Tuesday 8th November 2011
Good morning. Political uncertainty is rife in the Eurozone. We have Greece attempting to put together a coalition government, and today Italys Prime Minister Silvio Berlusconi is facing a crucial vote on the budget, amid fears that Italy could be the next victim of the eurozone debt crisis. This has kept the Euro weak and helped push GBP/EUR rates and GBP/USD rates slightly higher. At 08:30am this morning rates are as follows:
• GBP/EUR 1.1667
• GBP/USD 1.6065
• GBP/AUD 1.5557
• GBP/NZD 2.0169
• GBP/CHF 1.4502
• GBP/CAD 1.6314
• GBP/ZAR 12.723
• GBP/JPY 125.25
• GBP/DKK 8.6842
• GBP/NOK 9.0225
• EUR/USD 1.3764
Political Instability in the Eurozone
Borrowing costs for Italy’s government have risen significantly due to fears it may be unable to repay its huge debts. Yesterday Berlusconi dismissed reports he planned to resign and today EU finance ministers are due to meet in Brussels for further talks on the debt crisis.
Concerns over Italy are overshadowing developments in Greece, where political leaders are wrangling over the formation of a new unity government to impose austerity measures in return for international loans. Stock markets across Europe bounced up on the chance of the Italian premier’s departure but returned to negative territory at Monday’s close.
Buying Euros at the best exchange rates
This has kept the Euro weak and GBP/EUR rates high. For those buying Euros, it’s worth noting rates are relatively good at the moment, while only a few weeks ago trading levels were in the €1.12’s. Some clients may wish to hold out hoping rates will rise further, but what do we need to see for rates to rise further?
What you need to see is strength in Sterling, or weakness in the Euro. The Pound is unlikely to strengthen any further as we have more Quantitative Easing on the way, high unemployment, rising inflation, low interest rates and stagnant growth that threatens to push the UK back into recession. So, not much here that will push the Pound higher.
On the Euro side, what else could we possibly see that would cause more weakness? We already have Greece on the brink of collapse, fears Italy and Spain will follow suit, all of which has already been priced in the market. It’s these issues in the EU that are keeping rates where they are.
Strategies to employ to get the best Pound/Euro exchange rate
If you need to buy Euros then consider fixing the current rate with a Forward contract. This is where you can fix the current rate for up to 2 years, and only put down 10% of the total Sterling you want to convert. This then protects against adverse rate movements and allows you to budget.
If you do think that rates will rise further, then you should place a Stop Loss order. this is where you place an order to buy your currency if rates should fall below a pre-agreed level. In this way you can still aim for a higher rate, but have a worst case scenario should rates drop.
Employing strategies like this often help you get the best exchange rates, rather than just hope rates will move your way. Hope is not a reliable economic tool!
To discuss our best exchange rates, contact us now by clicking here.
Pretty busy for UK data: Retail Sales, House Prices, Manufacturing Production, Industrial Production and a GDP estimate. So lots today that could affect Sterling exchange rates. Australia releases Trade Balance numbers. From the Eurozone the only release of note is German Trade Balance figures. There are no significant US releases today.
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