BoE decision to hold rates showed the 9 member committee voted 7-2 to hold rates. The new member Ben Broadbent voted to hold rates, in stark contrast to his predecessor who had consistently voted to raise rates. This signalled that interest rates in the UK are likely to remain low for some time, and there is now a greater chance of more Quantitative Easing.

Sterling fell nearly 1% against other currencies as a result.

What do the analysts say?

"This is the first time in many months that we see other MPC members than Adam Posen talking about more QE," said Valentin Marinov, strategist at Citi.

"We think we could see sterling moving lower still on the back of the BoE minutes against the dollar and the euro. Given that sterling/Swiss franc hit fresh all-time lows more stops could be triggered fuelling further correction to the downside." So, it could well be Sterling continues to fall against other currencies, however the Greek debt problems will probably limit falls in GBP/EUR somewhat.

More Quantitative Easing?

MPC member Paul Fisher said earlier in the week that there is an increased chance of more quantitative easing, saying Britain's economic recovery was fragile and more monetary stimulus may be needed if deflation risks mount. Markets are not pricing in a full quarter percentage point rate hike until June or July 2012, a sharp move from earlier this year, when a May 2011 rate rise was viewed as a likely option.

Expectations for when UK interest rates will rise from their record low level have been drastically pared in response to a run of soft data as the country enters a long period of drastic fiscal tightening. In contrast, the EU are likely to raise rates next month, and this could put GBP/EUR under further pressure.

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Sterling falls on BoE members comments

Wednesday 22nd June 2011
Good morning. Sterling fell against the Euro and US Dollar yesterday, after one of the Bank of England policy makers said there may have to be more Quantitative Easing in the UK, due to poor Pubic finance data and a fragile economic recovery. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1263


• GBP/USD 1.6229


• GBP/AUD 1.5295


• GBP/NZD 1.9929


• GBP/CAD 1.5760


• GBP/CHF 1.3647


• GBP/ZAR 10.868


• GBP/JPY 130.11


• GBP/HUF 300.21


• GBP/DKK 8.4002


• EUR/USD 1.4405

Sterling falls on Paul Fishers comments

Yesterday ths policy maker at the Bank of England painted a very gloomy picture of the UK economy, saying the economic recovery remains fragile and more monetary stimulus may be required in the UK. His comments caused investors to sell the Pound and as a result Sterling took a sharp fall against other currencies.

Investors are now not expecting a UK interest rate hike until next year, while the Eurozone is likely to raise their interest rates in July this year. This means the better return on offer in the EU will cause investors to move from Sterling to the Euro, and this will likely continue to push GBP/EUR rates downwards.

So what's going wrong with the UK economy?

Data yesterday showed that the UK has run up a record budget deficit in the last few months, and slowing economic growth is posing a challenge to the government that want to slash borrowing. Also factory orders are down, consumers have turned very cautious and manufacturing and services sectors have both disappointed in recent months.

Analysts say that the downside risks to growth far outweigh the risk of rising inflation, and it's because of this that interest rates are unlikely to move any time soon. Today we will see the minutes to the recent Bank of England vote on interest rates, and it will be interesting to see how the 9 member committee voted.

Greek government wins vote of confidence

The euro weakened very slightly yesterday after the Greek government won a vote of confidence as expected, but further losses may be limited as the market's focus turns to the Federal Reserve and its comments on the slowing U.S. economy.

The Greek government now faces a more arduous task of passing an austerity plan in order to secure a new bailout from the European Union and IMF. This is next Tuesday, and we expect volatility for the Euro.

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Pound vs Euro lower as markets calmer on EU debt

Tuesday 21st June 2011
Good morning. Sterling has climbed against the US Dollar, but dropped against the Euro. Why? It's because a top EU policy maker has calmed fears about stability in the region, strengthening the Euro and weakening the US Dollar. We'll look at this in detail after the usual snapshot of rates as at 08:30am:

• GBP/EUR 1.1304


• GBP/USD 1.6231


• GBP/AUD 1.5339


• GBP/NZD 1.9929


• GBP/CAD 1.5847


• GBP/CHF 1.3677


• GBP/ZAR 10.950


• GBP/JPY 130.11


• GBP/DKK 8.4302


• GBP/NOK 8.9616


• EUR/USD 1.4357

EU debt fears calmed and Euro strengthens

Yesterday Eurogroup chairman Jean-Claude Junker made comments that have calmed the markets meaning countries such as Ireland and Portugal can re-enter the markets. The comments were made in a meeting where finance ministers are discussing the bailout funds for countries such as Greece.

