Pound vs Euro Forecast predictions July 2011

Wednesday 13th July 2011
Good morning. Sterling lost ground against all currencies yesterday, as inflation figures were much lower than expected, as were retail sales and trade balance figures. This shows the Pound is incredibly weak at the moment, despite the problems in the Eurozone. We'll look at this in a moment after the usual rate snapshot as at 08:30am:

• GBP/EUR 1.1360
• GBP/USD 1.5975
• GBP/AUD 1.4954
• GBP/NZD 1.9328
• GBP/CAD 1.5352
• GBP/ZAR 10.888
• GBP/JPY 126.72
• GBP/DKK 8.4705
• GBP/NOK 8.8642
• EUR/USD 1.4058

Sterling weakens on poor economic data

Inflation figures, Retail Sales, Trade Balance figures, Consumer Prices and House Prices - these are the data releases we had yesterday, and all of them were much worse than expected. This pushed Sterling lower against other currencies, and the spike vs the Euro was also short lived, with GBP/EUR losing over a point during trading yesterday.

The data goes to show that the UK economy is very fragile, and interest rates are unlikely to rise for at least a year, which will keep Sterling weak and limit any gains in exchange rates. Analysts said sterling would be pulled around by moves in the euro against the dollar and developments in the euro zone debt crisis.

So with all the problems in the EU, why aren't GBP/EUR rates higher?

There are significant problems in the Eurozone, with Italy and Spain having similar problems to Greece and Ireland. The debt crisis has weakened the Euro significantly. Many have been asking why this hasn't resulted in much higher GBP/EUR rates.

Firstly it's important to note that the Euro is at it's lowest vs the Swiss Franc and US Dollar in many years, however against Sterling it remains fairly strong. This is partly due to the fact interest rates are higher in the Eurozone, but also because the UK is a close trading partner, and of course part of the European Union, meaning we have also been involved in bailing out troubled countries.

Sterling is a risky currency, and so when there are times of economic uncertainty as there are now, investors move to safe haven currencies such as the US Dollar and Swiss Franc. This compounds Sterling's problems, and this is why rates remain low despite all the issues in the Eurozone.

So what should you do if you need to buy or sell Euros?

Will Pound EUro rates go up in July? Will GBP/EUR rates go down? The last few weeks have illustrated the swings we can see, with rates between €1.10 and €1.14 in the last week alone. The currencies are being pulled in different directions due to interest rates and EU debt problems.

We think rates will continue to fall, but there is so much uncertainty things could go either way. In times like these Stop Loss and Limit orders are very useful, as they allow you to aim for a higher rate but have a safety net should rates move the wrong way. To find out more about how these contracts work, send us an enquiry today.

Today's Data

Today we have EU Bank stress tests, which will determine how able they are to weather a financial storm. There are also EU Industrial production figures released today. From the UK we have various measures of unemployment. It’s also quite a busy day for US data, with Mortgage Approvals, Import prices and a budget statement all likely to affect cable.

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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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Sterling weak despite high inflation/BoE Minutes today

18th May 2011
Good morning. High inflation figures yesterday gave Sterling a boost, however the gains were short lived. Rates this morning have already started to fall, as investors acknowledged that higher inflation for now was unlikely to lead to an interest rate rise before year-end. Today we have the BoE minutes, which we'll look at in more detail after the usual rate snapshot as at 08:30am this morning:

• GBP/EUR 1.1379
• GBP/USD 1.6249
• GBP/AUD 1.5273
• GBP/NZD 2.0599
• GBP/CAD 1.5771
• GBP/CHF 1.4293
• GBP/ZAR 11.222
• GBP/JPY 131.80
• GBP/HUF 304.06
• GBP/DKK 8.4853
• EUR/USD 1.4275

High inflation for the UK, but Sterling remains weak

The UK Consumer Prices Index (CPI) annual rate of inflation rose to 4.5% in April, up from 4% in March.The rise in CPI was bigger than analysts had forecast and follows a surprise fall in the index last month.

CPI is now at its highest level since October 2008. The increasing pressure to raise rates following the jump in inflation was reflected in the currency markets, where the pound rose by more than half a cent against the dollar to $1.6285, and by almost 0.4 cents against the euro, to 1.1460 euros. This chart from the BBC illustrates inflation:
















However, gains were short lived as analysts said the data did little to change expectations that UK rates will rise from 0.5 percent in November at the earliest which is much slower than other regions including the euro zone. This has caused the Pound to fall back nearly 1 cent already from yesterdays high of €1.1460.

Today's Data - Bank of England Minutes and Employment

Weak readings for UK jobs figures this morning could add to the view that rates will stay low, even as retail sales due on Thursday are expected to rise due to extended holidays in April.

At the same time, the release of BoE meeting minutes on Wednesday will be watched closely for any shift in tone from policymakers, particularly Martin Weale, who has been voting for a rate rise but last month said he had been surprised by the economy's weak recovery.

