Pound/Euro falls from 2 month high

Tuesday 19th July 2011
Good morning. Yesterday Sterling hit a near 2 month high vs the Euro nearly getting to €1.15, however the gains were short lived, as the Pound fell through the day on fears the UK economy is slow, debt is high, and the BoE minutes this week could also be negative. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1384
• GBP/USD 1.6114
• GBP/AUD 1.5104
• GBP/NZD 1.8992
• GBP/CAD 1.5395
• GBP/ZAR 11.193
• GBP/JPY 127.28
• GBP/DKK 8.4858
• GBP/NOK 8.9483
• EUR/USD 1.4155

Sterling vs Euro falls on UK economy fears

The EU sovereign debt crisis in the past week had significantly weakened the Euro, helping to push GBP/EUR rates to a near 2 month high. The Pound fell however yesterday, as figures paint a less than rosy picture of the UK economy, meaning interest rates will stay low for some time to come.

It's this weakness in Sterling that has caused rates to fall back away, and the gains have not been anything to do with strength in the Pound, rather weakness in the Euro.

"There are not so many fundamental reasons to buy sterling.. it has a low yield, low volatility that enables investors to hold onto short positions and the BoE won't be raising rates any time soon," said Peter Kinsella, currency strategist at Commerzbank.

"So investors are buying it basically as a reflection that it's not the euro."

The euro struggled in the aftermath of results from European bank stress tests last week which investors said were too lenient as they did not test the impact of a Greek sovereign default. However, analysts said sterling's gains against the euro may be limited due to concerns about the weakness of the UK economy and its high levels of debt.

"Sterling is a very cheap currency, but it can't bounce independently until the UK has weathered the economic and fiscal storms," said Kit Juckes, currency strategist at Societe Generale

Today's Data

Australia releases its minutes to the recent interest rate decision, the EU releases measures on economic sentiment and construction output, and the USA has some number showing Housing Starts and building permits. There is also an interest rate decision from Australia. Markets may also be positioning ahead of the BoE minutes tomorrow, which if dovish could cause a further drop in 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.

Weekly GBP/EUR & GBP/USD currency forecast

In this week’s Report:

• Pound/Euro finally gains from it’s 13 month low
• Euro weakens significantly after ECB comments
• Pound vs US Dollar rates fall from 19 month high
• 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 the short trading week last week the GBP/EUR cross certainly didn’t lack in volatility with the total movements between the currencies amounting to approximately 3% over the week.











Early in the week Sterling fell to a 13-month low against the euro after a raft of data releases showed a patchy British economic recovery, this in turn suggested the Bank of England would not raise interest rates soon. The pound fell to 1.1048, its lowest since March 2010, as markets continued to factor in diverging rate outlooks with further hikes expected this year in the euro zone.

Analysts said further near-term gains were likely for the euro but the currency was reaching levels that may be unsustainable. “Whilst it is possible to build a 1.08/1.06 scenario based on a strong euro and a weak pound, we do not believe these gains will last," Chris Turner, analyst at ING.

After another rocky start on Thursday Sterling rebounded from the 13-month low against the euro after the European Central Bank signalled it may not raise interest rates again as early as next month. ECB President Jean-Claude Trichet offered a much less hawkish tone on the central bank's rate outlook than markets had been expecting after April's hike, prompting traders to book profits on the euro's gains versus sterling after weak UK services data earlier in the day drove the pound lower.

Jean-Claude Trichets comments helped push Sterling a little above 1.13 Vs. Euro where it stayed to round the week off on a high.

Both the ECB and the BoE kept interest rates unchanged, but many believe the euro will regain its upper hand against sterling while the ECB continues to tighten monetary policy much faster than the BoE. Markets are now not pricing in a BoE rate hike until November or December, while many in the market see the possibility of another ECB rate rise in summer.

"Once the dust settles, the market is going to realise that the next ECB rate rise is going to come before the BoE raises rates, We might see profit taking along the way, but the euro will find a foot hold, and we'll probably see it return to 1.11 in the short term," said Richard Wiltshire, at ETX Capital.

Sterling vs. US Dollar;

Pound vs. US Dollar rates have declined from the 19 month highs we have seen in recent weeks, and since the beginning of the month rates to buy Dollars have been in decline, as the chart below clearly shows:











At the beginning of last week, the news of the death of Osama Bin Laden initially caused global markets to soar, as investors took the news as a signal to move away from traditional safe havens such as the US Dollar.

