Weekly GBP/EUR & GBP/USD report, and weekly data

Tuesday 30th August 2011

Good morning. As is customary for Monday mornings, today we'll take a detailed look at the movements in Sterling/Euro Sterling/US Dollar and a round up of the weeks data that may affect exchange rates



In this week’s Report:



• Sterling starts to fall on poor UK data

• UK Interest Rates going to remain on hold for some time

• GBP/USD falls from 2 year 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;



After the previous week saw more than a 2% gain in the Sterling/Euro exchange rate, we hoped that last week would at least provide some degree of calm for the volatile pairing, but unfortunately this wasn’t to be.



























Tuesday saw better than expected CBI industrial order data from the UK which was closely followed by a large fall in Eurozone economic sentiment from the ZEW. This is a key indicator for the health of the EU economy over the coming months and such a large fall does not look good.



These concerns were compounded when on Wednesday both German IFO business climate figures and Eurozone industrial new orders were worse than expected and the industrial order figures actually showed a negative reading.



Later in the week UK consumer confidence rose and GDP figures remained at 0.2% after fears they could be downwardly revised, so surely with all the poor EUR data and some reasonable figures for the UK the rate went up? Unfortunately not...



MPC member Martin Weale gave a speech in Dublin on Thursday in which he explained the reasons for him to abandon his call for a 25 basis point hike in the UK interest rate at the latest policy meeting. The main reason is the sharp deterioration in economic data since the start of the year and there are now suggestions that we could see a coalition in favour of renewed asset purchases (Quantitative Easing) between members of the Bank of England should the UK economic outlook deteriorate significantly.



It has forced the Pound to retreat by 1.5% against the Euro since Wednesday of last week and just goes to show that even if the data suggests one thing, the rate can do quite the opposite. We had already expected the interest rate in the UK to remain at the current all time low until at least May 2012 but now the MPC has a unanimous 9-0 vote in favour of keeping the rate at 0.5% it could stay there until late 2012 or even 2013.



There doesn’t seem to be much out on the data front this week so we expect the rate to mainly be driven by continuing debt problems in the EU and any more news about a stagnating UK economy. The mid-market rate should remain range-bound between 1.12 & 1.15 and even though this doesn’t seem like a huge movement, it can make a £4,600 difference on a €200,000 trade.



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Sterling vs. US Dollar;



Sterling maintained its march against the dollar early last week bolstered by profit taking and support from a slight recovery in risk appetite after less gloomy than forecast China manufacturing data and German factory activity numbers marginally eased global growth worries. Further gains were expected to be limited due to concerns about the UK's faltering economic recovery.

By mid-week Sterling fell 0.5 per cent to $1.6411 on better-than-expected U.S. durable goods orders data which reduced some dollar bearishness temporarily. Analysts said sterling would struggle to find clear direction ahead of a speech by Federal Reserve President Ben Bernanke on Friday.

Some investors were speculating he may use the speech to signal further monetary stimulus to prop up the faltering U.S. economy whilst others had been betting on sterling in recent sessions on the perception the UK is a safer investment destination given U.S. fiscal problems and the euro zone debt crisis that shows few signs of resolution.



Market analysts said sterling may come under renewed pressure, given the UK economy is struggling and rate hike expectations have been pushed back into late 2012. Traders said the pound remains at risk of selling if data continues to show the economic recovery is stuttering, which would increase speculation that the Bank of England may opt for more "quantitative easing" stimulus.



Friday saw US Q2 GDP figures return slightly lower than expected at 1% growth for the quarter. Though growth remains weak, Fed officials do not appear particularly concerned about recession risks, and some have voiced doubts about the wisdom of more QE. The dollar pared losses against Sterling as Federal Reserve Chairman Ben Bernanke said the central bank was prepared to employ tools as needed to promote a stronger U.S. recovery but offered no definitive action and stopped short of signalling QE3.



To put last week’s market movements into perspective, a typical transfer of $200K would have cost £4500 more at the end of the week.



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Weekly Economic Data that may affect exchange rates



Monday – No UK Data yesterday as it was Bank Holiday. There were some GDP figures from Germany and Home Sales data from the USA



Tuesday – Today we have UK House Prices and Mortgage Approvals. Eurozone & USA confidence figures are also released today. Staying in the US, we have the FOMC minutes, which show what was discussed at their recent interest rate decision.



