Currency Forecasts

Will Sterling go up or down this week?

Good morning. In today’s post we’ll have a look to the week ahead and see what economic data releases are due that could affect GBP exchange rates. GBP/EUR has been rather flat of late, while the markets await any news that could break the Brexit deadlock. It could be that cross party talks collapse this week, and that would probably weaken the Pound. Read on to see what else is happening in the coming week that could move the markets. If you need to make an international transfer, then contact us today to discuss how we can help you achieve the best exchange rates.

This week’s economic data releases

Monday 13th May 2019 – There is nothing of note on the calendar today from either the UK or EU, so we expect GBP/EUR to remain flat in the absence of any Brexit news. This afternoon we have some speeches by members of the US and Canadian central banks that could influence GBP/USD and GBP/CAD respectively.

Tuesday 14th May 2019 – Today could affect Sterling, as we will see the latest jobs data from the UK including Average Earnings, the Unemployment rate, and the Claimant count change. UK unemployment is the lowest in decades and wages are growing faster than inflation. If this continues it could help the Pound. Elsewhere, GBP/EUR could also be affected by EU wide measures of Industrial Production and an Economic Sentiment Survey.

Wednesday 15th May – There’s nothing for Britain today, but GBP/EUR could still move on numbers from the Eurozone. Gross Domestic Product (GDP) figrues are release for Germany and the Eurozone as a whole. We expect quarterly growth of 0.3%/0.4%. If higher, the Euro would strengthen and pull GBP/EUR lower. Elsewhere, for those watching GBP/USD and GBP/CAD, we have US Retail Sales, and Inflation numbers from Canada .

Thursday 16th May – It’s quiet again in the UK so focus for GBP/EUR will be on speeches by various members of the European Central Bank (ECB). Any dovish comments would weaken the Euro, while any hawkish signals that stimulus could be scales back would strengthen the Euro and bring the GBP/EUR rate down. We’ll also see a speech by a Bank of England (BoE) member. GBP/AUD could also be affected by the latest Australian jobs figures.

Friday 17th May – We end the week with a raft of inflationary measures from the Eurozone, which could impact future interest rate movements. Other than that it’s quite quiet on the data front.

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GBP/AUD exchange rates heading back toward 1.90

Australian Flag

GBP/AUD exchange rates have rallied back against the Australian Dollar in the last few days pushing back to 1.87 and seemingly heading towards 1.90. This move comes ahead of the Reserve Bank of Australia monetary policy statement overnight which will give clues as to the future direction of interest rates for the Australian economy.

Sentiment from the central bank has been quite dovish this year which has kept the Australian Dollar in check and although they have kept interest rate son hold at the latest meeting, it is expected the latest statement will again hint that the next move will be a negative one in order to try and stimulate the Australian economy.

The reasons the Reserve Bank might cut rates are fairly obvious – stagnant household incomes, weak retail trade spending, weak wages growth, low inflation growth, a weak economy overall. This has been the case for a little while now but the RBA has decided not to act. However it appears this tactic has not been having the desired impact and hence whey many analysts expect a rate cut is just around the corner.

Will the AUD weaken further?

In my view yes. We may actually see a further decline overnight if the monetary statement supports the view that the next move will be a cut.

Often central banks will keep their cards very close to their chests, and again this may be the case with the RBA. However it seems clear that their current policies are not having he desired impact with a slowing Australian economy. I would look for a dovish tone from the RBA statement and hence would expect further short term losses for the Australian Dollar. Look for GBP/AUD exchange rates to move towards 1.90

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What could impact the currency markets this week?

Good afternoon and I hope you all had an enjoyable bank holiday break. Following last weeks late surge for the pound I will explore what could impact the pound and other select major currencies (USD, AUD, NZD) in the coming week.

In the absence of any major key Brexit news, something that will dominate the pounds movements over the short to medium term, Theresa May is set to meet the chairman of an influential committee of backbench Tory MPs, Sir Graham Brady, amid calls for her to set a firm resignation date. This comes following a very poor show for the Conservative Part during last weeks local elections. This meeting, which No 10 insists is routine, will heap more pressure on the PM, with local Tory associations confirming they will hold a vote of confidence in her leadership on 15 June.

Brexit and political uncertainty aside below I have outlined the key data this week that could impact the currency markets.

Economic data releases that could affect exchange rates

Tuesday 7th May – today has been very quiet from the pound point of view but this afternoon there will be a speech from the Bank of England member Andrew Haldane. There will also be a series of speeches in the US from key Fed members including Randal Quarles. Nothing expected from these but one to keep an eye on.

Wednesday 8th May – those looking at the NZD may have an early start as overnight will see the release of the latest Reserve Bank of New Zealand (RBNZ) and accompanying monetary statement. Rates expected to remain on hold but the statement will be closely scrutinised for clues as to the future direction of interest rates. For those looking at the Euro there will be a speech from ECB President Mario Draghi at 12:30

Thursday 9th May – this morning look out for the NIESR GDP estimate, this is often very close to the actual release and can cause movements for the pound. This afternoon will see jobless data in the US at 13:30 followed by a speech from Fed Chair Jerome Powell.

