Weekly GBP/EUR and GBP/USD forecast

Tuesday 6th September 2011
Good morning. Today we'll take a detailed look at GBP/EUR and GBP/USD rates over the course of the last weeks trading. In this week’s Report:

• Pound slips away on poor data but rallies at end of week
• UK interest rates to remain on hold for some time
• 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;

At the start of the week we saw the GBP/EUR rate reduce for two consecutive trading days to 1.1283. Clients were receiving less Euros for their pounds as the Euro gained ground against Sterling. This movement would have seen a difference of nearly 1000 euros on a £200,000 trade over a two day period.

Sterling was vulnerable almost across the board this week. UK net lending and money supply data was poor on Tuesday and consumer confidence data remains at very low levels. The euro was on the back foot.

Euro zone annual inflation was unchanged in August while the number of people without jobs continued to increase. This was confirmed by figures released on Wednesday, adding to expectations that the next ECB (European Central Bank) interest rate move could be a cut rather than a hike. As a result we saw GBP/ EUR trade around the €1.13 level and a dip in the market was looking increasingly likely towards the latter stages of the week as the euro continues to enjoy hefty investment from Asian sovereign buyers.

EU statistics office Eurostat said inflation in the 17 countries using the euro was 2.5 percent year-on-year in August, the same as in July, as expected by economists.
The European Central Bank has indicated they want to keep inflation below, but close to, 2 percent, and economists had been expecting the bank to raise interest rates a third time this year to 1.75 percent from 1.5 percent to stem price pressures.

There was no surprise month-end moves from the British Pound this time, Wednesdays session was a case of sideways trading among the major currencies, though the euro had weakened significantly by Thursday morning.

With regards to the euro exchange rate we note that PMI (Purchasing Managers Index) numbers are due across Europe with slight declines expected in general and risk appetite should respond accordingly.

Friday morning’s whole-of-Eurozone Producer Price Index data showed an acceleration in the increase in input prices for Eurozone producers. Invariably, manufacturers will pass these price rises on to consumers, so the figure suggests that the single economic area may face higher prices as 2011 draws to a close, meaning further interest rate rises by the ECB are increasingly likely.

If you need to buy or sell Euros, send us an enquiry today.

Sterling vs. US Dollar;

The Sterling/Dollar had a bullish day on Monday, as traders continued to sell the USD against many other currencies. As the stock markets rallied, the Pound gained strength against the Greenback.

On Tuesday Pound/Dollar decreased by nearly 170 pips, in converse with the positive Interbank sentiment at nearly +1%, depreciating from 1.6420 to 1.6253, closing the day at 1.6297.

The pound edged higher against the U.S. dollar on Wednesday, as the dollar was weighed by mounting speculation that the Federal Reserve may soon implement fresh stimulus measures to boost U.S. growth.
On Thursday Pound/Dollar decreased with nearly 125 pips, in line with the negative Interbank sentiment at almost -8%, depreciating from 1.6257 to 1.6130, closing the day at 1.6178.

The pound slipped to a three-week low versus the US dollar on Thursday afternoon to $1.6197 after data released showed that manufacturing activity in the UK shrank in August, further signalling that the economic recovery is stalling.

Friday afternoon’s Non-Farm Payroll figure caused massive price action for the Dollar at the time of its release. The figure immediately caused investors to move out of stocks and into defensive bond plays, which saw the US Dollar gain ground as the week’s session drew to a close.

The Pound edged higher against the Greenback on Friday, extending a bounce from a 3-week low struck on Thursday at 1.6130 ahead of the US jobs data. GBP/USD managed to regain the 1.6200 mark during the European session and touched a daily high of 1.6253 in recent trade.

If you need to buy or sell US Dollars, send us an enquiry today.

Weekly Economic Data that may affect exchange rates

Tuesday – Today in Australia we have the RBA interest rate decision and policy statement. In the Eurozone we have GDP figures month on month and year on year.

Wednesday – Wednesday sees industrial production and manufacturing production figures released in the UK, whilst in Canada we have the BoC interest rate decision.

Thursday – An important day for the UK and Eurozone with interest rate decisions for both economies. On the other side of the pond we have jobless claims data.

Friday – We end the week with a busy day in UK but quieter elsewhere with data Producer Price Index in the UK which measures the change in the price of goods manufactured. The UK also releases figures relating to the Trade Balance and Producer Price index.

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Weekly GBP/EUR & GBP/USD Outlook Forecast

Monday 8th August 2011

Good morning, As always on a Monday morning, today we'll take stock of the last weeks movements that has created best exchange rates to buy Euros and US Dollar is some time, following the turmoil in the financial markets last week.

In this weeks Report:

• EU debt crisis significantly weakens Euro
• World markets rocked by sovereign debt worries
• US Debt agreed, Job figures better than expected
• 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;

This week European markets have again fallen sharply amid a crisis of confidence in the ability of Eurozone leaders to deal with debt problems. Due to this the pound has risen sharply against the euro reaching a two month high last Thursday.