So what have the analysts said may be the effect on GBP/EUR rates? "The market overreacted this morning to news of the euro zone finance ministers' meeting. There are some headlines coming out now on the ESM and reports of the European Financial Stability Fund expansion," said Jane Foley, senior currency strategist at Rabobank.

"On the assumption that we get further reasonable news from the finance ministers and assuming the euro remains reasonably well supported above last Thursday's close at €1.1370, we will be heading back towards €1.1100."

It's the weakness in the Euro that has caused higher GBP/EUR rates of late, and if there are more positive comments regards the Euro then the exchange rate is likely to drop further.

UK Data today could also push GBP/EUR lower

There are concerns over the health of the UK economy, after lots of poor economic data points to slowing growth. Today we have Public Sector borrowing figures which are widely expected to add to the gloom over the budget deficit.

Summary for those needing to buy Euros

It's really the fact that the Euro and Sterling are both very weak currencies at the moment, and it's a tug of war on which can perform worst. Recently it's been the Greek debt that has taken centre stage, but with markets now calmer and more poor UK data expected, we think that GBP/EUR will remain under pressure and head back towards €1.10.

If you need to buy Euros and are worried about the rates falling, click below to send us a free enquiry on our exchange rates, and the tools we have to make sure you don't lose out if rates fall, even if you don't need your currency for many months.

Pound vs Euro/Pound vs US Dollar weekly forecast

Monday 20th June 2011

• Poor UK data puts Sterling on back foot
• Greek debt weakens the Euro
• US Dollar strengthens on safe haven status
• Round up of the week’s data that may affect rates

(For currencies other then GBP, EUR and USD, contact us for a consultation)

Sterling vs. Euro;

Last week began with a bank holiday for Europe’s strongest economies France and Germany whilst Sterling hit its strongest levels in more than a week against the euro, helped by euro zone debt concerns. Sterling pared brief gains made against the euro on Tuesday after UK inflation data came in as forecast, giving investors little reason to believe the Bank of England will raise interest rates any time soon.

Wednesday saw mixed fortunes for Sterling. A fall after UK employment data showed the number of Britons claiming unemployment benefits rose sharply at their fastest pace in two years, then a rise as credit agency Moody’s said it would review the credit ratings of BNP Paribas, France's biggest bank, and its peers Societe Generale and Credit Agricole, focusing on their holdings of Greek public and private debt.

Greece continued to dominate headlines with violent protests, debt and bailout concerns and also received credit for causing a rift between France and Germany. Sterling was subdued on Thursday as a loss of risk appetite swept the financial markets however Friday saw the euro gain and recoup its losses after French President Nicolas Sarkozy said a “breakthrough” had been made on the Greek debt crisis, following a meeting with German Chancellor Angela Merkel.
The past week has seen Sterling's short term, upside prospects hurt by Bank of England Governor Mervyn King, who reiterated the case for ultra-low interest rates despite stubbornly high inflation. Sweeping cuts from the British government to try and put the UK finances on a firmer footing are also expected to dampen economic growth in coming months, lessening the need for monetary tightening and Sentiment towards sterling take a knock, as weak UK economic data added concern about a faltering UK economy.

Despite the doom and gloom, a ray of light could come from the Aid package for Greece which is dependent on the Greek parliament passing additional austerity measures. The past weeks volatility highlights the necessity of being prepared to act quickly and staying in close contact with your FCG account manager if you are exposed to the Foreign Exchange markets. If you have not done so already fill in this form to make a free enquiry now.

Sterling vs. US Dollar;

Another disappointing week for the UK saw Sterling dip down to a three week low against the Dollar last Thursday. The main pressure on the Pound is the ongoing expectation that base rates will not be hiked by the Bank of England until 2012.

