Currency Forecasts
Getting the best exchange rates
Pound surges higher against Euro and US Dollar
The Pound has surged this week, rising to €1.15 vs the Euro and above $1.30 against the US Dollar. There are 2 reasons for the gains we have seen for Sterling. The first is optimism in the markets that Theresa May will be able to make progress with Brexit talks when she meets Junker today in Brussels. There are still hopes that she can gain concessions to get the withdrawal deal through parliament, removing the chances of a ‘No Deal’ and in doing so, remove much of the uncertainty that has been keeping the Pound subdued.
The second reason is decent UK data showing the economy is performing well. Unemployment is at record lows, wage growth is rising at it’s fastest pace in 10 years, and UK retail sales figures show that consumers are still spending. The news of Honda closing its factory in the UK has not had much of an impact as it’s not believed to be due to Brexit. Global car sales are down and they have said they are restricting their manufacturing base to where they sell most of their cars.
In the light of the recent gains, in today’s post I will outline why using a broker like us when making international payments can save you thousands of Pounds.
Getting the best exchange rates for purchasing property overseas
When purchasing property overseas, you will usually pay in a foreign currency, e.g. Euros. This means that you will need to convert your Sterling and in doing so, enter the potential minefield of the currency markets.
The natural inclination is to use your bank however this is usually a very expensive way of doing it. Banks don’t usually offer particularly competitive rates, and a currency broker can achieve rates that are typically 2% to 3% better. Given a property purchase will usually involve a sizable sum to be converted, the savings can be considerable. A 2% difference in the rate when buying €300,000 will save you more than £5,000.00.
How does using a broker work?
Using a broker is straightforward. The first step is to register an account which you can do online. This shouldn’t cost you anything or obligate you in any way, and simply allows you to get a live quote to compare rates of exchange.
When purchasing a property overseas, the first step is paying a deposit. You would do this using a ‘Spot Contract’. You simply fix a rate with your broker, settle the required Sterling amount by debit card or bank transfer, and your currency is then transferred to the solicitor dealing with the sale. We don’t charge you any fees or commission, as we will be making a small profit through our margin (the difference between the rate we buy at, and the rate offered to you).
Protecting against volatility using a Forward Contract
Most purchases will have a lag time between paying the deposit and paying the completion balance, of up to 3 months. The exchange rate could change significantly in that time, so simply relying on another ‘Spot Contract’ at the time of completion could prove costly should the rate fall. Most overseas purchasers therefore opt for a ‘Forward contract’. This allows you to eliminate the risk of fluctuating exchange rates by freezing an exchange rate today for a transaction that will take place in the future.
Forwards are very popular when buying overseas, as it allows you to fix a rate on the balance due at the same time as securing your deposit, thus protecting you from unfavourable movements in the market. A 10% deposit is required to secure the contract, with the remaining 90% due when you want your currency to be transferred. You then know the cost of your property in Pounds, regardless what happens with exchange rates.
Taking a gamble
For those less risk averse that are happy to gamble on the rate moving up in their given timeframe, 2 other contracts are available: A Stop Loss order will protect you against adverse exchange rate movements and secure your currency if it falls below a pre-agreed level, giving you a worst-case scenario while still allowing you to take advantage of any gains in the rate should the market move in your favour.
A Limit order is the opposite; it is placed to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you. If you have a target rate you are aiming for, you can place a Limit order to buy should it get there, while having a Stop Loss order in place to protect against adverse movements.
Get in touch today to find out more
Everybody’s specific requirements are of course very different, as are attitudes to risk. If you are looking to buy property overseas, or need to convert currency and want to make exchange rates work for you, you should have a free consultation with one of our foreign exchange brokers so that you can discuss all the options available, and make an informed choice about which type of contract is right for you.
Political Uncertainty keeping the pound in check
Pound exchange have remained relatively stable today despite the on-going Brexit debacle. To highlight how much of shambles this whole process has been seven MP’s have resigned from the Labour Party in protest at Jeremy Corbyn’s approach to Brexit and anti-semitism.
The MP’s who all back a further referendum have reportedly said they will not be launching a new political party but instead will sit in Parliament as an independent group.
As my my colleague Alastair alluded to in his post last week there are a number of potential outcomes as we head towards the key date of the 29th March. He is of the opinion that a deal will be reached, even if it is at the 11th hour, however I am not so sure. For me I believe there isn’t enough time to get a deal in place and I would expect an extension of Article 50 to be seen. If this is the case then I expect the pound to continue to trade in a relatively tight range against the Euro.
What data could impact exchange rates this week?
Of course the on-going Brexit debacle will keep the pound in check and will continue to dominate as we head towards the 29th March. Below I have given an outline of key data this week that could have a more immediate impact on exchange rates.
Tuesday 19th – 09:30 UK unemployment figures. Expected to remain on hold at 2.8%
Tuesday 19th – 10:00 EU construction output. Strong figures forecast up from 0.9% to 2.1% which could see some Euro strength.
