Monday 11th June 2012
Good morning. So another Monday morning and a fresh week to look forward to. Today I will take a look back at the reasons why the GBP/EUR exchange rates are being pulled in both directions due to the continuing crisis in Europe, and the possibility of more QE in the UK. In addition we will look at what measures you can take to protect against adverse exchange rate movements.
In this week’s Report:
- BoE hold off more QE, for now at least
- EU markets get the jitters over Spain
- Global Economic turmoil continues to drive rates
- Round up of the week’s other data that may affect rates
(For currencies other than GBP, EUR and USD, contact us for a consultation)
Sterling vs. Euro;
The BOE left interest rates on hold at the record low of 0.5% again this month and despite speculation, resisted pumping more money into the quantitative easing program which helped support the pound on Thursday. However the minutes from this meeting out later in the month will state how the members voted and will be eagerly awaited for signs of any on the horizon. As there was an outside chance of QE, the fact there was not gave Sterling a slight boost. However, it’s now very likely we will see more stimulus in the coming months, so the Pound could well fall in value.
What’s happening in Europe? Will the Euro get weaker?
Moving to the EU, with all eyes on the problems in Greece recently the focus seemed to be shifting towards other euro countries. The Spanish credit rating was downgraded to a triple B status by the Fitch rating agency, a strong sign it thinks Spain’s ability to honour its debts is weakening. This fuels rumours that Spain could be the next country to seek a bailout and speculation over the growing size of the bailout could begin to mount.
Elsewhere, France has had to cut its growth forecasts for Q2 (April to June) of this year to -0.1% having previously predicted there would be zero growth. This cut is another sign of the lack of growth within the Eurozone after the latest set of official figures confirmed the EU economy achieved zero growth in the first three months of 2012.
The GBP/EUR rates this week have seen highs of 1.2416 and lows of 1.2283. Putting this into real terms, a transfer of £100,000 would have a difference of just over 1300 Euros in just 3 trading days.
With the continuing problems in the EU, pressure from the IMF for the UK to cut interest rates further and the likelihood that there will be further funds pumped in to the UK’s QE program, the GBP/EUR rates really could go either way in the following weeks.
Options to help you get the best exchange rates
At the Foremost Currency Group we can help protect you from an uncertain market. Waiting until the last minute and leaving your transfer to chance can often prove to be a very costly mistake. So what are your options?
Do Nothing – This high risk strategy means relying solely upon a spot contract and one won’t know the rate of exchange achievable until the actual point of buying the currency. The volatility and unpredictability of the currency markets makes this strategy high risk and speculative. The markets do move both ways, so it could result in a win (or lose) situation, however it does make budgeting for the future virtually impossible.
Secure a Forward Contract – This will enable you to lock into a rate of exchange the moment you know you have a currency requirement in the future. It will protect you against any market movement, both positive and negative and you will know exactly how much the transaction will cost you.
Use Currency Options –The two key tools are a Stop Loss order, which will protect you against adverse exchange rate movements and secure your currency if it falls below a pre-agreed level. The other is a Limit order, which is placed at the top end of the market to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you.
Whatever your requirements, send us a free enquiry now.
Weekly Economic Data that may affect exchange rates
Monday – We ease into the new week light on data. Of note are German wholesale prices released at 7am, followed later in the day by some House Prices from the Royal Institute of Chartered Surveyors.
Tuesday – Starting in the UK we have the latest Industrial and Manufacturing production figures. Later in the day we will see a GDP estimate from the NIESR. Other data of note today is a budget statement and speech by the US Federal Reserve.
Wednesday –In the EU today we see German inflation data and EU wide Industrial Production. Over in the States we have Inflation data, Retail Sales and Business Inventories. There is also an interest rate decision for New Zealand.
Thursday – A monthly report from the ECB is released today, followed by inflation data. In the USA there are further inflation measures and jobless claims, unusually for a Thursday there are no UK releases of note.
Friday – We end the week with UK Trade balance data, followed by EU trade balance data. In the USA consumer sentiment figures are released.
Getting the best exchange rates
You want the best exchange rates, of course you do. That’s why you’re reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you.
It’s free, it doesn’t obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.