This week’s data that reinforced this expectation was a downturn in UK retail sales which demonstrated an acute dip in British consumer confidence. Indeed the figures for May which showed a 1.4% decline struck a more than usually heavy blow as the pre data release rumours were for a slight upturn in retail sales. The ONS warned that UK spending trends have changed both year on year and month on month with even some of the usually heavy hitting major retailers of the UK high street suffering from lower sales.

Sterling appears particularly vulnerable to these changes and any further dips in confidence in the current socio-economic climate could see Sterling drop further against the Dollar. Indeed the back drop of the European sovereign debt crisis that is centred on Greece is triggering a pull out of riskier assets in favour of safe haven options. As we saw in the peak of the downturn the US dollar is always viewed as a global safe haven and may continue to hold its strength if no meaningful resolution is made in Europe.

It is not however one way traffic for Cable, as the graph above shows the currency climate is throwing up significant market volatility. There are still very real concerns about the US economic recovery, and of course whenever a short sharp dip is seen there is always a possibility of a quick correction: "With solid support around the $1.6000 area and the swiftness of the move from $1.6400 over the past two days the potential for a short squeeze remains quite high," CMC analysts said in a note.

In the back drop of such sharp movements it may well be a prudent move to discuss Limit Orders and Stop Losses with us, as they allow you set parameters that you choose in the market to potentially target the price you want to buy or sell at and allow you the protection of a guaranteed worst case scenario. To find out more about these tools contact us now.

Weekly Economic Data that may affect exchange rates

Monday 20th June 2011
UK House prices are released today, giving an indication on the health of the UK housing market. Also from the UK today is an inflation report. We also have EU investment flow figures, which could weigh on the Euro given the debt problems that are affecting some EU member states.

Tuesday 21st June 2011
Today we have the German ZEW index which is a measure of economic sentiment. Given Germany is by far the largest economy in the EU, this often has a big impact on GBP/EUR rates. From the UK we see Public sector borrowing figures and Industrial Orders. From the USA Existing Homes sales will give an indication on the health of the US housing market.

Wednesday 22nd June 2011
Today we will be privy to the Bank of England MPC minutes from their recent decision to hold interest rates. It shows how the 9 member committee voted and can affect Sterling if there are any surprises. Some consumer confidence measures from the Eurozone could affect the value of the single currency. Stateside we have a statement from the FED and a press conference shortly afterwards, both of which could affect GBP/USD rates.

Thursday 23rd June 2011
On to Thursday, and the main UK data is mortgage approvals and a BoE report on financial stability. Rom the Eurozone we have a raft of inflation figures that if high could support the case for a July interest rate hike, which could push GBP/EUR lower. Unemployment data is the main news from the States

Friday 24th June 2011
There is no UK data of note today. The main data are EU Retail sales and German confidence measures. Rom the US we have release regards GDP and durable goods orders.

If you need to buy or sell foreign currency, send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Poor Retail Sales hurts Sterling, but Greek debt supports GBP/EUR

17th June 2011
Good morning. Sterling fell slightly during trading yesterday, after Retail Sales figures were very disappointing indeed, and this weakened the Pound. It's very clear that the Bank of England will not be raising interest rates for some time, and this news pushes back the chances of a hike even further.

Interest Rates

Most analysts now expect the Bank of England to push up interest rates in June 2012. This is nearly a year away, and is likely to keep Sterling very weak indeed. As I've stated several times in the last few weeks, the EU are likely to raise their interest rates several times this year, and that's going to strengthen the Euro and make it more expensive to purchase.

So why hasn't the GBP/EUR rate fallen that much?

It's to do with the debt problems. On economic figures alone, it's clear that the UK economy is going to get worse before it gets better. However the debt problems with Greece have weakened the Euro slightly, so this is limiting the drop in the exchange rate. Be warned however that these debt issues won't hang around forever, and once resolved focus will revert to basic economic data, and that clearly shows that the UK is not recovering as fast as had been hoped.

The Euros problems continued yesterday when an ECB member said that the EU bailout should be doubled. This is helping to stop a significant drop in GBP/EUR rates.