Tuesday 19th – 15:00 EU speeches from European Central Bank member Peter Praet
Wednesday 20th – 09:00 EU Markit services PMI
Wednesday 20th – 13:30 US Initial jobless claims
Wednesday 20th – 14:45 US Markit Services PMI
Thursday 21st – 09:00 EU Markit services PMI
Friday 22nd – 10:00 EU Consumer Price Index
Friday 22nd – 15:30 EU ECB President Draghi speech
Friday 22nd – US Fed monetary policy report
Looking for the best rates? Speak to an expert
We provide exceptional rates of exchange for all major international currencies. We don’t offer cash, but can help those looking to move funds via bank transfer e.g. buying or selling property overseas, importing or exporting goods, or simply topping up a foreign bank account. We don’t charge commission or fees, and our rates are very competitive.
Pound Rises on Retail Sales data
Retail Sales better than expected
The Pound has recovered most of yesterday’s losses after stronger than expected Retail Sales number were released this morning. The markets had only been expecting a small rise of 0.2%, but the actual number came in at a much more impressive 1.0%. This indicates that consumers are still spending. Retail Sales is a good barometer of the overall health of the economy, so the better result helped the Pound rise. You can see live graphs here.
May suffers defeat; currency markets ignore it
In other news, May lost a series of votes last night as was expected. It didn’t affect the Pound much because it doesn’t really mean anything. The lack of support however means there is no impetus for the EU to make concessions to help get the deal through.
Will a deal be done?
I’m still of the view that they will make the necessary concessions. From the EU’s point of view however, there is little point in doing so now. If they did there is the risk of the UK going back and asking for more. It’s more likely they will leave things until the last minute as the EU has been shown to do in the past. If they do make concessions, parliament have already indicated that they will vote the deal through. This would help the Pound as it would put to bed once and for all any chance of a ‘No Deal’, and both sides could get on with negotiating a trade deal.
Getting the best exchange rates
If you need to change currency and want to get the best exchange rates, then get in touch today to see how we can help. We offer exceptional rates of exchange that are up to 5% better than banks or other brokers may offer. You can also speak to one of our expert brokers about the market to help with the timing of your trade.
Pound exchange rates fall on Brexit woes
Pound exchange rates have fallen sharply today following rumours that the European Research Group (ERG) will vote against Prime Minister Theresa May’s Brexit proposal tonight.
MPs will vote later on whether they still support the government’s approach that they backed in a vote last month and the Brexit Secretary Stephen Barclay has come under fire for refusing to rule out a no-deal Brexit. Brexiteers are unhappy with the motion because they say it implies support for ruling out a no-deal Brexit.
Tonight’s events are not expected to be set in stone as Mrs May has promised lawmakers will get another chance to express their opinion on the 27th February.
Why has the pound fallen?
With only six weeks to go until the UK is to officially leave the European Union on the 29th March markets are concerned the risk of a ‘no deal’ Brexit is becoming more and more apparent. It is this risk that has caused the pound to fall.
Tonight a number of amendments will be voted for, inclusive of one that calls for a second referendum. Analysts believe that if Mrs May did open the door for a second referendum then the pound could bounce significantly. Either way it is likely the pound will see some volatility in the next six weeks.
Looking for the best exchange rates?
If you need to exchange a large volume of currency, and would like to get a quote or speak to an expert about the current trends, make an enquiry with us today by following the link below.
NZD rallies following rate decision
New Zealand Dollar exchange rates have rallied sharply overnight following the latest Reserve Bank of New Zealand (RBNZ) interest rate meeting.
NZD exchange rates have strengthened nearly 1.5% as the RBNZ held interest rates at 1.75%. This move was expected but it was the accompanying statement that caused the New Zealand Dollar to rally sharply.
Upbeat statement causes NZD strength
In the post decision statement many analysts were expecting a relatively dovish tone to come from the minutes with most analysts expecting a series of interest rate cuts on the horizon. However the statement was far more upbeat with longer term projections actually suggesting a potential rate rise with a freeze of rates until 2021.
This has brought to a halt the recent rally for the pound which had climbed from 1.87 in early February to peak at just below 1.92. It also highlights how volatile the market can be and the impact this can have on an international money transfer. On a £300k transfer to New Zealand between the high/low rate of exchange in the last week the difference is a staggering $15,000 NZD.
Is this the end of the GBP/NZD rally?
For me I still feel it is likely the pound will have a stronger year and particularity against the riskier currencies such as the NZD, AUD and ZAR. If we can make a break though regarding Brexit (a big if I know) then the pound is likely to see some significant support. I also feel the sentiment from the RBNZ was maybe there to mask over the recent issues seen for the New Zealand economy. Growth has been steadily falling and tensions between New Zealand and China growing as New Zealand has lost its favoured status with the Chinese political leadership following the Government decision to rule Huawei out of the 5G mobile build.
China is the second biggest trading partner for New Zealand (behind Australia) and on-going tensions will not be good for future business. My take on this is that the recent blip for sterling maybe short lived and I would look for the pound to push back over 1.90 in the short-medium term.
Do you need to send money internationally?
Here at currencyforecasts our aim is to help private and corporate clients with the timing of their exchange. By being kept fully up to date on the market trends and short to medioum term movements we can potentially help you save thousands of pounds on your money transfers.
We offer exceptional rates of exchange coupled with tools to enable you to avoid sharp price changes. Even if you are already using a currency broker, it’s likely we can get you a better rate. Why not give us a try? To find out more about how we can help, or to get a quick comparison quote, complete our free enquiry form here.
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