It soon became clear however that the events will not really mean and end to the ‘war on terror’, and initial gains were short lived. As a result the US Dollar has gained strength on its safe haven status, and most of the week saw GBP/USD rates in decline as the dollar became more expensive to purchase.

There was also better jobs data from the USA on Friday, with many more new jobs being created than analysts had expected, again causing USD strength and a decline in rates. Analysts said the jobs data, while encouraging, was not sufficient to meaningfully shift the outlook for U.S. monetary policy.

Volatility in USD rates at the end of last week was mostly caused by events in the Eurozone however. As outlined in the GBP/EUR report, expectations for a rate hike in the EU have declined, and this is having an effect on the value of the dollar also.

"We're still looking at the divergence in interest rate outlooks between the Fed and ECB as the primary driver in market activity over the medium term," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.

Rates in the US are at a record low, while EU and UK rates are forecast to go up before those in the US. This is keeping the Dollar weak and exchange rates favourable, despite the decline last week.

So in summary, despite a retreat in exchanger rates caused by a weak pound and Euro giving some USD strength, exchange rates are still very close to the best they have been in over 18 months. This is despite Sterling being weak against most currencies. It’s the fact that poor US data and low interest rates in the US have weakened the USD even more than the pound, and the net result is relatively high exchange rates despite the state of the UK economy.

If you need to purchase USD with Sterling, you may wish to consider taking advantage of the rate while it is so favourable. To have a free consultation on the services we offer, click the banner at the bottom of the post to send us an enquiry today.

Weekly Economic Data that may affect exchange rates

Monday
Today for the UK we have House Price Data and Retail sales, although the figures are released at midnight Monday. During the day expect GBP/EUR volatility as we have confidence measure from the Eurozone in addition to Trade Balance figures from Germany.

Tuesday
There is no UK data of note; however markets will be reacting to the UK data released at midnight Monday. Most data today is from the USA; Import Prices and a survey on economic optimism.

Wednesday
Today is key for UK data. We have an inflation report from the Bank of England, a speech by Mervyn King the BoE governor in addition to Trade Balance figures. Expect a choppy day for Sterling. Germany has some inflation figures that could affect the Euro. The US has a monthly budget statement at 7pm.

Thursday
A very busy day today for economic data. We have some Employment figures from Australia and Retail Sales for New Zealand.

From the UK watch a GDP estimate at 3pm, and also a Manufacturing Production report. For both the UK and EU there is an Industrial production report for both zones; expect GBP/EUR volatility. There is also a monthly report from the European Central Bank today, so lots here that could affect GBP/EUR rates.

Stateside we have Retail Sales, inflation Data and Jobless Claims.

Friday
There is no UK data today. There are GDP figures from Germany and the Eurozone as a whole. It’s an important release that will give a view of the EU economy and so could affect GBP/EUR rates. From the USA there are some inflation figures, but given rates in the US are expected to remain low, it may not have much of an effect.


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Pound vs Euro & US Dollar predictions March 2011

In this week’s Report:

• Sterling vs Euro tumbles to 3 week low
• Interest Rate speculation in UK/EU driving exchange rates
• Effect of unrest in Libya on Oil Prices and GBP/USD
• Round up of the week’s data that may affect rates

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

Sterling vs. Euro; 3 week low

Sterling fell on Friday as data showing a deeper fourth-quarter UK economic contraction reduced expectations of an interest rate hike by mid-year and raised concerns about how the economy can deal with rising inflation. Revised data showed the UK economy shrank 0.6 percent in the last three months of 2010, more than the preliminary reading of a 0.4 percent contraction. This data highlights the dilemma faced by the BoE in balancing rising inflation, which is double the central bank's 2 percent target.

Due to this, Sterling slumped to a three-week low against the Euro, extending its downward movement versus the single currency this week. Also helping to boost the single currency was hawkish rhetoric on Euro zone interest rates, as European Central Bank policymaker Axel Weber kept the speculators on their toes when he stated that Euro zone rates could only rise from here. The Euro looked to end the week nearly 2 percent higher on the week, its best performance since late October.

The negative risks to the Euro’s health have been repressed for some time now. The real financial uncertainties that remain behind the Euro-region have been offered a temporary stay of execution when policy officials offered their open-ended promises to further bolster the bailout effort going forward. Yet, in the weeks since, conditions have continued to deteriorate. And, reminding of the trouble ahead, German policymakers discussed proposals aimed at insuring a hard-line approach to further bailout accommodations at EU meetings. It just so happens, that the Parliament plans to vote on these proposals on March 17 – one week before the EU summit.