Summary

With all the uncertainty surrounding the UK economy, its important to remember without the Greek debt problems, exchange rates would be significantly lower. With interest rates on the up in the EU soon with the UK unlikely to follow suit for at least a year, it's more likely that the exchange rate will resume it's downward trend before long.

Forward Contracts

If you need to buy Euros in the next 12 months, you can protect yourself against a downturn in the rate. With a Forward contract you can fix today's exchange rates for up to 2 years into the future. You only need to pay a 10% deposit now, with the remaining 90% not due until you need the currency.

In this way you can budget effectively for any purchase you need to make, safe in the knowledge of exactly what exchange rate you have regardless of which way rates move. It should be noted that once a rate is fixed, you can't then take advantage of any gains in the rate, but you will be protected against a downturn in rates.

Find out more about Forward contracts by clicking here.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exchange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Pound goes up vs Euro due to Greek debt

16th June 2011
Good morning. Sterling fell against all currencies except the Euro yesterday, after poor jobs data and slow wage growth added to the view interest rates are going nowhere in the near term. The Euro however weakened significantly on Greek debt concerns, pushing GBP/EUR rates through the €1.14 level. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1433


• GBP/USD 1.6157


• GBP/AUD 1.5326


• GBP/NZD 2.0103


• GBP/CAD 1.5854


• GBP/CHF 1.3757


• GBP/ZAR 11.042


• GBP/JPY 130.20


• GBP/HUF 305.72


• GBP/DKK 8.5248


• EUR/USD 1.4131

Weak jobs data hurts Sterling

Yesterday the office for national statistics (ONS) showed that more than double the amount of people claiming jobless benefit that forecasts had suggested. This shows that the UK recovery is still on very shaky ground, and as a result Sterling dropped against nearly all major currencies.

Sterling Euro rates rise

Against the Euro however GBP/EUR rates rose due to fears over Greek debt. It's to do with the EU banking system; Moody's the ratings agency said it was going to review the ratings of French banks, due to their holding of Greek debt. This weakened the Euro significantly, pushing exchange rates up despite the fact that the pound weakened yesterday.

Pound vs US Dollar

Inflation rose in the US last month, and this pushed market sentiment up strengthening the US Dollar. This compounded the weak pound and GBP/USD rates have fallen sharply into the $1.61's.

Today's data

The main data is UK retail sales, which if poor could hurt the Pound. We also have various inflation measures from the EU, so we think the gains in GBP/EUR will be short lived and could resume it's downward trend if EU inflation is high, supporting the view for an interest rate hike.

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Pound vs Euro will the rate go up?

15th June 2011
Good morning. UK inflation figures yesterday offered little reason to believe the Bank of England will raise interest rates any time soon, and as a result Sterling fell slightly and struggled vs other currencies. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1385


• GBP/USD 1.6351


• GBP/AUD 1.5286


• GBP/NZD 2.0066


• GBP/CAD 1.5814


• GBP/ZAR 11.074


• GBP/JPY 131.78


• GBP/DKK 8.4933


• GBP/NOK 8.8843


• EUR/USD 1.4355

UK Inflation / Interest Rates

Inflation rose to 4.5% yesterday, in line with analysts expectations. Despite this being well above the governments target of 2%, it's unlikely the Bank of England will raise interest rates to combat this due to the effect it would have on the economic recovery.

The BoE has repeatedly warned that inflation could get as high as 5% before retreating, and the fact interest rates will stay low despite this is keeping the Pound weak.

With other central banks such as the EU expected to raise interest rates several times this year, the differential is likely to keep GBP/EUR rates low.

Sterling has risen slightly this morning however, as investors look to buy Sterling before the Retail Sales figures today. Also the EU finance meeting is casting doubt on the ability of Greece to repay it's debts, and this has weakened the Euro slightly.

What do the analysts say?

"I wouldn't want to buy sterling after the data," said Chris Walker, currency strategist at UBS. It doesn't change expectations that rates will stay low for the next six months, at least."

Other analysts said stubborn inflation was harmful to the broader economy, which has suffered as the UK grapples with strict fiscal austerity measures, and many see downward risks to the pound.