Wednesday – Unemployment data from Germany and the EU and USA are the main releases to watch out for today. We also see GDP figures from Canada and Factory Orders from the USA.



Thursday – The busiest day of the week. We start with Retail Sales from Australia and Switzerland, and then GDP figures are released for Germany & Switzerland. Later in the day we have inflation figures from Germany and the UK. From the USA we see Jobless Claims and Manufacturing figures.



Friday – We end the week with Retail Sales from Germany, and Construction figures from the UK. In the US, we have further unemployment measures in addition to the non-farm payrolls numbers. As these are notoriously difficult to forecast, the actual figures often differ significantly, causing GBP/USD volatility.



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Weekly Pound vs Euro & Pound vs US Dollar forecast

Monday 22nd August 2011

Good morning. As regular readers will know, on a Monday we take stock of the last weeks movements in Pound vs Euro and Pound vs US Dollar. In this week’s Report:



• Sterling hovers near 12-week high vs. struggling euro

• Scope for Sterling gains seen as limited due to weak UK economy

• GBP/USD rates close to 2 year 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;



Sterling hovered near a 12-week high against the euro towards the end of last week, as concerns about a worsening euro zone debt crisis dented the single currency. Mounting fears of a global recession and concerns about stresses facing some European banks caused European stocks to fall 2.6 %, extending a steep decline that continued throughout the week.





















Analysts said sterling has benefited to an extent from the troubles besetting the euro, though its scope for gains was expected to be limited due to recent evidence of a sluggish UK economy. The euro was down 0.1 % by Thursday last week, which placed it not too far from the August 5 low, below which would mark its weakest position since late May.



"Given the renewed demand for safe-haven currencies, sterling has fared quite well," said Michael Derks, strategist at FXPro. "Sterling is the least bad of the big currencies, but economically the country is still completely stuck in neutral". These comments highlight the fact the gains may be limited.



Data on Thursday showed British retail sales barely grew in July as cash-strapped consumers cut back on spending, underscoring the risks for the UK's already fragile economic recovery. However, public finance figures on Friday showed that the UK government's harsh austerity measures are helping to bring down UK debt as intended, which is a welcome sign of progress for the UK economy, albeit only a small glimmer of hope in an ocean of neutrality.



Higher unemployment and rising inflation are expected to continue to restrain consumer spending and, together with signs key British export markets are slowing, increase the risk the UK economy may still fail to pick up. In spite of stubborn inflation, markets expect the Bank of England to keep interest rates on hold until the end of 2012, with possible calls for further quantitative easing to stimulate growth. This will mean that although the economy may be quietly strengthening, it may not be reflected on the currency markets for quite some time, with further QE likely to be interpreted by investors as a sign of weakness for Sterling.



So, with exchange rates close to a 3 month high, and fears Sterling could slip back away due to poor economic conditions in the UK, those that need to purchase Euros within the next 6 months should contact us now to discuss how we can help protect against the market dropping.



Do you need best exchange rates to buy or sell Euros? Send us a free enquiry now.



Sterling vs. US Dollar;



Last week the GBP/USD got very close to a two year high which was mainly due to a batch of poor US data showing a plunge in factory activity in the U.S. mid-Atlantic region. Concerns about the UK recovery and the chance of monetary easing are expected to keep the pound in check. The poor data from the US made the dollar cheaper to buy, and this is why rates climbed against the USD despite dropping against the Euro.























Traders said markets were thin and declining risk appetite was pushing investors back to the dollar in the near-term, but the pound was gaining some support from the perception it was the best of a bad bunch of currencies.



Last week markets across the World dropped, with the biggest fall on the FTSE since the financial crisis began. We saw a flight from risk, where investors were jittery and moved their funds to perceived safe havens. Usually this means the US Dollar and Swiss Franc, however with problems in the US and the Swiss keeping their currency weak, Sterling benefited.



"Despite negative data coming out of the UK suggesting there's quite a significant cyclical downturn taking place, global investors see the UK as relatively stable from a political and ratings perspective against Europe and the U.S.," said Ian Stannard, head of European FX strategy at Morgan Stanley.



So Sterling is gaining support from the perception it is the best of a bad bunch of currencies. We have stable credit ratings, political calm and a deficit reduction plan in place. The government's fiscal austerity programme is also expected to hamper demand in the economy, leaving sterling vulnerable to weakness in the medium term.



