Pound to Euro and Pound to US Dollar Forecast

Pound to Euro Forecast Outlook
The last week has seen some fluctuation in the GBP/EUR exchange rates, exhibiting just over a 1.7% movement from the low to the high of the week. Whilst remaining relatively stable, the downwards movements that we have seen can be attributed to the release of UK Retail Sales figures. The data released showed a decline of 1.8% compared with the forecast 0.5% fall.

Whilst this data will be possibly misjudged due to the return of VAT to it’s former 17.5% level and the recent poor weather, the figures do little to allay fears over a renewed downturn to an already depressed economy and currency. The drop from 1.1453 to 1.1335 on release of the figures; highlights the importance of staying in contact with your account executive. On a trade of £200,000, this is a difference of over £2300.

Looking to the week ahead; we will be seeing revised GDP figures for Germany on Wednesday and the UK on Friday. If Germany releases better figures than the UK, this will only go to strengthen the Euro more against Sterling. As we currently experience a weak amount of confidence in Sterling; issues of high public borrowing and the possibility of credit-rating downgrade only amplify fears of a declining GBP/EUR rate.

Those looking to purchase Euros, may wish to investigate taking out a forward contract with FCG. This allows a client to protect their interests by purchasing ahead for anything up to two year securing the prevailing market exchange rate with only a 10% deposit.

In other data releases this interest this week; the UK Consumer Confidence survey is significant. A low reading here, as is the general consensus, could spell bad news for Sterling on Friday driving the UK to further economic downturn. We can only further emphasise the benefits of staying ahead by staying in touch with your broker at FCG, by calling +44 (0)1442 891060.

Pound to US Dollar
Last week we witnessed another poor week for the pound Vs the greenback largely due to the feds decision to increase its discount rate to 0.75% from 0.5%. The Fed stated the reason for its move was due to “continued improvement in financial market conditions” leaving many analysts feeling they could soon raise its other key lending rate.

The movement off the back of this decision saw GBP/USD rates fall by just over 2.75% from the week high, representing a difference of nearly $8700 based on a £200,000 transfer. With such dramatic movements this shows the importance of staying in contact with your account manager here at FCG to try and help make the best decision for your individual requirement.

The week ahead sees a host of important data releases for both the US and UK with the latter focusing on Fridays Gross Domestic Product (GDP) figures revised from the fourth quarter of 2009. If the figures are different from the original 0.2% expect market volatility as GDP determines if the country is in recession. The pick of US posts are consumer confidence figures released on Tuesday 23rd at 15:00pm

US GDP revised figures on Friday 26th. Friday also sees real personal consumption expenditure (RPCE) results for the fourth quarter of 2009. The RPCE is an average of the amount of money consumers spend on durable goods, consumer products and services and is considered as an important indicator of inflation. Other news from the US includes the durable goods orders for January with a predicted increase to 1.2% from 0.9%.

With the Dollar seemingly going from strength to strength and Sterling still very fragile in many investors eyes, small differences from the above data could make this week a very difficult one for those with a GBP/USD requirement.

Here at FCG we have many tools at our disposal for securing your currency including a forward contract, which allows you to lock a rate today with a small deposit for anything up to two years in the future. The idea of the forward contract is to protect clients from adverse market movements and with potentially tough times ahead this could prove a wise option. If you are not yet a client with us you can open a trading facility in a matter of minutes by clicking here giving you access to our commercial rates of exchange and as previously mentioned our forward contracts.

This Weeks Data
For the first part of the week the main economic data comes from the EU and Germany in particular. On Wednesday, we will see Consumer Confidence and Gross Domestic Product (GDP) data from Germany. GDP s a measure of the total value of all goods and services produced by Germany, and is considered as a broad measure of the German economic activity and health. Because Germany is the largest economy in the EU, it has an effect on the Euros’ value as a whole. We expect a quarterly gain of 0.7% – more than this and expect the Euro to strengthen and GBP/EUR rates to drop. We also have several confidence measures from the EU, which will be interesting to see in ongoing saga of the debt situation in Greece which has been putting the single currency under pressure of late.

For the UK, we have mortgage approvals today, but the end of the week is when the more significant announcements will come. We have Consumer Confidence & House Price information which will give clues to how the recovery from the recession is going. We also have the GDP release from the Office of National Statistics. Analysts expect a 0.2% quarterly gain. These are the most important UK figures this week, as the forecasted gain is very small, and we may well see signs of a double dip recession that could hurt the pound.

In the USA, we have jobless claims, confidence measures, and GDP figures on Friday. The US has been performing fairly well of late, and further good figures may strengthen the US Dollar. When the US Dollar gains strength, it’s often to the detriment of riskier currencies such as Sterling, so expect Sterling exchange rates to drop should we get continued good news from the states.

Below is a full breakdown of the week’s data. For detailed information on how these releases could affect your particular requirement, contact us today.

Tuesday
UK – Mortgage Approvals
US – Consumer Confidence
Jap – Retail Trade
Jap – Trade Balance

Wednesday
Ger – Consumer Confidence
Ger – Gross Domestic Product
EU – Industrial Orders
US – Mortgage Approvals

Thursday
Ger – Unemployment
UK – Business Investment
EU – Consumer & Economic Confidence
US – Jobless Claims
NZ – Building Permits
NZ – Trade Balance

Friday
UK – Nationwide House Prices
UK – Consumer Confidence
UK – Gross Domestic Product
EU – Consumer Price Index
Ger – Consumer Price Index
US – Gross Domestic Product


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