Sterling vs Euro Outlook Forecast October 2011

Thursday 29th September
Good morning. Sterling was range bound against the US Dollar yesterday, and down slightly on the Euro. This is because risk appetite has been boosted by optimism that policymakers could stave off a Greek default for the time being, however signs the Bank of England may adopt more stimulus measures is keeping the Pound in check. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1481
• GBP/USD 1.5634
• GBP/AUD 1.5920
• GBP/NZD 2.0063
• GBP/CHF 1.4012
• GBP/CAD 1.6112
• GBP/ZAR 12.278
• GBP/JPY 119.57
• GBP/DKK 8.5432
• GBP/NOK 9.0105
• EUR/USD 1.3611

Sterling down vs the Euro

The pound was down slightly versus the euro during trading yesterday. The single currency has been supported on news that leaders are resuming their mission to Greece today, and that euro zone finance ministers will meet again in October to discuss the release of more aid . This strengthened the Euro and made it more expensive to purchase.

Also hampering the Pound is the continued speculation that there will be more Quantitative Easing which is weakening the Pound and keeping exchange rates from rising.

Germany faces test in EU bailout vote

German Chancellor Angela Merkel faces a vote on whether to approve new powers for the EU’s main bailout fund. The vote is on whether to endorse a eurozone commitment to boost bailout guarantees to €440bn. Chancellor Merkel has said she believes the vote is about Germany demonstrating its determination to save the euro.

However, as Greece seemingly nears default and the debt crisis increasingly threatens to envelop Italy, a consensus has emerged in the past days that the current deal being voted on by the Bundestag does not go far enough. G20 leaders met over the weekend to discuss the best way forward, but EU officials stressed that no grand plan of action had been agreed.

How might this affect exchange rates?

If a plan is agreed, then it could strengthen the Euro, making it more expensive and push GBP/EUR rates down. If however analysts think that the plan will not be enough to stop Greece from defaulting on it’s debts, then the Euro could weaken and GBP/EUR rates could rise.

Behind all of this is the QE risk in the UK that will likely limit any gains. When times are so uncertain, you can use Stop Loss and Limit Orders. This allows you to place an upper limit where your currency will automatically be purchase if rates rise. At the same time, a Stop Loss places a lower limit so you have a worst case scenario. In this way you can still hope for a higher rate, but not leave yourself open to losses should rates indeed drop away.

Send us an enquiry now to find out more about these contract types.

Today’s Data

From the UK today we have Money Supply data. From the EU there are business climate and consumer sentiment surveys. In the US there are various releases including Jobless Claims, Home Sales and GDP figures.

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