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.

GBP/EUR & GBP/USD Forecast, (Weekly outlook)

In this week’s Report:

• Better UK data overshadowed by growth worries
• Inflation up, but GBP gains limited
• Interest rates continue to drive exchange rates
• 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;

Despite an interesting week for data in the UK, Sterling’s upside pressure against the Euro remains stunted over concerns for the long term growth of the economy. The pound started the week down against the Euro after the previous week’s growth figures had indicated that the UK interest rates would lag behind the Eurozone despite continued problems with the debt crisis in Greece and the bailout:










Tuesday saw the release of the UK Consumer Price Inflation figures for April where the year on year reading was up at 4.5% for 4% previously and significantly higher than the 4.2% that was expected. The movement was largely due to the rise in food prices and alcohol and tobacco duties, however, despite the figures the GBP/EUR cross only moved 30 pips which were quickly lost.

Furthermore, Mervin King’s letter to the treasury stated that an attempt to bring inflation back to target of 2% too quickly would harm the economy and would in fact risk undershooting the target. His comments highlight the Bank of England’s difficulties of having to balance rising price pressures with an economy recovering at a terribly slow pace.

Midweek Sterling slipped 0.6% against the single currency following an unexpected rise in the number of people claiming unemployment benefit and the minutes of the previous Bank of England meeting. The BoE showed a 6 -3 split to keep rates on hold with two of the ‘hawks’ , Martin Weale and Spencer Dale commenting their decision was ‘finely balanced’. The third ‘hawk’ Andrew Sentance cast his final vote before his departure from the committee and will be replaced by Ben Broadbent in June. Broadbent has already commented that he does not share Sentance’s hawkish outlook and this is likely to be reflected by a more dovish committee and a series of 7 – 2 splits in the coming months.

Sterling’s performance continued to be somewhat subdued on Thursday after positive results from UK retail sales for the month of April. Sales rose by 1.1% up from expected 0.8% with the reasons being cited as extra holidays with the Royal wedding as well as record high temperatures. Sterling gains made immediately after the results were soon lost again after it was broadly interpreted that these retail figures would be unsustainable month on month and compounded by the fact that they have no impact on the outlook for UK interest rates.

Sterling ended the week largely unchanged and with its performance capped somewhat because of the outlook for UK interest rate changes. Despite the continuing pressure on the Eurozone’s stance toward the Greek bailout, it is widely expected that the ECB will raise rate twice before the BoE does, which continues to be an underlying reason for Sterling’s weak performance and why exchange rate changes between the GBP/EUR cross are largely driven by Euro data rather than Sterling data.

Sterling vs. US Dollar;
Last week was a quieter week than many of the recent weeks for cable, with neither currency able to continue gains it had made over the other in the last 2 months, for example when the cross approached the 1.70’s in the first week of May and yet had been in the 1.50’s as recently as March.










On the whole, since that spike in early May, Sterling has come under fairly consistent pressure in this cross, as a general consensus remains that the Bank of England will maintain interest rates at record lows in the short and medium terms, to maintain an environment that in the very least is not inhibitive of economic growth. This consensus exists in spite of an increased inflationary pressure in the UK; Tuesday’s figures showed that annual core inflation (CPI) figure had spike to 4.5%, up from 4% last month and now at the highest point since October 2008. Indeed you can see below the current and historic CPI and RPI levels in this handy chart:
















There was some volatility mid week as the Bank of England minutes on Wednesday drove the cross to 6 week low as the minute’s supported the consensus mentioned above. It was a small shock therefore when Thursdays retail sales figure release was better than expected as you heard about in today’s Euro report, bringing cable back into the $1.62’s where the Interbank buffeted for a high proportion of last week.

The future of the cross is still very uncertain, with the short term difficult to foresee. Many banks and brokers still feel the long term future will see higher exchange rates, mainly based on the belief that as the tentative global recovery gathers pace, the exit from risk aversion will see the Dollar retract as investors flee the global safe haven in the search for higher yield.

Indeed although the B of E is dovish at present and unlikely to raise rates in the coming months, most believe they will raise rates before the Fed. So long term it seems fair to say that UK buyers of the dollar have better times ahead, but that when these times appear is hard to call. Indeed it would be remiss to say things are rosy as any scares in the world economy can as we have seen very recently push global investments into the Dollar and retest the lows on cable.

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
Today we have much data from the EU that could affect GBP/EUR rates. Firstly from Germany we have inflation data which could give indications of interest rate movements in the EU. Secondly we have Industrial orders and EU wide inflation figures also; expect EUR volatility today.

Tuesday
Staying in the EU, today we have German Business Climate and confidence measures. From the UK we see a release regarding Public Sector borrowing. This measures the financial deficit in UK national accounts. It negative, this should be positive for Sterling and vice versa. There are Home Sales data figures from the USA today.