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Inflation, Budget, BoE Minutes, Best Exchange Rates

23rd March 2011
Good morning. Inflation data yesterday was higher than expected, and this pushed the pound higher against the Euro slightly, but to a 14 month high against the US Dollar. We may see slight further gains after the BoE minutes this morning, but the Budget at Mid-day may take the wind out of Sterling sails. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1529
• GBP/USD 1.6364
• GBP/AUD 1.6217
• GBP/NZD 2.2087
• GBP/CAD 1.6056
• GBP/CHF 1.4708
• GBP/ZAR 11.280
• GBP/JPY 132.22
• GBP/HUF 310.49
• GBP/NOK 9.1147
• EUR/USD 1.4188

Inflation Data pushes Sterling higher

Yesterday inflation figures were above forecast, and more than double the governments target of 2%. The news increased the chance of an interest rate hike in the UK in the coming months. Against the Euro gains were limited due to the fact the EU are expected to raise rates next month.

Against the US Dollar though we hit a 14 month high. Most analysts think Sterling is overvalued though and so we expect it to drop back away in the coming days.

Boe Minutes at 09:30

This morning we'll see the minutes to the recent BoE decision to hold rates. The minutes contain discussions, differences of view, and crucially how each of the 9 member committee voted. If more than 2 voted for a hike, this may give Sterling a slight push higher when released at 09:30am.

How will the budget affect rates?

Markets await the UK government's 2011 Budget, due to be unveiled today at lunchtime, which will seek to bolster faltering growth without compromising on a tough austerity programme put in place to get public finances in order.

We don't really expect may surprises. Growth forecasts will probably be revised down. Experts expect the forecast for economic growth in 2011 to be downgraded - after figures showed a 0.6% contraction in the last three months of 2010.

But they also believe borrowing figures will not be as high as previously anticipated - up to £10bn lower than the £158bn predicted in last June's emergency Budget. Yesterday UK borrowing was again higher than expected.

Summary

We don't expect anything in the budget that will boost Sterling much, and in fact if the growth forecasts are worse than expected we may see falls in the Pound as many analysts think it's overvalued.

There may be slight gains after the BoE minutes, so if you need to buy Euros or US Dollars and want the best rates, it may be wise to consider moving before the budget and fixing a rate.



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Sterling gains against Euro & US Dollar Feb 2011

1st February 2011
Good morning. Sterling rose against the US Dollar and the Euro yesterday, lifted by gains in the euro on data showing the risk of higher inflation in the euro zone, while investors brushed off concerns about political unrest in Egypt. At 08:30am rates are as follows:

• GBP/EUR 1.1698
• GBP/USD 1.6058
• GBP/AUD 1.5997
• GBP/NZD 2.0699
• GBP/CAD 1.6011
• GBP/CHF 1.5142
• GBP/ZAR 11.453
• GBP/JPY 131.36
• GBP/NOK 9.2236
• EUR/USD 1.3720

Sterling gains on EU/UK Interest Rate expectations

Sterling gained in line with gains in the Euro, which rallied after data showing a higher than expected jump in inflation further fuelled speculation for higher euro zone interest rates. Sterling rose in line with the single currency, gaining against all currencies.

Expectations of higher inflation have also been brewing in the UK. Writing in a UK newspaper, Bank of England policymaker Martin Weale said a small rise in interest rates would now cost less in the long run than higher ingrained inflation. Still, he added that an increase in rates would not be needed should recent economic weakness lead to a sustained downturn.

So, the scales are finely balances at the moment. Either the UK will return back to growth, and economic figures will show that the recovery is working. If so, the pound may gain and it's likely interest rates will rise giving Sterling a further boost.

If however figures show the economy is indeed heading back into recession, there will be no need to raise rates, and Sterling will weaken significantly.

So will Sterling now gain further against US Dollar and Euro?

The pound ended January roughly 2 % higher versus the US Dollar, pushed higher on anticipation that UK rates may rise as early as in the first half of the year. BoE minutes last week surprised markets by showing Weale joined colleague Andrew Sentance in voting to raise UK rates by 25 basis points earlier this month from a record low 0.5 percent.

It's important to note however that this was before 4th quarter data showed a shock contraction in the UK economy, reminding investors that higher rates may choke the economy's fragile recovery, which would be negative for the Pound.

At the same time, price pressures could trigger stagflation, which could weaken the currency. Some analysts said the speculation that UK rates will rise before U.S. ones would help the pound to maintain its upward trend against the US Dollar. Against the Euro however gains will probably be limited, as the EU is now stronger and expected to raise interest rates before the UK.