Investor confidence was severely hit after European Commission President Jose Manuel Barroso warned that financial markets are not convinced that Eurozone governments are prepared to take necessary action to defend the stability of the Eurozone.

Barroso says that the Eurozone crisis is no longer “just in the Euro-area periphery”, a reference to the uncertainty spreading from Ireland, Portugal and Greece to Spain and Italy which are now at the eye of the storm. The fear that these countries would need assistance has significantly weakened the Euro giving some great opportunities to buy at the moment.

The European Central Bank has said it will offer a fresh round of loans to banks in light of continuing fears about the Eurozone debt crisis. "Given the renewed tensions in some financial markets, the ECB has decided to conduct a supplementary refinancing operation," said the bank's president, Jean-Claude Trichet. He added that economic uncertainty was "particularly high"'.

Last week bonds issued by the Irish and Portuguese were bought up by the ECB but there was concern that they did not appear to have intervened to help Spain and Italy, whose borrowing costs have risen significantly recently.

Time will tell whether the EU manage to come to an agreement to avert the crisis escalating, but in the meantime you should look at the positive; you can buy Euros at a much better price than has recently been available. It's very important to note however that this is purely due to movements with the debt crisis in the US and fundamental UK data is still very poor.

If you need to buy Euros in the next 6 months, consider discussing the options available with a currency broker such as Forward contracts, Stop Loss orders and Limit orders, to ensure you secure the best possible exchange rate.

Do you need to buy or sell Euros? Send us a free enquiry now

Sterling vs. US Dollar;

The US Dollar suffered last week as fears escalated that the US economy was heading towards another recession. Stock markets tumbled to their lowest point since 1978 and Sterling climbed close to 1.65 as continued political and economic woes weighted on the dollar.












Carrying over from the week previous, a last minute deal to raise the U.S. borrowing limit cleared its biggest hurdle in Congress on Monday, warding off the risk of a debt default after weeks of feuding which damaged America's image abroad but failed to dispel fears of a credit downgrade.

Moody's Investors Service and Fitch Ratings maintained U.S. ratings for now, but said additional deficit-reduction measures were needed for the government to put its finances in order, Underscoring that threat, Moody's assigned a negative outlook to the AAA rating, which means a downgrade is possible in the next 12 to 18 months.

Fitch promised to conclude a more thorough review of the United States by the end of the month and did not rule out slapping a negative outlook on the rating. Now investors await Standard & Poor's. The agency has been tougher than its rivals, threatening to downgrade U.S. ratings by mid-October if lawmakers did not come up with a plan to meaningfully cut the budget deficit.

The dollar fell further on Friday despite stronger-than-expected U.S. jobs growth, the much anticipated Non-farm payrolls accelerated more than expected and the unemployment rate dipped to 9.1 percent from 9.2 percent Markets however remain sceptical on the inability to stem the spread of the euro zone's debt crisis, but Friday's employment report offered a glimmer of hope.

Do you need to buy or sell US Dollars? Send us an enquiry now.

Weekly Economic Data that may affect exchange rates

Monday – House Prices and Retail Sales from the UK today will give some idea how confidence in the economy is faring. Eurozone confidence figures are also due, which in the current climate are unlikely to be positive.

Tuesday – Lots of UK data today; Manufacturing Production, Trade balance, Industrial Production and a GDP estimate. We could therefore see significant volatility for Sterling today. There is also an interest rate announcement and press conference by the US Federal Reserve.

Wednesday – German inflation figures will be closely watched today, for any hint of a further EU interest rate hike. In the UK we see a confidence report, and there is a Bank of England inflation report, along with a speech by BoE governor Mervyn King.

Thursday – A bit quieter today, with a report from the European Central bank the only thing likely to affect GBP/EUR. In the USA there are various jobless measures.

Friday – We end the week with Industrial production figures from the EU, and Retail Sales from the United States.

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 update forecast

In this week’s Report:

• Bank of England minutes causes fall for Sterling
• Chance of further Quantitative Easing for the UK
• Greek debt keeps Euro weak, limiting GBP/EUR drop
• Round up of the week’s data that may affect rates

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

Sterling vs. Euro;

Sterling finished last week over half a cent down against the euro from the start of the week but almost 1 cent better than the lowest point of trading midweek. Last weeks key UK data and indeed the biggest drop came following the minutes of the Bank of England meeting, held at the beginning of the month, which of course showed a 7-2 split in favour of keeping rates on hold.











However, with exit of Andrew Sentence from the committee and the addition of Ben Broadbent the minutes were interpreted as being particularly dovish. As a result, the money markets are now not pricing in a BoE rate rise until July or August 2012, while only a few months ago the expectation was for two rate rises by the end of this year.