Wednesday
Today the UK releases GDP data. This is considered a broad measure of UK economic activity and often has a big impact on Sterling exchange rates. It shows it the economy is growing and is a significant release. Also today we see German consumer confidence.

Thursday
A quiet day for EU and UK data. Main releases are from the USA – Gross Domestic Product & Jobless Claims. The USD has been quite weak of late, with some analysts expecting better data. If so, expect GBP/USD rates to drop away.
Friday
We end the week with further inflation data from Germany, which will give indications of possible interest rate movements within the EU. From the USA we have Consumer Sentiment, Personal Income & Expenditure, in addition to some Home Sales data.

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Pound vs Euro & Pound vs US Dollar

6th December 2010

Where to for Sterling / Euro pair?

Last week started relatively unspectacularly as the focus remained on the debt crisis in the Euro-Zone with particular attention on Ireland and Portugal and the stance that the ECB would take.

We saw Sterling exchange rates gain momentum against the Euro in trading on Tuesday and Wednesday seeing highs on both days and flirting with 1.1985 on Weds, a price not seen since the late Sept and the then Euro sell-off and subsequent decline. Sterling gained support from defensive inflows as investors saw Sterling as a safer option on the back of positive news from independent analysis of the UK budget deficit and good PMI figure in construction on Wednesday albeit UK economic calendar being notably light.

Sterling strength evaporated on Thursday in a choppy trading session as the focus shifted to the imminent ECB decision, the fact that the Euro had not been oversold and doubts remained over the UK recovery on the back of Nationwide showing a slowdown and subdued housing market which weigh on prices. Furthermore, consumer confidence is relatively week and private sector debt high. This accompanied with tax rises from 2011 and concerns over debt in the banking sector is adding to market uncertainty.

Friday’s session started with the Euro looking bullish due in a range-bound early session propped up by the news that the ECB kept their main refinancing rate at 1% and that any exit rates should be put on hold for the short-term. Euro buying was put down to ECB demand which gave strength to the opinion that due to the overarching political pressure the ECB would offer unlimited liquidity to respective central banks.

Exchange Rate Forecast: We think that further defensive buying of Sterling may occur as fears abound that European Central banks may become addicted to the generous ECB offered liquidity. It is believed that the ECB stance has already been factored in to prices in which case it may be the time to bring those Euros home.

Sterling to US Dollar rates fall from 10 month high. Dollar exchange rate forecast:-

This time last month, we saw Ben Bernanke introduce the second round of QE for the US, which as expected saw the dollar lose strength and relight fear that the world currency may be losing its ‘safe haven’ status, with investors pulling funds to speculate in riskier currencies, leading to drops in dollar exchange rates.

‘Cable’ reached heights of just below 1.63, a level untouched since the beginning of 2010, and November remained a bleak outlook for the ‘Greenback’. What more could the FED have asked for to happen to Europe than an Irish bailout, with fear that Portugal and then an economy larger than Greece, Ireland and Portugal put together, i.e. Spain, raise questions about the possibility of following suit. How about rumours that Germany might pull from the euro altogether and return to the Deutsche Mark? A fear that may not be as ridiculous as first thought.

Historically, a weakened euro has lead to a strengthened dollar, and it would seem history has indeed repeated itself, evident by a drop in GBP/USD to as low as 1.54. This, along with better than expected midweek data releases, in the form of Non-Farm Employment Change, for the US, may have been the reason why each individual pound bought you less dollars. However, as the week progressed, poorer US data figures, such as Unemployment Claims, meant £100,000 bought you almost $1000 dollars more than the day before.

Due to less important data releases occurring at the beginning of this week, we could see the end of the week affecting the markets in a more volatile fashion. Data of note, will be Thursday’s BoE decision on UK interest rates, which if forecasts are correct, 0.5% may be ‘hitting the nail on the head’, so to speak, not to mention nearly two years without change.

So in summary, rates have fallen from a 10 month high due to the US Dollar gaining strength in the wake of the EU’s problems. We’re still trading well above $1.50 however, so if you wish to take advantage of the rate and protect yourself against further market losses, contact us today to discuss the options available.

Weekly Economic Data that may affect exchange rates

This week we have interest rate decisions for Canada, Australia, New Zealand and the UK. While rates for all zones will probably remain on hold, the accompanying comments can often cause significant changes in rates. In addition, there are various inflation measures for the EU and UK which can also affect the chances of future rate movements, and so we expect some volatility for GBP/EUR rates.

We list the main data below, but of course the effect this will have on your requirement depends on the currency you need to buy or sell, the volume you need to convert, and the timescales you’re working to.

Discuss these aspects with an expert FX trader at FCG and find out about the various options you have available. In this way you are armed with the knowledge to enable you to make an informed decision on when to fix your rate.