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Sterling gains on BoE MPC Minutes

27th January 2011
Good morning. After big falls on Tuesday due to lower GDP, Sterling gained slightly yesterday as the BoE minutes showed 2 MPC members voted for an interest rate hike. However, grim UK growth prospects stopped the pound gaining much. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1642
• GBP/USD 1.5912
• GBP/AUD 1.6053
• GBP/NZD 2.0669
• GBP/CAD 1.5848
• GBP/CHF 1.5037
• GBP/ZAR 11.251
• GBP/JPY 131.84
• GBP/HUF 318.36
• EUR/USD 1.3662

Sterling gains on Interest Rate expectations

The pound rose yesterday after minutes from the Bank of England's policy meeting this month showed two policymakers voted for an interest rate hike. Minutes of the Monetary Policy Committee's most recent meeting show members explicitly discussed the case for raising rates in January. The fact rates may go up means the pound gained against the Euro and other major currencies.

For most members the risks to inflation "in the medium term had probably shifted upwards," the minutes said. The fact that more members think higher rates are necessary strengthened Sterling and pushed exchange rates higher. Remember though, these minutes were released 2 weeks after the actual decision, and crucially this was before Tuesday's shock news that GDP growth has contracted and a warning that inflation could hit 5%.

Some MPC members were concerned a rate increase could be "misinterpreted as a signal that the committee would attempt the bring inflation back to the target excessively rapidly". A "relatively sharp tightening" could hurt activity and confidence, the minutes say.

Analysts said that there was evidently now much more concern about inflation on the MPC. "I don't think the BoE minutes will change the outlook," said Paul Robson, currency strategist at RBS Global Banking.

"The market may be pricing in chances of a rate hike but the UK faces the possibility of no growth and high inflation. There are concerns about stagflation and sterling will find it difficult to rise much." So, while the pound has gained slightly, the concerns over growth stopped Sterling gaining much against the Euro.

The poor GDP data will raise concerns about whether the UK economy is robust enough to withstand the government's harsh austerity measures aimed at tackling the fiscal deficit. Sticky inflation meanwhile will heighten the BoE's dilemma on whether to raise interest rates or not. While this uncertainty remains, Sterling exchange rates will remain volatile.

Today's Data

Today we see a raft of data from the EU so expect some movement in GBP/EUR rates. Consumer confidence, Economic Confidence and Industrial confidence are all released at 10am. From the USA we have various measures of unemployment. Jobless figures are very hard to predict and so expect some movement in GBP/USD rates today

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Sterling falls vs Euro and US Dollar despite high inflation

15th December 2010
Good morning. The pound fell again yesterday against both the Euro and US Dollar. UK Inflation came in higher than expected, and investors took profits on a strong pound, and the sell off caused weakness for Sterling. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1806
• GBP/USD 1.5736
• GBP/AUD 1.5848
• GBP/NZD 2.1009
• GBP/CAD 1.5847
• GBP/CHF 1.5118
• GBP/ZAR 10.748
• GBP/JPY 132.10
• GBP/HUF 324.18
• EUR/USD 1.3330

UK Inflation rises; interest rates to rise?

Inflation rose to a 6 month high in November, figures showed yesterday. This is the latest surprisingly good economic figures for the UK, and initially it strengthened the pound as it dented lingering hopes of further monetary easing by the Bank of England.

Andrew Sentance, the most hawkish member of the Bank's Monetary Policy Committee, said the data strengthened his view that interest rates should rise now. "I think we would reinforce our credibility by gradually moving interest rates upwards," Sentance said. Usually higher interest rates lead to a stronger currency.

Bank Deputy Governor Charles Bean that policymakers were watching price pressures "like hawks" and admitted inflation had been above target for an uncomfortably long time.

However the Bank has already acknowledged that inflation will stay above 3 percent all next year, and analysts said the latest data will not change the policy of keeping rates low.

"The Monetary Policy Committee is unlikely to respond to this surprise," said Barclays Capital economist Fabio Fois. "The committee has nailed its colours to the mast: it views the current high rate of inflation as temporary."

So, despite the higher inflation it looks unlikely that the BoE will push rates up. Due to this the pound then retreated back, as investors pondered the likelihood of further Quantitative Easing.

Summary

So it's a weak Euro that has been pushing exchange rates higher, and despite a run of good UK data the pound has actually fallen back away, highlighting the uncertainty surrounding the economic recovery in Britain. Markets will soon slow as we approach the Christmas break, and often when trade is thin economic data can have an even stronger effect on exchange rates than usual.

Today's Data

UK data is all out at 09:30am; Unemployment figures and Jobless claims. The figures measure unemployment and are an indicator how the economy is performing. We also have employment figures from the EU today. From the US we have inflation data and Industrial production figures.

We expect the claimant count for the UK to be 4.5% and total unemployment at around 7.7%. Watch the 09:30 figures, and if the numbers are bigger than this, expect the pound to drop quite quickly. Of course better figures could provide some support for Sterling.

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