Many are questioning the Pounds buoyancy at the moment, as the UK economy is far from healthy. Just last week we had poor Retail Sales figures, higher than expected unemployment, and dovish minutes from the Bank of England. Due to this, many analysts think that these gains will be short lived.



So in summery Sterling vs USD rates got very close to the best they have been in two years, however many analysts do not expect these levels to last for long.



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Weekly Economic Data that may affect exchange rates



Monday – There are no scheduled economic releases today.



Tuesday – UK Mortgage Approvals are released today, showing the health of the UK housing market. Rom the Eurozone we have Inflation Data from Germany, and also Economic Sentiment Surveys from Germany and the EU. Also from the EU, we have measures of consumer confidence that may affect the value of the Euro. In the USA, Home Sales figures are released. Trade Balance figures and Inflation data are released from New Zealand.



Wednesday – Today’s UK data is Nationwide Housing Prices. In the EU we have Industrial New Orders, and Business Climate assessment figures from Germany. In the USA, we have Mortgage Approvals. New Zealand releases Retail Sales.



Thursday – The most important release today are German GDP figures. If poor these could weaken the Euro. In the USA we see Jobless Claims and Unemployment Data.



Friday – After yesterday’s German GDP figures, today is the turn of the UK. This will show at what pace the economy is growing, and is likely to have an impact on the value of Sterling. GDP is also released in the USA in the afternoon, followed by a speech from FED chairman Ben Bernanke.



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Pound Sterling Forecast for GBP/EUR & GBP/USD

Monday 15th August 2011.

Good morning. As usual on a Monday, today we'll take a detailed look at the Pound/Sterling forecast for Sterling vs Euro, Sterling vs US Dollar, and this weeks data that may affect getting the best exchange rates.

In this week’s Report:



• Rumours of French downgrade weakens Euro

• Market Volatility creates big exchange rate swings

• BoE paint gloomy picture of UK growth

• 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 was a rollercoaster ride for all the major markets, with currencies and indeed the GBP/EUR cross being no different. Wild swings in both directions during continued choppy trading resulted in excellent price points for both buyers and sellers on this cross.

The market as a whole seems unable to decide whether Sterling or the Euro is the most stable bet going forward. Rumours that France along with several of its marquee investment banks were in line for credit rating downgrades swung the cross in the Pounds favour, only for gains to be pegged back by poor UK economic figures.



The most notable event which detracted from GBP gains was the Bank of England’s Growth forecast cut, which demonstrated to the market, as if it didn’t already know that times are still hard in the UK and that the economy is by no means out of the woods. Indeed it is still not out of the realms of possibility that a second recession could bite in Britain.



However for all the gloom on this side of the channel, much of the focus going forward will be on whether France with its problems, will be able to continue to support Germany in bankrolling the sovereign debt issues cropping up all over Europe. With severe worries about Spain and Italy requiring bailouts akin to those in Greece, Ireland & Portugal, the purse strings across the channel may not be as freely loosened as they have been thus far.



This week will probably continue to see fairly choppy rate fluctuations, although most traders will expect it to calm down when compared to the week gone by. A full list of the main data to watch out for follows later, but for this cross Tuesdays UK inflation figures and the Bank of England Minutes usually cause some volatility and Tuesdays’ Euro zone GDP figure is worth watching out for too. This said, often the biggest market moves occur on the back of events that appear on no calendar; the rumours and political events that unfold throughout the week.



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Sterling vs. US Dollar;

In what was one of the most turbulent weeks across the global markets since the credit crisis began in 2008, all eyes were on the US as worldwide stability looked shakier than ever. Global stocks saw Billions of dollars wiped from their value on consecutive days in the early part of the week as the markets readied themselves for another potential credit crunch.

In the wake of the US being downgraded to AA rating from AAA by the credit rating agency ‘Standard and Poor’s’, Sterling began the week at a near two-month high against the beleaguered Dollar as the downgrade led more investors to sell the greenback.



Sterling’s momentum against the Dollar was maintained early on Tuesday as the UK’s AAA rating looked safe following Standard and Poor’s Chief stating in an interview that he didn’t expect a ratings drop in the UK within the next 2 years. However, comments about Sterling becoming the next ‘safe haven’ currency were quickly dismissed in light of the unfolding problems with rioting in the capital which dragged on throughout the week.



This was followed just before lunch on Tuesday by a slight slip as UK manufacturing data fell by a surprise 0.4% rather than a 0.2% growth as expected – However, continuing concerns over the US prevented the Pound slipping too much. "In isolation this data is definitely sterling-negative. In ordinary conditions it feeds the idea the Bank of England will not be hiking interest rates any time soon," said Jane Foley, currency strategist at Rabobank.