"High UK inflation remains a risk to growth, both via a squeeze on real consumers incomes and by limiting the BoE's ability to ease policy further in response to the fiscal drag from spending cuts in the next year," BBH analysts said.

Summary

Quite simply, it's expected Sterling will remain weak against other currencies for some time to come. Today we have some jobs data from the UK that could hurt the Pound even more, and Retail Sales figures tomorrow will also be closely watched.

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Sterling at 1 week high vs Euro

14th June 2011
Good morning. The pound has risen to a 1 week high vs the Euro. This is due to Greece having it's credit rating downgraded, causing concerns again over EU debt which has weakened the Euro slightly. There are also inflation figures for the UK today which are expected to be high, increasing the chance of a UK interest rate hike and strengthening Sterling. At 08:30am this morning rates stand as follows:

• GBP/EUR 1.1360


• GBP/USD 1.6423


• GBP/AUD 1.5444


• GBP/NZD 2.0074


• GBP/CAD 1.5999


• GBP/CHF 1.3732


• GBP/ZAR 11.066


• GBP/JPY 131.90


• GBP/HUF 300.31


• GBP/DKK 8.4725


• EUR/USD 1.4452

Greek debt worries weaken the Euro

EU policy makers are thrashing out an agreement on whether private investors should take part in the restructuring of Greek debt. This ongoing debt worries in the EU have weakened the Euro very slightly, pushing GBP/EUR to a 1 week high. The ongoing EU finance summit is discussing this and other issues that could affect the value of the Euro.

UK Inflation data today

Concerns about the UK economy have weakened the pound lately, with both Moody's and the IMF warning over UK growth. Today at 09:30 am we have some inflation data in the shape of the Consumer Price Index. It's forecast to be 4.5% for May, however anything above this would probably boost the Pound. Any gains however are unlikely to be sustained, as it's not likely the Bank of England will respond by raising interest rate, on fears that it could stall the fragile recovery.

The Pound could also take a knock later this week, as we have Jobs data tomorrow and Retail Sales on Thursday, all of which could lend to the view the recovery in the UK is stalling, which could weaken Sterling.

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Pound vs Euro Forecast/Outlook Predictions for 2011

13th June 2011
Good morning. As usual for a Monday, we're going to take a detailed look at Sterling vs Euro exchange rates, the movements over the last week, and where GBP/EUR rates may head for the remainder of 2011. This outlook forecast can help you make the decision on when to buy your Euros and help you achieve the best exchange rates for Euros.

Sterling vs. Euro;

Last week was a volatile one for the Sterling/Euro cross, hitting a 1 month low before making a muted recovery later in the week. In just the last 10 days alone rates have fluctuated from highs of €1.1550 to lows in the €1.11’s. This represents a difference of more than £6000 on a €200,000 currency purchase, clearly illustrating just how volatile the currency markets can be:













Last week started with a warning from the International Monetary Fund (IMF) on UK growth. The IMF's annual economic assessment said the UK economic recovery was broadly on track but more quantitative easing may be required if growth continues to be weak. This was the first blow to the Pound and the catalyst for a downward trend in the GBP/EUR rate.

Following the IMF’s warning on growth, a media report had quoted a Moody's analyst saying the UK was at risk of losing its AAA credit rating. This caused Sterling to fall significantly against other currencies as the markets took note of the warning. It was not an official announcement however, and as markets realised this the losses were short lived, however Moody’s did then state that despite the fact the outlook for UK growth remains stable for now, any weaker growth in the economy could lead to a reassessment.

Interest Rates

Following this double whammy of criticism of the UK economy, we had the interest rate decisions for both the UK and EU. As expected, the UK left the interest rate on hold at a record low of 0.5% for 27th consecutive month, with most analysts not expecting any change until well into 2012. Interest rates affect exchange rates because higher rates represent a higher return for investors, and as such attract investment in a currency causing it strength. So as a general rule of thumb, when interest rates are low a currency remains weak, and when interest rates are expected to rise, it can cause strength.

The European Central Bank (ECB) also left interest rates on hold as expected, however in a press conference afterwards the ECB president Jean Claude Trichet used the phrase ‘Strong Vigilance’ which historically is his way of saying “interest rates are likely to go up in the next meeting”.