Sterling’s performance was further muted by signs the Bank of England could yet be inclined to embark on another round of quantitative easing, and this has driven the pound lower this week with many investors forced to unwind more bullish positions.

Euro confidence was bolstered on Tuesday when Greece’s socialist premier ‘George Papandreau’ was given a vote of confidence by the Greek Government making way for a new wave of austerity measures which were subsequently agreed by the EU on Thursday. Mr Papendreau now needs to push these measures through his own parliament which will include a sale of $70 billion of state assets. Despite the dire straits Greece find itself in, the Euro held firm against Sterling as the events were interpreted as a scene of solidarity on behalf of the European community.

Adam Cole at RBC Capital Markets suggested that Sterling’s position is unlikely to change unless the market starts to point towards better growth figures in the form of Q3 GDP figures - If this happens then it may be enough to begin to mute the doves in the MPC and see Sterling make some headway against the single currency.

This however is not the case at the moment, and last week was yet another of Sterling being bullied around by the Euro on European data, and probable delays in interest rate rises in the UK. This week’s key UK data release is the final Q1 GDP figures. The market expects to see 0.5% growth, however keep in close contact with us if you are buying or selling Euros, as any deviation from this figure (especially negative) is likely to cause some volatility in the market. Discuss ‘Stops’ and ‘Limits’ as a way of maximising your position whilst at the same time protecting yourself from any potential drops in the market. If you haven’t already, make a free enquiry with us now by clicking here.

Pound vs US Dollar Forecast

Fed Chairman Ben Bernanke’s second ever press conference given last week seemed to rule out almost entirely the prospect of further policy stimulus, strengthening the US Dollar even as the US economy is going through a soft patch and the unemployment rate has been rising. This has pushed GBP/USD rates lower as the chart below clearly illustrates:











The Fed believes that the factors weighing on growth are very much temporary, including higher commodity prices constraining consumption and disruption from the Japanese earthquake to the supply chain that has hit industrial production. It also believes the pace of recovery will pick up later this year.

However, it did sound a note of warning about inflation saying that it had noted the pace of price increases recently and it would continue to "pay close attention to the evolution of inflation and inflation expectations." This was considered more "hawkish" than some had expected, however, like the Bank of England, the Fed thinks that inflation will eventually moderate when commodity prices fall.

However, while we think a floor has been put in for the dollar for now there are many reasons for scepticism that the greenback rally will continue... Firstly, the Fed could change its mind if the economic situation deteriorates, so we need to see how the data pans out over the next few months. Secondly, the US still faces a political wrangle to get Congress to agree to raise the debt ceiling so the US can avoid bankruptcy later this year. Although we think the debt ceiling will be extended, the US's massive $14 trillion debt load means that we are unconvinced at the extent the dollar can rally. With debts that big the US needs a weak currency to boost exports and to create a little bit of inflation; thus bringing down the size of the debt in real terms.

On Friday, Cable (GBP/USD) went below $1.60 for the first time in 3 months; could this be the beginning of the much speculated rally, or just a temporary trough? Could the Greenback realise its current potential by rising further against a weak pound? If you are buying or selling USD it is an important time to be keeping abreast of what's happening in the markets. Click here to send us an enquiry, and have a free consultation.

Weekly Economic Data that may affect exchange rates

Monday – From the UK today we have Nationwide Housing Prices, which is an indicator of the health of the UK housing market. From the EU we have Retail Sales from Germany, the largest economy in the EU. It’s considered a barometer of EU consumer confidence. From the USA we have Personal Expenditure data, which is a significant indicator of inflation and could affect future interest rates.

Tuesday – Gross Domestic Product is the main UK release today, which is a broad measure of economic activity. From the Eurozone we have the Consumer Price Index from Germany. This is an inflationary measure and if high could increase the chance of an EU rate hike, pushing GBP/EUR lower. Consumer Confidence from the USA is the major release from across the pond.

Wednesday – UK data today is in the form of Consumer Credit, Mortgage Approvals, Consumer Confidence and Money Supply. Recent UK data has been very gloomy, and further poor data could push Sterling lower. From the Eurozone we have measures of economic, industrial and consumer confidence all of which could affect GBP/EUR rates.

Thursday – Unemployment data from Germany today is the main release from the Eurozone. The UK has little data out today, however there is a credit conditions report from the BoE. This studies the risk attitude towards UK banks, and can indicate economic growth (or lack thereof!). We also have jobless figures from the USA and Gross Domestic Product from Canada.

Friday – We end the week with a raft of inflation data from the UK and EUR, in the shape of the Purchasing Managers Index. This can indicate where interest rates may move in the coming months, and given the interest rate differential has been a big driver in GBP/EUR rates of late; markets will be paying close attention to the figures. From the USA we have some Manufacturing and Construction data.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exhange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.