The fortunes of Sterling were almost instantly reversed on Wednesday as the Pound fell by 1 percent against the Dollar following the news that BoE lowered its expectation for annual GDP growth to around 2.0 percent in the last quarter of 2011. In May, it had forecast 2.47 percent growth by the end of the year. Investors, appearing very fickle following comments earlier in the week took the news and headed straight back to the relative ‘safely’ of the US Dollar and out of Sterling.



Following the release of the inflation report, BoE Governor Mervyn King suggested that monetary policy would remain ultra loose with interest rates being kept at a record low of 0.5 percent for some time as the global economy is slowing. It is widely expected that interest rates will be kept on hold now until the end of next year.



Mervin King went on to say that adding to the BoE's asset-buying programme would be a possibility if the economic outlook deteriorated, but suggested that more quantitative easing may not be imminent. Despite the markets ending the week more stable than they started and with the stock market recovering somewhat, the global market’s future is far from predictable. Gold remains at near record levels and this is for good reason - no one is quite sure what will happen next.



Will we will drop from this seeming precipice into another full scale recession or will we be able claw our way slowly back to growth? All this uncertainty leaves the Cable notoriously difficult to predict. UK retail sales and US inflation data are just two of the releases this week which have the potential to see Cable move significantly - Speak to your FCG account manager for up to the minute market data and ensure that you capitalise on your gains whilst protecting yourself against negative market movement.



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Weekly Economic Data that may affect exchange rates



Monday – There is no data of note from the UK or EU. There is some trade flow data from the US, which is looked at as an indicator of the trade deficit.



Tuesday – We start in the EU, where we have GDP figures from Germany, Europe’s largest economy. There are also GDP figures for the EU as a whole, in addition to EU Trade Balance. From the UK we have inflation data (Consumer Price Index). From the USA we will see the latest measures of Industrial Production and Housing Starts.



Wednesday – Various unemployment measures are released for the UK today, and we also have the minutes to the latest Bank of England (BoE) decision to hold interest rates. Any mention of Quantitative Easing could weaken Sterling. From the Eurozone, there are Consumer Price Index figures, which if high could strengthen the Euro. From the US there are also inflation numbers released in the afternoon, along with mortgage approvals.



Thursday – Today’s UK data is Retail Sales, which are a barometer of consumer confidence. From the USA we have unemployment figures, Jobless Claims and Home Sales. There are no major releases from the EU today.



Friday – We end the week with Public Sector borrowing from the UK, and further inflation figures from Germany.

If you need to get the best exchange rates 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 Outlook August 2011

Monday 1st August 2011

As always on a Monday, we'll take stock of the movements in exchange rates for GBP/EUR & GBP/USD over the last week. In this week’s Report:

• Euro debt again weakens Euro
• US debt issue weaken US Dollar
• Sterling benefits despite continued weak data
• 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;

Markets continue to expect the Bank of England to hold interest rates at record lows well into 2012, with some speculation that more asset purchases may be needed to revive flagging growth in the UK economy.

After figures showed the economy barely grew in the second quarter, BOE policymaker David Miles said last Wednesday that the recovery appeared to have slowed and there is a risk the economy could tip back into recession. On the upside, analysts said sterling was likely to benefit from any downgrade to U.S. debt by rating agencies as the UK, with a sound fiscal plan in place, is likely to retain its AAA rating.

But austerity measures to curb Britain's budget deficit are also crimping growth and consumer spending, meaning sterling is unlikely to strengthen significantly in coming months. UK data has been lacklustre of late, with the CBI figures reminding investors that consumers are struggling and that growth in the current quarter is unlikely to be encouraging.

Sterling did however rise against a broadly weaker euro last Thursday as the single currency slipped on lingering concerns about euro zone debt. British retail sales fell at their fastest pace in a year in July and stores expect a further deterioration in August, as hard-hit consumers clamp down on spending, a survey by the Confederation of British Industry showed. Movements in sterling over the past week were largely driven by a broad sell-off in the euro after an Italian bond auction. Also, the pound has benefited as investors have shunned the dollar and the euro due to fiscal issues plaguing those areas, while the UK has been making progress on reining in government spending, although some analysts say this has come at a cost to economic growth.

