Currency Forecasts

Pound Euro Exchange Rate under Pressure amid Brexit Speculation

Comments from European Central Bank (ECB) policymakers have provoked significant volatility for the Euro over the course of the last week.

Markets are continuing to speculate over the likely timing of the ECB’s first interest rate hike since 2011, with policymakers proving split on the matter.

While some see a July 2019 rate hike as a possibility other members of the ECB council believe rates should remain on hold until much later in the year.

Even so, with the central bank shifting towards a generally more hawkish outlook this gave investors an increased incentive to pile into the Euro. However, as the German ZEW economic sentiment index plunged to a six-year low of -24.7 in July the mood towards the single currency soured once again.

Brexit speculation also helped to weigh down the GBP/EUR exchange rate.

Demand for the Pound weakened in response to fears over the possibility of a leadership challenge against Theresa May, with a number of Brexiteers expressing issues with the government’s Brexit white paper.

Although May’s proposals would represent a softer form of Brexit there is still considerable uncertainty over the likely shape of the final deal with the EU.

What could impact the pound this week?

This week is quite heavy on the data front with a number of key releases that could impact the pound. I have highlighted below the main releases to focus on:

  • Tuesday 09:00 – Bank of England Governor Mark Carney speech
  • Tuesday 09:00 – UK ILO Unemployment Rate
  • Tuesday time tbc – The National Institute of Economic and Social Research (NIESR) GDP estimate. The NIESR are a very well respected think tank and their estimates are often very close to the mark. Well worth keeping an eye on this release.
  • Wednesday 09:30 – UK Producer Price Index and Consumer Price Index data. Key inflation figures and will influence the central banks views on monetary policy.
  • Thursday 09:30 – UK Retail Sales. A fall from 1.3% to 0.4% is expected and this could cause the pound to fall in Thursday morning.
  • Friday 09:30 – UK Public Sector Net Borrowing.

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Trump comments cause a US dollar rally

With Donald Trump making his first visit to the UK as the US President his comments regarding the potential “soft Brexit” approach led to the pound falling back to a near month high against the pound. Since the beginning of the week the dollar has now rallied close to 2% although we have seen a slight recovery for the pound this afternoon.

During his historic meeting with the Prime Minister Theresa May it was suggested that Trump had said that Theresa May had ignored his advice by opting for a soft Brexit and warned her that any attempts to maintain close ties with the EU would make a lucrative US trade deal very unlikely. He was later to say that his  comments were indeed “fake news” and hailed the “highest level of special” relationship with Theresa May.

As a result we have had a mixed day for GBP/USD with a high/low range from 1.3215 to 1.31.

Do you need to buy or sell US dollars?

Should you have an upcoming money transfer to arrange involving the US dollar we are seeing some significant market movement of late. For this reason it is important to make sure you get as much information relating to the currency markets as you can. By using the cervices of a currency broker you will have access to key market data that can have a major impact on the cost of your currency transfer. There are many benefits of using a broker other than just the exchange rate. By using a specialist currency broker, you gain access to multiple contract types. This can help safeguard your money transfer from adverse market movement. You will also find the process to be efficient and far less time-consuming than the banks.

Ahead of England’s crunch semi final against Croatia, what could impact sterling today?

As the country firmly slips back into football mode ahead of the much anticipated world cup semi final against Croatia, for those that are interested, I will look at what could impact the pound for the rest of the week. With much of the England gripped by football fever and the prospect of football “coming home” the pound has settled following the busy start to the week.

As the market still digests the political instability caused by the resignation of key Brexit figures David Davis and Boris Johnson, it would appear the chances of Theresa May’s leadership coming under threat is waning. Many of her cabinet have publicly backed her leading to a degree of calm for the pound (for now).

What could impact the pound for the rest of the week?

Looking away from the Brexit debacle I have outlined below the data that could impact Sterling, Euro and the US dollar exchange rates for the rest of the week.

  • Wednesday 13:30 US Producer Price Index data. This is a key inflation barometer for the US and generally a higher reading is better for the dollar. Figures expected to fall from 0.5% to 0.2% month on month.
  • Wednesday 16:35 Bank of England Governor Mark Carney is due to speak. Nothing expected from his speech but worth watching for any clues as to future monetary policy for the UK.
  • Thursday 10:00 Eurozone Industrial Production data. A sharp increase expected month on months from -0.9% to 1.2% so could lead to Euro strength.
  • Thursday 13:30 US initial jobless claims and Consumer Price Index (CPI) figures. Figures expected to remain flat so no market movement anticipated following this release.
  • Friday 12:00 Monetary Policy Committee (MPC) member Sir Jon Cunliffe is speaking.
  • Friday 16:00 US Fed Monetary Policy report.