So, markets now expect an EU rate hike in July, with at least one more hike on the cards later in the year. Further rate hikes in the EU after July however may not come as soon as some analysts had been expecting, and this paring back of future rate hike expectations caused the muted recovery in GBP/EUR rates.

Will GBP/EUR go up or down in 2011?

In summary, there is not much to suggest Sterling will strengthen against the single currency. Indeed with future interest rate hike on the cards in the EU, most market participants expect the Euro to continue to gather strength against Sterling in the coming months, potentially pushing GBP/EUR rates lower. So, if you need to buy Euros through the remainder of the year, contact us today to discuss the options we have available to protect you against adverse movements.

Likewise if you need to sell Euros back to Sterling, it’s impossible to gauge how much the expected EU rate hikes are already priced into the market, so you may wish to consider taking advantage of rates that are currently very close to the best in 12 months.

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Weekly Economic Data that may affect exchange rates

Below I have listed the main data released for the week ahead.

Monday
The only UK data of note is the RICS house price data released at midnight tonight. This presents the housing costs in the UK housing market and is considered a measure of the economy as a whole. There is little data of note from the EU as markets are closed for Whit Monday. Australian markets are also closed for the Queen’s birthday.

Tuesday
From the UK today we have Nationwide Consumer confidence, which is a barometer of how consumers feel the economy is performing. There are also UK releases for House Prices in addition to various inflationary measures in the shape of the Consumer Price Index. From the US we have Retail Sales and inflation data. There is no data of note from the Eurozone.

Wednesday
The EU today starts the ECOFIN meeting, where Finance ministers of the 27 member states discuss the economy. Given the turmoil in the markets at the moment any decisions could affect exchange rates. There are also industrial production figures from the EU today. From the UK we have unemployment data. Stateside we will see Industrial production and various inflationary measures.

Thursday
Today we have Retail Sales from the UK, and Jobless data from the USA. There is also an interest rate decision from Switzerland.

Friday
A very quiet day with only Trade Balance figures from the EU. Other than that there is a minor consumer sentiment measure from the USA.

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Effect of Interest Rates on Exchange Rates

10th June 2011
Good morning. Both the UK and EU left interest rates on hold yesterday as expected, but the EU signalled rates would rise in July. We'll take a detailed look in a moment on how this may affect exchange rates in the coming months. First, the usual snapshot of rates as at 08:30am:

• GBP/EUR 1.1260


• GBP/USD 1.6271


• GBP/AUD 1.5354


• GBP/NZD 1.9742


• GBP/CAD 1.5876


• GBP/CHF 1.3711


• GBP/ZAR 10.997


• GBP/JPY 130.20


• GBP/DKK 8.3965


• GBP/NOK 8.8654


• EUR/USD 1.4448

UK Interest Rates

The Bank of England yesterday left interest rates on hold for the 27th month in a row. This is due to stagnant growth. Most analysts now don't expect interest rates to go up until well into 2012, and as such Sterling is likely to remain weak.

Higher interest rates strengthen a currency due to the higher return attracting investors to the currency. As rates are at a record low and likely to remain so for quite some time, Sterling will remain weak.

EU Interest Rates

The ECB also left interest rates on hold, however in the press conference afterwards they indicated rates would go up in July. This was also expected, and as investors booked profits on the Euro it caused GBP/EUR rates to rise slightly.

It was also signalled that further rate rises would come in the EU, but perhaps not as fast as some analysts were expecting. This paring back of future rate hike expectations also helped slightly to push GBP/EUR higher.

So what does this mean for exchange rates?

As outlined above, higher rates in the Eurozone will attract investors to the single currency. This is likely to cause strength in the coming months and make the Euro more expensive to purchase. So we expect GBP/EUR could drop in the coming months as we get closer to a rate hike in the EU.

Today's Data

An incredibly busy day for UK data. We have: Industrial Production, Producer Price Index, Manufacturing Production and Industrial Production. All of these are released at 09:30am, and will give a very good overview of economic health. Depending on the results, we could see big swings in exchange rates today.