Commerzbank currency strategist Peter Kinsella said this view would keep the pound supported, but still added the belief that UK interest rates will stay low due to a sluggish economy that would cap any significant upside in Sterling. Many times in July we have seen that data releases haven’t necessarily dictated the movement of the markets, the euro has fallen roughly 3 percent versus sterling so far this month, showing a confused and volatile time for the GBP/EUR cross.

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Sterling vs. US Dollar;

Sterling slipped against the Dollar last Friday, tracking a slide in the Euro versus the U.S. currency after a threat by ratings agency Moody's to cut Spain's credit rating prompted some investors to sell riskier currencies for the Dollar. But losses versus the Dollar were limited given that investors remain negative on the U.S. currency as Washington remains far from reaching an agreement on government borrowing before a deadline next week. The Pound ended July around 1.5 percent higher versus the Dollar.

Debt negotiations in the US were hit by further complications at the end of last month as Republican leaders abandoned a vote on plans to increase the debt ceiling after failing to secure enough votes to get the plan approved. This failure gave US politicians 4 days to complete any deal. If they struggle to arrange a deal and the US misses a coupon payment, a technical default would have occurred, but what does that mean for the world economy and the US Dollar?

Any default would lead to a huge adjustment in the value of the Dollar, which would be reinforced by the almost certainty of the Fed starting QE3 to offset the compulsory reductions in governmental spending. We are in uncharted territory in terms of the potential effects on the world economy, particularly with the inter-bank rate which could, according some economists, be affected more by a US technical default than the aftermath of the Lehman Brothers failure.

Some analysts have said Sterling is likely to benefit from any downgrade to U.S. debt by rating agencies, as the UK (with a sound fiscal plan in place) is likely to retain its AAA rating. But austerity measures to curb Britain's budget deficit are also restricting growth and consumer spending, meaning Sterling is unlikely to soar above the $1.70 level in the coming months.

The US problems would have worrying implications for the European debt markets, since if the safe haven of the US cannot meet its obligations, who can? The recent problems in Spain and Italy would be amplified and may lead eventually to those countries requiring some sort of bail-out. However, since money would have to flow somewhere, the Euro could actually benefit from the US problems. The recent shift away from the Greenback has been profound in all currencies, in the shorter term and over the past weeks, as investors have been protecting themselves from potential Dollar fallout.

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Weekly Economic Data that may affect exchange rates

Monday – Inflation data and unemployment figures are released from the EU today. In the UK we have House Prices and Inflation data. In the US there are manufacturing prices.

Tuesday – After the holiday in Australia yesterday, today we have House prices, building permits, commodity Index and an interest rate decision, all of which could strengthen the Aussie. Closer to home, we have Inflation data for both the UK and Eurozone. Also from the UK there are shop price index figures from the BRC.

Wednesday – Australian Retail Sales and Trade Balance figures are released today. From the Eurozone there are also Retail Sales figures. The EU and UK both release Purchasing Managers Index which is a measure of inflation. Stateside, watch for Mortgage Approvals and Factory orders.

Thursday – As with every first Thursday in the month, the UK and EU announce their latest interest rate decision. Both are expected to leave rates on hold, but watch for any mention of Quantitative Easing from the BoE. The USA has various measure of unemployment.

Friday – A busy end to the week, with PPI (Inflation) data from the UK, in addition to Industrial Production figures from Germany. A busy day in the states also, with Unemployment and Non Farm Payrolls at lunchtime.

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Weekly GBP/EUR & GBP/USD Forecast Outlook

In this week’s Report:

• EU bailout agreed, strengthening Euro
• US deficit and credit rating threat weaken USD
• Global Markets surge on the agreement
• 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;

The main news of last week was of course the details surrounding the European Sovereign debt crisis. Details of how Greece will restructure its massive debts emerged last week as euro zone leaders agreed a package they hope will help resolve the debt crisis. The share prices of banks seen as most exposed to distressed euro zone government debts rose by more than 5%, led by Lloyds, which ended the week almost 20% higher than on Monday.







The news also strengthened both the Euro and to some extent the pound (against other major currencies), as investors calmed about investing in riskier currencies. Against the Dollar, the Euro stayed near a 2 week high as news of the agreement broke. The latest Greek bail-out by the 17 euro zone governments and the International Monetary Fund is part of a comprehensive package to shore up the single currency unveiled on Thursday.

