Sterling & Euro strengthen on aid package, GBP/EUR down

Friday 22nd July 2011
Good morning. The conclusion from the EU summit yesterday has raised confidence they would solve their debt problems, and both Sterling and the Euro are higher as a result. Sterling has hit a 5 week high vs the US Dollar, but has fallen against the stronger Euro. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1301
• GBP/USD 1.6307
• GBP/AUD 1.5044
• GBP/NZD 1.8897
• GBP/CAD 1.5397
• GBP/ZAR 10.997
• GBP/JPY 128.27
• GBP/DKK 8.4211
• GBP/NOK 8.7812
• EUR/USD 1.4425

Eurozone Aid Package Agreed - Euro strengthens

Details of how Greece will restructure its massive debts have emerged as eurozone leaders agree a package they hope will help resolve the debt crisis. The share prices of banks seen as most exposed to distressed eurozone government debts rose by more than 5%, led by Barclays, which ended the day 7.8% higher. The news also strengthened both the Euro and the Pound, as investors are calmer about investing in riskier currencies.

Meanwhile, the euro stayed near a 2 week high against the dollar, reached as news of the agreement broke. The latest Greek bail-out by the 17 eurozone governments and the International Monetary Fund is part of a comprehensive package to shore up the single currency unveiled on Thursday. Eurozone leaders hailed the comprehensive agreement.

So what next for GBP/EUR exchange rates?

The Euro has pushed higher, knocking GBP/EUR rates down accordingly. Sterling has also strengthened on the news due to the UK's exposure to Greek debt, but despite the Pound gaining the Euro has become much stronger, and the net result is lower exchange rates to buy Euros.

With the uncertainty over the Eurozone now over, markets will likely focus on fundamental data, and given the UK economy is in a poor state at the moment, we expect further falls for Sterling. It has only been the debt crisis keeping GBP/EUR rates high, and now this is resolved we could see further drops for the currency pair.

Today's Data

From the Eurozone today we see Industrial orders, showing the health of this sector. We also have confidence measures from Germany, the largest economy in the EU. In Canada we have retail sales and inflation data.

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Sterling hits 15 month low vs Euro

Friday 1st July 2011
Good morning. Sterling fell to a 15 month low yesterday against both the Euro and a basket of currencies, on month and quarter end selling. The Euro also gained strength after the ECB reiterated their view EU interest rates will rise next week. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1067


• GBP/USD 1.6069


• GBP/AUD 1.4991


• GBP/NZD 1.9429


• GBP/CAD 1.5475


• GBP/CHF 1.3584


• GBP/ZAR 10.866


• GBP/JPY 129.68


• GBP/DKK 8.2540


• GBP/NOK 8.6512


• EUR/USD 1.4516

Pound falls to 15 month low vs Euro

Yesterday the European Central Bank president reiterated his hawkish comments that mean it's very likely EU interest rates will go up next Thursday. This pushed the GBP/EUR rate lower, and it hit a 15 month low due to the fact the Euro is stronger than Sterling.

The second round of votes in Greece on austerity measures also went through, calming the markets and giving more reasons for the Euro to gain strength. We also saw German unemployment figures, showing the lowest unemployment since reunification, and this also lent to Euro strength, pushing GBP/EUR rates lower.

In contrast, UK economic data is very poor and it's likely our interest rates wont move for around a year. Analysts say a rather gloomy outlook for the UK economy would keep the pound subdued against the euro and growth-linked currencies like the Australian dollar .

Latest data showed British consumer confidence fell in June, a private sector index showed on Thursday, while UK house prices were flat, just adding to the view that the Pound is a very weak currency at the moment.

Today's Data

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.

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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.

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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.

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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.

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.

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.