Friday 1st November 2013
Good morning. It’s only been 2 days since my last post, but things can move very quickly in the currency markets. For most of this week exchange rates have been very stable, however yesterday was saw some significant negative data from the Eurozone that has weakened the Euro and pushed Pound/Euro rates back up. This is what we will look at in today’s report.
Why have Pound/Euro rates jumped to a 2 week high?
This week we’ve moved from a 2 month low to a 2 week high, due to poor data from the Eurozone. So what has caused the surge in rates? The single currency’s weakness was caused by a number of factors, and we have seen the single currency fall pushing Pound/Euro rates to their highest in 2 weeks.
Data on Thursday showed euro zone inflation fell to the lowest in 4 years, which increases the chance of an interest rate cut in the EU. We also saw German retail sales fall by half a percent, against a forecast of gains of half a percent. EU unemployment was also worse than expected, and all of this combined weakened the Euro significantly.
“In light of those inflation numbers, we have changed our call and are now expecting the ECB to cut its main refinance rate at next week’s meeting,” said Geoffrey Yu, currency strategist at UBS.
ECB about to cut interest rates?
Next Thursday both the Bank of England (BoE) and European Central Bank (ECB) announce their decision on interest rates. I expect the BoE to leave things on hold, but in light of the poor inflation numbers from the EU, there’s now a good chance the ECB could cut the rate.
This is the reason the Pound/Euro rate has risen. An interest rate cut would mean less return for savers and investors in the EU, and so these investors have been selling Euros in anticipation of the cut. This means the cut has now started to be priced into exchange rates, and Pound/Euro has climbed by over 1% as a result.
What does this mean if you are converting Euros to Pounds?
Those that took note in my last post of my suggestion to take advantage of the 2 month EUR/GBP high will be pleased, as it was short lived. Moving forwards, if the ECB do indeed cut rates, we could see the market continue to get worse for you. Some forecasts suggest rates will climb to €1.20 by the end of the year.
What does the latest news mean for those converting Pounds to Euros?
It’s good news as we have seen rates rise significantly. We’re now 2 cents below the best it’s been all year. A rate cut in the EU could push things higher, however for the most part this may now be priced in. Next week’s GDP estimate for the UK will also have an impact, as it will indicate whether the UK economy is still growing.
So good GDP and a rate cut could push things higher, but as we’ve seen this week trends can change very quickly. If I needed to buy Euros, I would place a ‘Stop Loss’ order, so if rates drop below a certain level my currency is purchased. In this way, you can still take advantage of further gains should the rate rise further, however have a worst case scenario should rates start to drop again. Stop Loss orders are very useful when markets are moving in a positive direction for you.
- Need to buy Euros at the best rate?
- Want to find out more about Stop Loss orders?
Send me a free enquiry now.
Pound/Dollar rates fall
In contrast to the euro zone, U.S. data was far more encouraging this week. A strong Chicago activity survey strengthened the US Dollar, and the good data means there still may be the case for the Federal Reserve scaling back its QE stimulus programme.
This has boosted the US Dollar, making it more expensive to purchase, and as a result Pound/Dollar rates have dipped back below $1.60 again.
Look for the best Pound/Dollar exchange rates? Click here.
Have a free consultation to help you get the best exchange rates
Regardless whether you are buying or selling a foreign currency, market movements such as we have seen this week can have a huge impact on the cost of your currency.
I can offer you a free consultation on your currency requirement, and explain the current trends and forecasts for which way rates will go. This, combined with the excellent rates of exchange I can offer can save you a significant sum on your conversion.
Therefore if you need to get the best exchange rates, why not take advantage of a free consultation with me. Click below to send me a free no obligation enquiry today, and I can get in touch to explain the options available to you. Our rates are up to 5% better than banks can offer, so find out today how much you could save.
Click here to send a free enquiry today.