Monday
From the UK Halifax House Prices is the only data of note. If the monthly gain in prices is less than 0.3% then the pound could weaken. From the Eurozone we have some confidence measures which will be interesting to see after the markets were calmed regards the EU bailout for Ireland.

Tuesday
Things get busier in terms of data releases as we see a GDP estimate for the UK. The figure estimates UK growth, and as such can often have a big impact on Sterling exchange rates. Also for the UK we see Retail Sales, Industrial Production and Manufacturing Production. So, lots that will give clues on the UK economy; expect Sterling volatility.
We also have some interest rate decisions for Australia and Canada; we expect no change.

Wednesday
Following Tuesday’s interest rate decisions today is the turn of New Zealand. From the UK Shop Prices and a measure of Consumer Confidence from the Nationwide are the releases to watch for. For the Euro, we could see movement as Germany, the largest economy in the EU, releases Industrial Production and Trade Balance figures.

Thursday
There is an Interest Rate decision for the UK today in addition to Trade Balance figures. Nobody expects the rate to change from 0.5%, but there is an outside chance further Quantitative Easing (QE) could be announced. It’s not likely, but if it does happen expect Sterling to fall sharply.
From the EU we have a monthly report that contains an analysis of the current climate.
From the US various measures of employment could affect GBP/USD rates.

Friday
We end the week with various inflation measures from the UK. If inflation is higher than expected, it usually pushes Sterling higher. This is because higher inflation normally indicates a potential hike in the interest rate. The increased return for investors spurs demand and strengthens the currency. Of course, lower than expect figures could have the opposite effect.

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what's happening in the currency markets.

Best exchange rates for US Dollar & Euro

9th November 2010
Good morning. Sterling rose to a 5 week high against the Euro yesterday worries about euro zone debt dented the single currency. Sterling lost some ground against the dollar which was lifted on short covering. We have lots of UK data today that could change things, which we'll cover below in a moment. First, rates at 08:30am this morning are as follows:

• GBP/EUR 1.1630
• GBP/USD 1.6094
• GBP/AUD 1.5950
• GBP/NZD 2.0538
• GBP/CAD 1.6201
• GBP/CHF 1.5511
• GBP/ZAR 11.035
• GBP/JPY 130.04
• GBP/HUF 320.03
• GBP/NOK 9.4094
• EUR/USD 1.3838

Sterling vs Euro at 5 week high

Worries about Irish debt have weakened the Euro making it cheaper to purchase. Coupled with the better UK data of late, and the result is the best exchange rates to buy Euros in 5 weeks.

Markets now look ahead to Wednesday's inflation report from the Bank of England. It will include the BoE's latest growth and inflation forecasts. A news conference with Governor Mervyn King will be watched for clues as to how seriously the monetary policy committee considered more quantitative easing last week, following the U.S. Federal Reserve's decision to inject $600 billion in extra stimulus into the U.S. economy.

Given that the BoE want to weaken the pound to boost exports, as our Dealing director discussed with an MPC member recently on CNBC, then it could be this run of strength for the pound may be short lived.

Rates have risen 5 points in just a few weeks, and so if you need to buy Euros, consider either a Forward contract to lock in rates now, or alternatively consider a Stop Loss order. this is where you can place an order to buy should rates fall below a pre-agreed level. in this way, you can still aim for a higher rate while having a safety net should rates drop.

We have lots of data today that could bring an end to the run of strength in the pound. See below for more details.

Pound vs US Dollar

Last week we hit a 9 month high vs the US Dollar, with rates climbing above $1.60. Better non-farm payrolls data on Friday however strengthened the dollar and pegged rates back slightly. Again given the host of data we have today and tomorrow, Sterling movements may be the main driver in GBP/USD rates in the coming days.

Today's Data

We have a busy day today. For the UK, we have GDP estimate, House Price Data, Industrial & Manufacturing Production and Trade Balance data. With so much being released, we expect a volatile day for the pound. If the releases come in above forecast, expect the pound to gain. If figures are worse than expected however, expect big falls for the pound.

Below we list the UK data that is released at 09:30am, and the forecast figure. Numbers below these forecast will probably result in rates falling. If rates come in above however, we could see rates gain. The GDP estimate will also be released today.

• 09:30 UK Industrial Production (MoM) (Sep) 0.4%
• 09:30 UK Industrial Production (YoY) (Sep) 3.6%
• 09:30 UK Manufacturing Production (MoM) (Sep) 0.2%
• 09:30 UK Manufacturing Production (YoY) (Sep) 4.9%
• 09:30 UK Total Trade Balance (Sep) -£4.500

If you are looking for the best exchange rates, click the link below to send us an enquiry, and have a free consultation on what's happening in the currency markets.