Currency Forecasts

Michel Barnier comments push GBP/EUR to a two month high

Sterling exchange rates have once again rallied off the back of comments made by EU chief negotiator Michel Barnier. In his comments yesterday afternoon Mr Barnier said a Brexit deal could be possible within the next 6-8 weeks, a potential lifeline for Theresa May and her government. He went to say that if both sides are “realist” there could be an agreement on the terms of the UK divorce bill by early November.

You will have seen the next key date in the Brexit diary is scheduled to be the 17th & 18th of October, as I wrote about in my post last week. It suggest this deadline may well be extended but has caused a significant degree of market positivity. To highlight this we are now trading at close to two month high against the Euro. Other large movements have been seen against the Australian Dollar (AUD) and South African Rand (ZAR) with the pound now trading at close to a two year high against these respective currencies.

Will the sterling spike last?

This is not the first time Michel Barnier has thrown an ‘olive branch’ to Theresa May. In fact less than two weeks back he was to make similar comments but the following day back tracked. As a result the gains from the previous day were wiped out. For me this cat and mouse scenario will intensify as we near the deadline of the 17th October. The market is very fickle and any comments, whether true or not, will be scrutinised and will cause the market to react. At the moment the pound as received a shot in the arm but this could be short lived. Any negative comments from those in senior positions and these current gains could be wiped out in a flash.

You can view live graphs for all our currency pairs that we can trade here. If you need to make a currency transfer and want to take advantage of this spike, or just get a quote, click here.

Currency forecasts for GBP, EUR, USD, CAD, AUD

Good morning. As I mentioned on Friday, the Pound has risen on the back of positive noises coming from the Brexit negotiations. In today’s post, I’ll have a quick look at some major currency pairs including Sterling, Euro, US Dollar, Canadian Dollar, Australian Dollar. I’ll look at what data releases are coming in the week ahead, and how these could affect Sterling exchange rates. Usually it’s these sort of economic data releases that move exchange rates. The expected result will already be priced into exchange rates, but if the actual result is better or worse than expected, the value of the respective currency will change.

Of course in the current climate, any Brexit news will probably have a bigger effect on exchange rates, as we saw last week. If you need to make a transfer or convert currency, then get in touch to find out how we can help. We provide exceptional rates of exchange, and can also offer a free consultation to give our views on the current market, and which way exchange rates may move. Enquire online here or email me directly alastair@currencyforecasts.co.uk

Sterling/Euro

Pound Euro remains just below €1.12 after rising towards the end of last week, as I outlined on Friday. We’ve already     had UK GDP figures this morning that were slightly better than expected. The Pound didn’t gain though, as at the same time we had industrial and manufacturing production numbers that were worse than expected, which cancelled out the decent growth numbers. Tomorrow morning we’ll see the latest jobless numbers. These are really good at the moment and the average earnings data will be watched closely to see if wages have grown by the expected 2.8%.

The most important releases come on Thursday, when both the Bank of England (BoE) and European Central Bank (ECB) announce their latest decision on interest rates and monetary stimulus. We’re not expecting any change from either bank, however we often see Pound/Euro rates move on comments that are made in the press conference. If EU data is poor this week, then it’s less likely the ECB will announce an end to the stimulus measures, and this could weaken the Euro. On Friday, the BoE governor Mark Carney gives a speech. When he speaks the Pound usually falls as he is notoriously negative about the impacts Brexit may have on the economy. He might announce an extension to his term too. Ultimately Brexit will be driving this pair, and anything deemed as progress will send the Pound higher, and vice versa.

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Sterling/Dollar

The Dollar has been very strong of late, which is why GBP/USD rates had fallen so low. This is in part due to the USD’s safe haven status. Investors globally are worried about emerging markets and trade wars, and due to this the Dollar has benefited and become more expensive. As with the Euro report, the most important event, other than any Brexit surprises, will be the BoE decision on Thursday. There’s not much data from across the pond, but some things to watch out for include US inflation on Thursday, Retail Sales and Industrial production numbers on Friday, and a measure of consumer sentiment at the end of the week.

GBPUSD remains around the $1.2950 level, due to the strong USD. It would take further Brexit developments to push this pair above $1.30.

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Sterling/Canadian Dollar

GBP/CAD is just above $1.70 at the moment. The pair rose a little last week due to the strength in Sterling. There’s not much coming from Canada this week so most movement in this pair will come from UK news – Brexit and announcements from the BoE.

You can read a detailed outlook of the UK data releases for the week ahead in the Euro section above.

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Sterling/Australia Dollar

GBP/AUD is only just below the highest rate we’ve seen in over 2 years before the referendum. Investors have been selling off emerging market currencies of late, and this has also weakened the AUD making it cheaper to buy. This is because Australia trades very closely with many emerging markets, so the jitters about global trade have made the Aussie Dollar much cheaper to buy. From Australia this week we’ll see business confidence data, consumer confidence data, and various wage and jobs numbers. If this data is good then it could halt the rise in GBP/AUD rates as the Dollar strengthens.

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Sterling finds support against Euro

 

Pound supported on Brexit hopes

Sterling has risen from €1.11 to €1.12 vs the Euro today. Pound/Dollar has also risen and broken through the $1.30 mark. As I outlined in my last post, there were some rumours this week about the UK and Germany softening their stance on Brexit negotiations, and this optimism has kept the Pound supported this week. I think a deal will eventually be agreed, probably in November. Markets seem more confident of this too, and comments and rumours from influencers are causing the moves in the value of Sterling.

Today’s rise comes as the EU negotiator Michel Barnier, has said that he is ready to simplify Irish border checks, and that they are open to discussing other backstops. The comments were released today, from meetings earlier this week. More positive news then, and the Pound has risen by 1 cent against the Euro to hit €1.12. Click here to view live real time graphs.