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Sterling recovers against Euro/Interest Rates today

9th June 2011
Good morning. Yesterday Sterling fell on rumours that Moody's would downgrade the UK's credit rating. However these comments have now been downplayed and Sterling has recovered slightly. Today we have interest rate decisions for the UK and EU. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1234


• GBP/USD 1.6444


• GBP/AUD 1.5506


• GBP/NZD 2.0010


• GBP/CAD 1.6083


• GBP/CHF 1.3762


• GBP/ZAR 10.980


• GBP/JPY 131.76


• GBP/DKK 8.3773


• GBP/NOK 8.8377


• EUR/USD 1.4634

Moody's Comments downplayed

Yesterday a media report had quoted a Moody's analyst saying the UK was at risk of losing its good credit rating. This caused Sterling to fall significantly against other currencies. However as it was not an official announcement, as I said in yesterdays post, the losses were short lived.

They have said that the outlook for the UK remains stable, however did also say that weaker growth in the UK could lead to a reassessment.

Interest Rate decisions today

Both the UK and EU announce their interest rate decisions at 12:00pm and 12:45pm respectively. We don't expect any change from either central bank.

However, the ECB will hold a press conference after the decision, and it's expected that this will be quite hawkish. We do expect the ECB to raise rates next month, and if the comments in the press conference support this, then the Euro could strengthen and GBP/EUR rates could fall.

If you need to buy Euros, you may wish to consider fixing a rate before this, as there is a good chance rates could drop for the reasons above.

Make a free enquiry with us now to find out more.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.

Pound falls again vs Euro on Moodys downgrade warning

8th June 2011
Good morning. Sterling has continued to fall vs the Euro on UK data that shows growth is very slow, adding to the view that softness in the economy will keep UK interest rates on hold for the foreseeable future. Also this morning Moody's has warned the UK risks having its credit rating downgraded, pushing the Pound lower. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1146


• GBP/USD 1.6369


• GBP/AUD 1.5345


• GBP/NZD 2.0043


• GBP/CAD 1.6001


• GBP/CHF 1.3676


• GBP/ZAR 10.989


• GBP/JPY 130.76


• GBP/DKK 8.3103


• GBP/NOK 8.7555


• EUR/USD 1.4680

Moody's warns on UK Credit Rating

Sterling has fallen to a new one month low versus the euro and slid to a session low against the dollar this morning, on a media report of a Moody's warning that the UK could lose its AAA rating. The report quoted the rating agency as saying the UK could lose its top-notch rating if growth remained weak and the government failed to meet its fiscal consolidation targets.

It should be noted however that this was simply mentioned in a media interview, and is not an official release by Moodys. The markets however will still take note and this is why the Pound has fallen against the Euro today.

This is in addition to the IMF earlier in the week warning on UK growth. The news, combined with poor UK data and the fact interest rates are likely to remain on hold for the foreseeable future, has pushed Sterling lower against most currencies.

Today's Data

Germany releases a raft of data today including Gross Domestic Product, Trade Balance figures and Industrial Production. There are also GDP figures released for the EU as a whole. These GDP releases are quite important, and if good they will support the case for an interest rate hike in the EU and push GBP/EUR rates down. There is also an interest rate decision from New Zealand today.

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IMF assesment pushes GBP/EUR to 1 month low

7th June 2011
Good morning. Sterling fell again vs the Euro yesterday, hitting a new 1 month low. It was due to the IMF giving a muted reaction to UK growth, stating further Quantitative Easing may be required. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1202


• GBP/USD 1.6400


• GBP/AUD 1.5330


• GBP/NZD 2.0014


• GBP/CAD 1.6013


• GBP/ZAR 11.058


• GBP/JPY 131.58


• GBP/CHF 1.3676


• GBP/NOK 8.7774


• GBP/DKK 8.3526


• EUR/USD 1.4634

IMF annual assessment weakens Sterling

The IMF's annual economic assessment said the UK economic recovery was broadly on track but more quantitative easing may be required if growth continues to be weak.

The news weakened Sterling and pushed exchange rates lower. This combined with expectations the European Central Bank will flag an interest rate hike at its meeting on Thursday, helped the euro shrug off lingering worries over Greek debt and caused Strength in the single currency.