On the GBP/EUR cross rates were knocked 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 Euro zone seemingly 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. If however this unified agreement shows any signs of cracking, perhaps if more peripheral EU nations require funding then the potential for a weakening of the Euro is a distinct possibility.

With such uncertainty in the markets it is essential to keep close tabs on your positions. To make the most of our commercial exchange rates, make an enquiry with us now for free.

Sterling vs. US Dollar;

Last week started with Sterling encountering losses of almost 1 cent against the Dollar following concerns about UK banks' exposure to the euro zone debt crisis. However, sterling rallied on Tuesday, helped by a rebound in equities market when banking stocks were hit by concerns Europe's bank stress tests were unrealistic.








Sterling is seen as especially vulnerable to renewed euro zone debt worries, particularly against the dollar due to concerns about UK banking sector health and given the UK's close trade links with Europe. "Sterling's outlook is still very closely linked to sentiment towards Europe. Ultimately the UK is so closely entwined with Europe that a crisis would certainly hit the UK". Lee Hardman, currency strategist at BTMU said.

This is likely to dominate the cross in the coming weeks despite the growing concerns in the US over the problems the growing deficit in the Federal budget as discussed in last week’s report. The most anticipated data release over the course week was the minutes of the Bank of England committee meeting which was held at the beginning of the month. With a 7-2 split in favour of keeping rates on hold at 0.5% there were no great surprises contained within the minutes and as a result virtually nothing happen with regards to the cross.

The problems with the US deficit in the Federal budget continue to rumble on following the threat from ‘Moody’s’ and ‘Standard and Poors to downgrade America from their AAA rating. This is unless a compromise between Obama’s camp and Congress can be made within the next 2 years to find a way to move forward and repair the damage.

Speculation continues however, that many in the Republican camp would prefer that a compromise in not reached and that the country is downgraded - in a political more to try and topple Obama’s government. Sterling finished the week up against the Dollar hanging on the shirt tails of the Euros performance following the conclusion of a draft report created at a Eurozone summit outlining a method to it would go about solving the region’s debt problems.

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Weekly Economic Data that may affect exchange rates

Below are the main releases for the week ahead. For a free consultation on how these releases 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 is quiet for data releases. Mortgage Approval data from the UK at 09:30am, Inflation figures from Australia and Trade balance figures from New Zealand are the only releases of note.

Tuesday – Much more to watch out for today, including UK House Prices and UK GDP which if poor could push the Pound lower. Germany releases measures of Consumer Confidence and Retail Sales. From the USA we have Home Sales and Consumer Confidence.

Wednesday – Onto Wednesday, and today we see Consumer Confidence figures from the UK. In the Eurozone we have inflation figures from Germany. In the USA we see Mortgage approvals, Durable Goods Orders and the Feds beige book which reports on the economic situation in the USA. We also have inflation figures from Australia today.

Thursday – A busy day for the EU today, with German Unemployment, EU Economic, Consumer and Industrial confidence measures. From the USA we have Jobless figures.

Friday – UK figures today are Consumer Credit, Mortgage Approvals and Money Supply. From the EU we see inflation data, and Canada and the USA both release GDP figures.

If you need to buy or sell foreign currency, click here 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 Forecast July 2011

Weekly Currency Report 11th July 2011

In this week’s Report:

• Sterling vs. US Dollar remains largely range-bound
• Sterling Euro bounces up due to US Dollar sell-off
• Forecast for GBP/EUR & GBP/USD
• 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;

We finally saw some respite for the Pound on Friday afternoon as rates moved back above 1.1250 for the first time this month.

The week started with some better than expected UK house price, service sector and manufacturing data but the positive readings did little to help Sterling as the ECB interest rate decision was looming on the horizon. It had widely been expected (and most likely already priced in to the market) that the ECB would raise interest rates by a quarter point to 1.5%, especially after Jean-Claude Trichet, the head of the European Central Bank, had used his codeword of “strong vigilance” with regards to inflation after last month’s announcement.

This time however, he stated that “there were still upside risks to inflation” which was similar to what he said after the last hike in April and suggests that the central bank were expecting to have to raise rates again later this year, and perhaps as early as August. However, there are still concerns within the markets about debt problems spreading to the peripheral economies, and also fears about how these economies would deal with further interest rate increases.