The volatility last week highlights the risk that private individuals are exposed to when international financial events entirely out of their control move the markets. With this inherit risk in the background and your life savings in the foreground it is well worth while seeking the guidance of an experienced currency trader at Foremost Currency Group to assist you through your currency purchase. Contact us Today.

Sterling vs. US Dollar; drops from near 1 yr high

Sterling finished the week in dramatic style against the US Dollar after slipping over a Cent following disappointing GDP figures on Friday. In what was a distinctly flat week for Cable, Sterling began well trading at over 3 month highs at 1.62 plus on the Mid Market.

The early part of the week was distinctly slim on market data releases and was driven more on speculation as to the minutes of the Bank of England’s meeting at the beginning of the month however, this had little impact on the exchange rates.

When the minutes were released sterling rose against the dollar after it showed a hawkish tone, with three members of the Monetary Policy Committee voting for a rise in interest rates. Bank of England Chief Economist Spencer Dale joined Andrew Sentance and Martin Weale in voting for higher rates. More importantly the minutes showed that some of those members who voted against a rise would consider changing their decision if the economy showed signs of picking up after the unexpected drop at the end of 2010.

Things started to unravel against Sterling on Thursday as problems in Libya escalated and concerns over the supply of oil were heavily voiced. As the price of oil spiked by over 8 cents at the high of the day, investors were driven to more ‘safe-haven’ status currencies such as the Dollar putting pressure on the Pound.

On Friday Sterling continued to slide against the Greenback and once again appeared to be the weaker relative after disappointing GDP figures were released showing a negative growth of 0.6%. Sterling supporters had been hoping for a more positive reading as evidence that lasts month’s disastrous reading had been a one off and a result of extraordinary weather conditions affecting the economy.

This was not the case and in fact this month’s reading showed that even though the poor weather did have an impact on growth the figure would still have been negative which prompts renewed concern about the stability of the economy and whether the UK may be headed towards another technical recession.

Next week is another important week in the markets with inflation data in the UK and across the Atlantic Non-farm payrolls are released, these crucial employment figures are generally seen as litmus test for the health of the US economy.

Weekly Economic Data that may affect exchange rates

Below we list the main data released for the week ahead. The implication of these economic releases will differ depending on the currency you need to buy or sell. For a free consultation on how this 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 week kicks of with data from the Eurozone in the shape of Consumer Price Index measure. These indicate inflation and therefore can impact interest rate policy. A high reading may cause GBP/EUR to fall. We have GDP figures from Canada at lunchtime, followed by House Prices and Inflation data from the USA.

Tuesday
The new month starts today and the first data of note is an Interest Rate decision from Australia and Canada, although we expect no change from either. From the UK we see the latest House prices from Nationwide, indicating how this sector is performing. We also have UK Mortgage approvals today. From the Eurozone watch for German unemployment and inflation data that may cause GBP/EUR volatility.

Wednesday
UK data today is in the form of Halifax house prices which follows yesterdays report from the Nationwide. The EU also has various inflationary measures being released today. Further afield Australia has GDP figures showing how the economy is performing.

Thursday
Today is very busy for EU data. We have: Gross Domestic Product; Retail Sales; Inflation figures and an Interest Rate decision. There’s a lot that could affect GBP/EUR rates so contact us if this is the currency you need to buy or sell. From the USA there are some unemployment and jobless figures at lunchtime.

Friday
We end the week with US unemployment and Non-Farm payrolls. This often causes significant volatility for Sterling vs. US Dollar rates as the actual figures are often very different to those forecasted.

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.

Pound vs Euro & US Dollar Forecast Outlook

14th February 2011

In this week’s Report:

• Pound vs. Euro; moving on interest rates
• Sterling vs. Dollar forecast
• The impact of interest rates on exchange rates
• Round up of the week’s data that may affect

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

Sterling vs. Euro;

The Pound endured widespread losses against the vast majority of the 16 most actively traded currencies in the FX Markets on Friday morning last week, and the UK currency also retraced back towards 1.18 against the Euro, after encountering strong resistance in the region of 1.1850

.

All in all a bit of an anticlimax for Sterling this past week as highly anticipated data releases in the form of an interest rate decision from the Bank of England on Thursday, Retail sales and House prices on Tuesday and PPI input on Friday all failed to have a heavy impact on the strength of the pound, despite positive results in all areas other than the interest rate decision, which remains at 0.5%.