If and when they agree a deal, the consensus is that Sterling should rise by 6% which would put GBP/EUR at €1.19 and GBP/USD at $1.38. If however we crash out without a deal, a drop of 8% is likely. This would put Pound/Euro at €1.02 and Pound/Dollar at $1.19.

Either way, a few months from now we could be looking at exchange rate that are very different to the current levels that are available. If you need to exchange currency in the next 3 months and would like to speak to an expert about what might happen, contact us today. We can outline your options and provide you a quote.

Bad news from Europe also helping to support GBP/EUR

Another reason for the halt in the decline of Pound/Euro rates is worse than expected numbers from Europe. This has weakened the single currency, making it cheaper to buy and keeping the rate above €1.11. German Factory orders were not impressive. Today we’ve also had poor EU growth figures and worse than expected German Trade balance numbers. This has stopped the Euro making any further gains so I don’t think we’ll see rates go below €1.11 in the short term.

Jobs data from the US later

At lunchtime we’ll see the latest US Non-Farm payrolls numbers. This release often causes large movements in exchange rates. This is because the number is notoriously difficult to forecast and the result is often a surprise. The markets expects 191,000 new jobs to be created. A higher number would push GBP/USD lower, and vice versa.

Other emerging market currencies are starting to recover also including the Turkish Lira. Safe haven flows to the USD has kept the Dollar strong lately, but this could now be coming to an end if investors no longer feel the need to put funds in safe havens.

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Pound rises 1% only to fall back within 2 hours.

GBPEUR

Why has the Pound gone up today?

We have seen Pound/Euro rise from 1.1040 to 1.1150, and Pound/Dollar from 1.2790 to 1.2930 this afternoon. This is a huge spike in such a short amount of time.

We are hearing that the reason for the rise in the value of the Pound, was that the UK and Germany have both reportedly dropped some of their key Brexit demands, potentially making a deal much easier to strike. This renewed optimism that a deal can be done has helped to push the Pound higher against other currencies.

You can view live graphs for all our currency pairs that we can trade here. If you need to make a currency transfer and want to take advantage of this spike, or just get a quote, click here.

What goes up, Must come down

GBPEUR

*** Update ***  A German Government spokesman has just said that their position on Brexit is unchanged. The Pound has relinquished it’s gains and is back to where it was first thing this morning. The graph above shows how short lived the spike for the Pound was.

This shows how quickly rumours and comments can affect the market. Spikes can be very short lived, as has proved to be the case this afternoon. In order to take advantage of temporary moves in the market, you can register a trading account with us for free. With an account open, you can see our trading rates online, and fix a rate to make a currency transfer instantly, and take advantage of moves like we have seen today.

To discuss how to open an account, contact us today.

Key Brexit dates: How could these impact the pound?

With the on going volatility surrounding Brexit, and following my colleague Alastair’s comprehensive outline for the pound in his post yesterday,  I thought it would be useful to outline some of the key dates to focus on for the rest of this year and the first half of 2019.

For some the talk surrounding Brexit is becoming rather tedious, however, from a currency point of view it cannot be avoided. With many analysts suggesting a 10% loss for the pound should a ‘no deal’ be seen it is important to know the key dates for your diary should you have a short to medium term currency transfer to arrange.

Key Dates: 2018

  • 20 September – EU leaders are expected to discuss Brexit, although a full summit has been ruled out
  • 17-18 October – EU summit. This has been seen as a deadline for an agreement setting out the terms of UK-EU “divorce” – the so-called withdrawal agreement – to allow enough time for the UK Parliament and the European Parliament to ratify it. A political declaration on the future relationship between the UK and the EU is also expected at this point
  • November – The EU has suggested this month is the latest a deal could be finalised. There is speculation that an emergency EU summit on Brexit might be held in this month, if a withdrawal agreement and a declaration on the future relationship are not reached in October
    If a deal has been agreed, MPs will be asked to approve it
  • 13-14 December – EU summit. If a deal has not been done by October, this is the fallback option if the two sides still want to reach an agreement

2019

Ratification of the withdrawal agreement by the UK Parliament and the European Parliament.

  • 21 January – If the government has not presented its withdrawal agreement by this date, powers for MPs to influence ministers’ next steps will kick in
  • 21-22 March – The final summit that the UK is expected to attend as a member of the EU
  • Before 29 March – Parliament will have to pass the European Union (Withdrawal Agreement) Bill to implement the withdrawal agreement, assuming it was approved by Parliament beforehand
  • 29 March, at 2300 GMT – The UK leaves the EU. A special summit of the 27 other EU countries soon after the UK’s exit is expected, but has not yet been scheduled
  • 23-26 May Elections for the European Parliament in 27 EU countries (the UK will no longer be represented in the parliament)

Source BBC website

What are the potential implications for the pound?

For me the next key date will be October 17-18th as this is when the deadline has been for the ‘Brexit divorce’. At this point we will see if an agreement has been made, or we  of a ‘no deal’. A no deal scenario could see a some prolonged heavy losses for the pound, although some are also saying that ‘no deal’ is better than a ‘poor deal’. In some ways the UK are stuck between a rock and a hard place and whatever deal is struck could have the potential to cause the pound to fall sharply.

Until this agreement has been made I think the pound will struggle to find any positive movement. We have been range bound between 1.10-1.12 in recent weeks but I feel a prolonged break below 1.10 and we could see a fall to 1.08 and below. For this reason, should you need to buy euros, you may need to prepare for furthers sterling losses.

If you need to exchange currency and would like a free quote, please get in touch.