On the other hand the state of the UK economy isn’t exactly doing much to help the Pound. The NIESR estimate for GDP growth slowed sharply in the three months to June, dropping from 0.5% to 0.1% which only reinforced the view that the UK economy will remain weak for some time. If UK inflation data released Tuesday either slows or remains the same then it could add fuel to the Bank of England’s argument that inflation it will cool on its own and there is therefore no need to raise interest rates until growth is back on track.

This kind of reading could have longer term implications for Sterling, as we saw last week when banks started to suggest that it could be May 2012 before UK rates go up. This then led to Barclays Capital reducing their 3 month forecast for GBP-EUR to 1.05 on Wednesday of this week, while some investment institutions maintain that rates will settle back up around 1.15 later this year.

While a fall well below 1.10 is possible, the continuing problems the Eurozone is facing will continue to limit confidence in the Euro so the slightest change in one of the countries concerned could have quite an effect on the exchange rate. For a more detailed look into this week’s data releases from the UK and EU have a look below at our market data section.

Sterling vs. US Dollar;

US economic activity in the first six months of the year was hampered by rising commodity prices and supply chain disruptions following Japan’s devastating earthquake in March. Although more positives can be taken from the early part of the second half of the year, the US economy remains unquestionable volatile. Most notably, efforts to improve unemployment have been encouraging, as US companies increased hiring measures throughout the month of June however; job growth is not expected to be strong enough to make any large dents into the mounting levels of unemployment. The private sector will account for all the jobs created, as has been the trend over the last seven months, with layoffs at state and local governments continuing.

The debt ceiling crisis remains the biggest grey cloud over the United States. President Obama insisted that he would not sign a short-term extension on the U.S. debt ceiling but instead would work through the weekend on a more permanent deal to avoid a debt default. Trying to break a budget deadlock to enable a debt ceiling increase remains a stiff challenge for Obama and his Democrat colleagues ahead of the August 2 deadline - the US treasury has warned it will run out of money to pay all of the country’s bills if the debt ceiling is not increased by the cut off date. Although it is likely that a deal will be firmed up before the deadline, the constant negative press is likely to see the greenback struggle to continue to rally as a consequence.

Cable has weakened from $1.68 to $1.59 over the last quarter, and is widely expected to remain trading around these levels for at least the medium term, according to the median average of 60 banks and analysts polled by Reuters, who predict Sterling will be trading at around $1.61 during the next 6 months.

Weekly Economic Data that may affect exchange rates

Below are the main releases for the week ahead. For a free consultation on how these releases 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’s UK data comprises RICS House Price balance, and BRC Retail Sales. Both of these give an overall barometer of the UK economy and so can affect Sterling exchange rate. Other than that it’s a quiet day with no data of note from the US or EU.

Tuesday – There are lots of UK releases today: Consumer Confidence, Retail Price Index, Goods Trade Balance, Overall Trade Balance, Consumer Prices and House Prices. So, clearly much here that will affect the Pound, depending if the numbers are above or below forecast. From the Eurozone we have German inflation figures and a meeting of EU finance ministers, in which the EU debt crisis will no doubt be discussed. Stateside we have FOMC minutes and Trade balance numbers.

Wednesday – 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.

Thursday – No UK data of note. EU inflation figures combined with a report from the ECB though could still affect GBP/EUR rates. There is also a speech from the ECB president, so we will be watching this closely for any coded comments that signal future fiscal policy. From the USA we have retail sales, inflation data and jobless claims.

Friday – Onto Friday, and most data is US based – inflation data and industrial production are the main releases of note. There are also trade balance figures from the EU.

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GBP/EUR forecast, GBP/USD outlook, weekly data

As usual for a Monday, today we'll have a detailed weekly look at Sterling vs Euro forecast, Sterling vs US Dollar outlook, and the weekly data that may affect exchange rates:

In this week’s Report:

• Pound vs. Euro drops to 18 month low
• EU Interest Rates likely to go up this week
• Greek austerity plan agreed, affecting EUR and USD
• Round up of the week’s data that may affect rates

Sterling vs. Euro;

The GBP/EUR rate plummeted last week to the lowest since March 2010, falling against a basket of currencies as well as the Euro. Britain’s currency slid against the Euro in particular on predictions that a faltering economy will limit the policy makers’ scope to raise interest rates, as the European Central Bank lifts borrowing costs to curb inflation. A report on Thursday showed U.K. consumer confidence fell more than economists forecast in June while the Bank of England’s Credit Conditions Survey said mortgage demand is predicted to drop in the third quarter.