UK producer prices rose twice as much as initial forecasts in January, which will only serve to add to concerns that the Bank of England is losing the battle to keep a lid on rising prices. PPI input rose 1% from December, the most since April, and exceeded the 0.5% forecast. The Pound also came under heavy selling pressure, after former BoE policy maker Kate Barker said that the MPC may be wary of raising interest rates because of the subsequent impact on the Pound and the threat to the economic recovery.

The UK currency has gained against all but one of the 16 most actively traded currencies this year, as markets priced in a rate hike by June, due to persistent inflation concerns. The comments, combined with concern that that BoE is losing control of inflation, has weakened the Pound and the UK currency will continue to be susceptible to any suggestion that the BoE will refrain from raising rates this year.

Economists are sceptical as to whether the Central Bank will raise rates before the first quarter of 2012, while the National Institute of Social and Economic Research anticipate three 25 basis point increases this year. If you would like a live quote, or to discuss the use of stop and limit orders in managing your currency risk, please call The Foremost Currency Group.

Sterling vs. US Dollar;

A very quiet week on Sterling/Dollar ended with a sudden drop of over 1 cent as we saw the rate move back below the psychological 1.60 level after it had hit a 4 month high just a week earlier.

The rate had traded in a very tight range at the start of the week between 1.6070 & 1.6120 but data towards the end of the week caused some optimism that we could see the Pound recover more ground moving forwards, even though the Bank of England held interest rates, as UK GDP estimate was revised up to -0.1% from -0.5%, and PPI figures also read better than expected.

This optimism was washed away by Friday lunchtime as Sterling slipped away against most major currencies as traders looked for some sort of clarity on the Bank of England’s current position regarding interest rates.

We will not see the minutes from Thursday’s meeting until later this month; it looks as though the markets still lack clarity on how close the BoE really is to increasing rates as inflation pressures continue to mount (further reinforced by Friday’s PPI data).

“This ongoing uncertainty helped to put the Pound on the back foot on Friday”, said John Hydeskov, currency strategist at Danske Bank, adding that the market was also keenly awaiting the BoE’s inflation report next week to gauge its outlook on prices.

“We’re not clearer on the central bank’s stance than we were before the decision. We still don’t know whether the MPC has more hawks”, he said.

It also looks like the Pound may have struggled due to renewed risk appetite after President Hosni Mubarak’s refusal to step down, after it looked highly likely on Thursday that he would, as investors flocked back to the Dollar and helped the Greenback rise 0.5% against a basket of major currencies.

Our view on Cable (GBP-USD) appears to be the same as most analysts as we think that while we should see it return to the 1.70+ levels not seen since 2008 at some point this year, uncertainty over economic growth on both sides of the Atlantic, and how the Bank of England will handle the current stagflation in the UK, mean we could easily see it back at 1.50 before this happens. As ever, should you have any upcoming USD requirements, make sure you get in touch with your FX Trader at Foremost Currency Group at your earliest convenience.

Weekly Economic Data that may affect exchange rates

Below we list the main data released for the week ahead. The implication of these economic releases will differ depending on the currency you need to buy or sell. With lot’s of data from the UK and Eurozone on Tuesday and Wednesday, we expect a volatile week for Sterling exchange rates. For a free consultation on how this 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
There is no UK data of note today. The main data is Industrial Production from the EU. This is an inflationary measure and with all the speculation of interest rates in the UK and EU at the moment, high figures may push GBP/EUR lower. There is also some housing data from the USA.
Tuesday
A very busy day for data. We have lots of UK data; Gross Domestic Product, Consumer Price Index, House price info and Retail Sales. Lots here that could affect the value of Sterling against other currencies. For the EU we also have GDP along with Trade balance figures and economic sentiment. Expect GBP/EUR volatility today. From the US we have Retail Sales and inflation measures.

Wednesday
Consumer Confidence figures from the UK are released today, in addition to a raft of unemployment and jobless figures. Staying in the UK we also have a BoE Inflation report and a speech by the banks governor. Expect Sterling weakness if he is dovish about inflationary pressures indicating no rise in interest rates soon. From the UK we have some housing data, inflation measure and the FOMC minutes.

Thursday
Today is much quieter with no UK data of note. From the EU there is a measure of confidence, but most data today is from the USA. US data includes jobless claims and Inflation data.

Friday
We end the week with UK Retail Sales and further inflation data from Germany and Canada.

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.