The combined effect was the GBP/EUR rate dropping into the €1.11's which is now the lowest in over a month, and not far from a 1 year low.

Interest Rates

This week both the UK and EU announce interest rate changes. It's expected both zones will leave rates on hold, however it's expected the EU will raise rates at least twice this year, while the UK is not expected to raise rates until 2012. This is the reason that GBP/EUR rates are low.

Today's Data

There is no data of note from the EU or UK today. Australia had an interest rate decision where rates were left on hold, and there are some inflation figures from Switzerland. Other than that, measures of economic optimism are released from the USA.

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GBP/EUR & GBP/USD Forecast Outlook June 2011

Good morning. As usual for a Monday, we'll take a detailed look at the past week and future weeks prospects for Sterling exchange rates. In this week’s Report:



• Pound falls to 4 week low vs. Euro

• US Jobs Data affects GBP/USD rates

• EU and UK Interest Rate Decisions this week

• Round up of the week’s data that may affect rates



(For currencies other then GBP, EUR and USD, contact us for a consultation)



Sterling vs. Euro;





Sterling slipped to a four-week low against a broadly supported Euro on Friday, and the UK currency risked more selling as UK services sector PMI rounded off a week of largely dismal data for the UK economy, which has hurt Sterling by bolstering the view that a sluggish recovery will keep UK interest rates low for months to come. The Euro ended the week nearly 2 percent higher versus Sterling, its best weekly performance since October, as the single currency has clawed back from losses in May, when it was sold on rising concerns about Greece's debt problems.









The Pound continues to come under pressure against the Euro which has discovered some strength after some seemingly positive news over the perceived change of stance by Germany over Greek debt restructuring. We saw the Pound tumble earlier last week on a below estimate Purchasing Managers Index figure and weak data pushing the prospect of any Bank of England rate rise further into the future.



This in turn is damaging the Pound, especially against the Euro with a hawkish central bank. We can expect no change to rates or the asset purchase scheme at next weeks MPC meeting and it is likely that we will see more criticism of the Bank of England as they continue to miss their two percent inflation target.



Successful Spanish bond auctions and the news over Greek restructuring lifted the Euro over the last couple of days at the end of last week. Given the fact that Eurozone inflation came in under market estimates, the ECB rate decision and press conference due this week is less important than previous months.



That said, the hawkish tone will probably continue in an effort to force inflation expectations to continue to fall. Eurozone GDP and retail sales are also due, the market expects solid, if not very good figures and therefore the risk remains to the downside if the numbers are below consensus.

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Weekly Economic Data that may affect exchange rates



Below we list the main data released for the week ahead. For a free consultation on how they could affect the cost of your currency requirement, open an account with us today. This is free to do, doesn’t obligate you in any way, and simply gives you access to our market knowledge and commercial exchange rates.



Monday

The only UK data of note is the BRC Retail Sales Monitor. As this measures how the high street is performing, it’s a good barometer of overall consumer confidence, and so can impact Sterling. We also have some investor confidence data from the Eurozone today.



Tuesday

There is no data of note from the EU or UK today. Australia has an interest rate decision, and there are some inflation figures from Switzerland. Other than that, measures of economic optimism are released from the USA.



Wednesday

Germany releases a raft of data today including Gross Domestic Product, Trade Balance figures and Industrial Production. There are also GDP figures released for the EU as a whole. These GDP releases are quite important, and if good they will support the case for an interest rate hike in the EU and push GBP/EUR rates down. There is also an interest rate decision from New Zealand today.



Thursday

After Australia and New Zealand announcing interest rates, today is the turn of the UK and EU. This has been the main driver for exchange rates over the last 3 months, and today’s decisions are some of the most important of the month. We expect no UK change, and the EU to push rates up in July. They could of course raise them today which could cause GBP/EUR to plummet. We also have UK Trade Balance figures today.



Friday

An incredibly busy day for UK data. We have: Industrial Production, Producer Price Index, Manufacturing Production and Industrial Production. All of these are released at 09:30am, and will give a very good overview of economic health. Depending on the results, we could see big swings in exchange rates today. Contact FCG prior to these releases to find out how you can protect against possible adverse exchange rate movements.





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