WIll the pound rise against the Euro?

29th September 2010
Good morning. It’s not though really, as the pound has fallen again against the Euro, 1.5 points since yesterday morning. It’s not looking positive for Euro buyers, however those needing to sell Euros are seeing the best rates for many months. Today we’ll look in detail at the decline, what may happen to the Pound vs Euro in the coming months. Rates @ 08:30am are as follows:

  • GBP/EUR 1.1610
  • GBP/USD 1.5821
  • GBP/AUD 1.6267
  • GBP/NZD 2.1372
  • GBP/CAD 1.6239
  • GBP/CHF 1.5439
  • GBP/ZAR 10.967
  • GBP/HKD 12.272
  • GBP/HUF 320.40
  • GBP/JPY 132.29
  • EUR/USD 1.3621
Pound falls again vs Euro
Sterling initially made some gains following good retail sales data. However, Andrew Posen, ons of the Bank of England’s Monetary Policy Committee said that he thinks the BoE should again start pumping money into the economy using Quantitative Easing.

“Posen’s comments were quite dovish, and not expected. It adds some probability of more QE and some downside risk to sterling,” said Giulia Comotti, fx strategist at Barclays Capital. “But there are no signs yet of others supporting his views, so a lot more has to happen before we see more QE.”

BoE policymaker Andrew Sentance said in comments published on Tuesday there was no need for the central bank to restart quantitative easing. Sentance has voted for an interest rate hike for four months running.

So, there’s clearly not a consensus at the BoE with how to help the economy. If they don’t know what to do, then the outlook for the economy is uncertain at best. This was reflected in the currency markets yesterday, as investors sold Sterling and pushed the pound down to a new 5 month low against the Euro.

It’s likely rates will remain volatile over the remainder of the year, as the cloud of uncertainty remains firmly in place over the UK. Below we’ll look at some client scenarios to give you an idea of how you can protect yourself against adverse movements.

Pounds to Euros

Rates have fallen from €1.22 to €1.16 in just a few weeks. This has made a €200k purchase more than £8k more expensive in an incredibly short period of time. Of course rates may increase, but they could continue to fall as we saw last year. If you’re willing to take a risk of rates improving, then you can place a Stop Loss order at a level below the current market. This way you can take advantage of any gains, but you have a worst case scenario in case things move down.

Euros to Pounds

It’s the best for over 4 months. Why hold out for an inch only to lose a mile! It’s worth considering locking in rates now with a Forward Contract. You pay a 10% deposit of the total to be converted, and you can fix the current levels for up to 2 years.

Pounds to US Dollars

We’re at a 7 week high. Again you could lock in with a Forward contract, or use Stop and Limit Orders to try and squeeze a bit more from the market.
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