As you can see there is still plenty of data for the rest of the week. The pounds short term movements are still set to be dominated by “Brexit” but it is still important to keep up to date with economic data.

Can we help you with currency exchange?

If you’re reading this blog, there’s a good chance that you’re interested in finding out what is moving the currency markets, and a desire to get the best possible exchange rate. We can help you achieve rates up to 3% better than your bank or existing broker might be offering. It costs nothing to get in touch for a quick quote to see what we can offer you. It’s always worth shopping around for the best exchange rate. Especially if you have a large transfer to make, as even a small improvement in the rate could save you thousands of Pounds.

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Sterling falls following the resignation of David Davis and Boris Johnson

Pound exchange rates initially founds some support this morning following the resignation of Brexit secretary David Davis. This week was always set to be dominated by British politics with Mrs Davis quittting late on Sunday night, saying Theresa May had “given away too much too easily”.

A successor for Mr Davis has already been found with the appointment of Dominic Raab as Brexit secretary. Mr Raab, who is currently housing minister, was a prominent Leave campaigner during the 2016 referendum.

Ordinarily with a prominent figure leaving an already fragile government you would have expected the pound to have fallen. However, in this instance, we were to to the reverse with GBP/EUR pushing as high as 1.1350 and GBP/USD peaking at 1.3362, up from last weeks lows of 1.31. Many would argue that Mr Davis leaving is not a huge surprise, however what maybe came as more shocking to the market was the resignation of Boris Johnson.

The resignation of two senior members of Theresa Mays government has now called into question her authority with many believing she is likley to face a challenge to her position. Following the news of resignation of Mr Johnson the pound was to fall as low as 1.1270 against the Euro and 1.3235 against the US dollar.

What now for the Pound?

A lot for me will depend on whether Theresa May is able to win back the confidence of her cabinet. Questions are already being asked as to whether she will face a challenge to her position. Should this happen then this brings back into the equation the real possibility of a “hard Brexit” something Theresa May has been actively trying to avoid. If May can hold onto power and her plan gains traction and becomes a realistic solution then we could actually see the pound gain further support against a number of currencies this week.

Do you need to send money overseas?

Do you need to transfer money internationally? Do you need help getting the best rate? If so then we can help.

If you would like to discuss our services, get a quote, or simply have a quick chat about what is happening with exchange rates, make a free enquiry today by clicking here. Our rates are up to 5% better than your bank could offer. We’ve never had a problem beating rates from other currency specialists.

Pound weakens on proposed Brexit Customs Plan

Why has the Pound fallen today?

Theresa May has revealed some details about the proposed new Brexit Customs Plan.  There are meetings today between the Prime Minister and Angela Merkel, but they don’t seem to be going as well as May had hoped. We’re hearing that Germany are said to regard the plan as ‘unworkable’. This is before they have even been discussed properly by the Cabinet, so it doesn’t bode well for those hoping there would be some progress with negotiations. There’s been an immediate effect on Sterling, and in the last hour GBPEUR has dropped into the €1.12’s against the Euro.

Brexit Customs Plan

This new Customs proposal is something that we’ve been talking about all week. It certainly has the potential to weaken the Pound further. It’s looking more and more likely that the EU will simply say that the plans aren’t workable. The UK government have come up with 2 previous proposals to keep frictionless trade with the EU. However, both were rejected by the EU. The latest proposal is said to have the best bits of both the previous offers.

I’m not surprised that the EU are unlikely to accept the new proposals. They’re also not very forthcoming with any alternatives, simply stating that the UK decided to leave, so the UK needs to come up with a plan. This can’t go on forever, and this continued uncertainty is starting to weigh on Sterling more and more. To me, it seems that we’re not going to make any meaningful progress with Brexit before the next EU summit in October. This means the Pound could potentially fall further in the coming weeks and months.

Protecting against rates falling

If you need to convert Pounds to Euros, Dollars, or any other currency, then you should consider how to protect yourself against the Pound dropping further. There are 2 ways that we at CurrencyForecasts.co.uk can help you do this.

The first is by using a ‘Forward contract’. You can freeze the current rate for up to 2 years by lodging a deposit of 10% of what you need to convert. This guarantees the rate and protects you against the rate getting worse.

The second way is by using a ‘Stop Loss’ order. This is where you instruct us to convert your currency if it drops below a pre-agreed level e.g. €1.12. This gives you a bottom line and a worst case scenario. If rates plummet, you’re currency is bought if it drops below this level. If it doesn’t however, you are free to take advantage of any subsequent gains. This allows you to take the chance of rates rising while still having protection. This is useful if time is on your side.

Get in touch today

If you would like to discuss our services, get a quote, or simply have a quick chat about what is happening with exchange rates, make a free enquiry today by clicking here.

Our rates are up to 5% better than your bank could offer. We’ve never had a problem beating rates from other currency specialists.