It was a dramatic week with market sentiment swinging from worries that Greece would go bankrupt to relief that it would get through the crisis, against a backdrop of violent protests and general strikes over austerity steps. The Greek parliament approved a detailed austerity plan on Thursday, paving the way for 12 billion euros of international aid.

“The market is bullish on risk and looking to buy euros,” said Paul Mackel, director of currency strategy at HSBC. “The Greek issues still linger, but there is a bit of calm now with the markets' focus on data.” Barclays Capital pushed back its forecast interest-rate hikes for the UK, saying the central bank will now most likely keep its main rate unchanged until May 2012.

The bank, which previously forecast a rate increase in November, said the change reflects weaker than previously expected economic growth and recent comments from central bank officials. This is in start contrast with the euro zone where even with weak manufacturing surveys, little changed regarding strong expectations that the European Central Bank would raise interest rates next week.

Sterling has fallen 9 percent in the past 12 months, making it the second-worst performer among 10 developed-market currencies after the U.S. Dollar, according to Bloomberg Correlation-Weighted Currency Indexes.

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Sterling vs. US Dollar;

It looks like the US market holiday for Independence Day today will mean a continuation of the relatively flat trading range for Cable that we saw over the last week; the pair hit a low on Tuesday of 1.5923 with a high Thursday of 1.6117.











Media & market attention was mainly focussed on the continuing debt problems in Greece and whether or not the austerity measures would be passed by the Greek parliament. Both the US & UK economies are struggling so both currencies are weak on paper, but how the EU handles the spiralling debt issues within its smaller nations will help to determine how the GBP/USD exchange rate moves.

The US Dollar is the world’s safe haven currency (for now) and as the global financial problems persist, risk-averse investors will continue to plough money into the Greenback, keeping the Dollar strong. If we get to a point where the crisis starts to ease then we should see a return of risk appetite whereby investors will start to put money into perceived risky assets (of which the Pound is one), taking them away from the Dollar and that should start to push the rate back up again.

There were still some data releases last week and we have seen confirmation that UK mortgage activity and consumer spending is still well below levels seen before the credit crunch took effect. With credit conditions this subdued, it continues to highlight the struggle the UK economy is facing and further strengthens the Bank of England’s argument for keeping UK interest rates at their current low of 0.5%.

Barclays Research is among a number of investment institutions forecasting that they will remain this low until 2nd quarter 2012. Without an interest rate hike there isn’t much on the horizon that looks like it will give the Pound a much needed boost, but we have to remember that the US is in the same boat, and some ratings agencies are starting to warn about the risk of the world’s largest economy defaulting on its debts. Unless the government can push through a $2.5 trillion increase in the debt ceiling, the Dollar could be in for a very rough time.

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Weekly Economic Data that may affect exchange rates

The week starts very quietly, but Thursday and Friday both have key releases that could upset the currency markets. Below are the main releases for the week ahead. For a free consultation on how these releases 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 – Very little data today due to US Markets being closed for Independence Day. In fact the only real data of note is an investor confidence release from the EU.

Tuesday – Again, a very quiet day for fundamental data. We have an interest rate decision for Australia, and factory order data from the USA. From the EU we have Retail Sales and Services PMI.

Wednesday – Today we have EU Gross Domestic Product (GDP) figures. This could show growth in the EU, and so expect volatility for GBP/EUR rates.

Thursday – The busiest and probably most important day of the week. Starting in the UK, we have various measures of manufacturing and industrial production, and also a GDP estimate. We will also see the BoE interest rate decision, but we expect no change in rates. Moving to the EU, we have an interest rate decision and we expect a rise from 1.25% to 1.50%. This could well strengthen the Euro and push GBP/EUR rates lower. We also have various measures of unemployment from the US, indicating how their economy is performing.
Friday – Again pretty busy today, with UK inflation data (PPI) and German trade balance figures. Germany now has the lowest unemployment since reunification and so further good data from Europe’s largest economy could strengthen the single currency. From the US we have Non Farm payrolls. This shows how many people are employed outside the agricultural sector (as it’s seasonal) and the numbers are very hard to predict. As such, the actual result can differ to forecasts and often causes big swings for GBP/USD and GBP/EUR.

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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.

If you need to buy or sell any currency, click here to send me an enquiry. You can then take advantage of a free consultation on the currency markets, and take the first step to taking advantage of the commercial exchange rates we offer. They can be up to 5% better than you can get at the bank, so fill the form in now.

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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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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