Friday 10th May – this morning will see the release of the Reserve Bank of Australia (RBA) monetary policy statement. Look out for clues as to he future direction for interest rates. Sentiment from the RBA has been changing quite frequently and again the statement could influence the short term movement for the Australian Dollar.

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Pound/Euro breaks above €1.17

Bank of England

Sterling has had a relatively decent end to the week, breaking the €1.17 barrier vs the Euro, and comfortable above $1.31 vs the US Dollar. The main reason for the gains is a slightly more Bullish Bank of England coupled with slightly better than expected data. Gains are likely to be limited however while Brexit uncertainty remains.

Bank of England helps boost Sterling

This week’s Bank of England (BoE) meeting had a more hawkish tone, and this helped the Pound strengthen a little. While interest rates were again left on hold for the 8th month in a row, as expected, comments made by the Governor Mark Carney helped Sterling. He stated that interest rate increases will happen faster than the markets currently expect, and that they will rise more in the next few years if the economy grows as expected and inflation reaches target levels. The prospect of higher interest rates generally strengthens a currency as it means a higher return for investors. However, few expect any moves before Brexit is sorted out, so gains were a little muted.

The BoE also raised its growth forecasts for the UK to 1.5%, as the global economy starts to show signs of stabilising. They also said that unemployment could fall further from its current record lows.

Further gains unlikely while Brexit remains unsolved

The upbeat tone from the BoE is positive for the UK economy and has helped the Pound. However we feel that there aren’t likely to be any significant gains for the Pound until there is more clarity over the UK’s exit from the European Union. The current GBP/EUR levels however are only just below the best we’ve seen in 2 years. For this reason, any clients that need to buy Euros may wish to consider fixing a rate while these levels are available. If a Brexit deal is agreed then we may see exchange rates rise further, however this may not happen for several months.

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Even if you don’t need to make your transfer right now, we offer the option to freeze the current rate for a future date by lodging a 10% deposit. If you would like to have a chat about how we can help you with your currency requirements, contact us today.

Monthly Currency Forecast GBP, EUR, USD, AUD, CAD

Good afternoon. In today’s Monthly Currency Forecast I’ll take a look at how some major currencies performed last month, and what the coming weeks could have in store. I’ll focus on GBP, EUR, USD, AUD and CAD. If you need to exchange currency at the best rates and would like a quote, click here.

Pound Sterling Forecast (GBP)

After some dramatic swings in the Pound over the first quarter of the year, volatility in the UK currency finally began to fade in April after Brexit was delayed until October. While markets were relieved that the UK did not ‘crash out’ of the EU without a deal, Sterling still drifted lower throughout the month amidst concerns about how another six-months of Brexit uncertainty could impact the UK economy. Meanwhile UK economic data finally began to influence GBP exchange rates again last month. However some mixed data, most notably the slowdown in inflation in March, meant the Pound was unable to benefit from the lull in Brexit angst.

Looking to the month ahead, we are likely to continue to see economic data have a greater bearing on Sterling in the coming weeks, notably with the UK’s first quarter GDP print. However, ultimately the direction of GBP in May will be reliant upon Brexit sentiment as well as the outcome of the upcoming European elections, which the UK looks unlikely to avoid.

Euro Forecast (EUR)

The Euro was beset by another month of underwhelming economic data in April, having the effect of limiting demand for the single currency. Adding to the pressure on EUR exchange rates was another cautious policy meeting from the European Central Bank, with ECB President Mario Draghi again warning of the downside risks facing the Eurozone.

However, offering some support to the Euro at the very end of the month was the Eurozone’s latest GDP figures, which defied expectations as they revealed growth accelerated from 0.2% to 0.4% in the first quarter of 2019.

The Euro’s fortunes in May are likely to be closely tied to the European elections, with the single currency potentially weakening if there is a surge in support for Eurosceptic parties. On top of this, EUR investors will have to contend with the latest round of Eurozone economic releases, which could dampen market appetite if data remains broadly gloomy.

US Dollar Forecast (USD)

The US Dollar proved to be the big winner in April, with the safe-haven currency punching higher as a risk-off mood swept through markets.
This appeared mostly driven by an increasingly dovish outlook from central banks around the globe, with economists forecasting that some could even implement rate cuts in 2019.

Further bolstering the appeal of USD throughout April was a run of solid economic data, capped off by a surprisingly strong GDP print, which saw headline growth jump from 2.2% to 3.2% in the first quarter of 2019. Whether the US Dollar will be able to carry this momentum through to this month will likely depend on whether the risk-off mood continues to prevail, with USD exchange rates potentially coming under pressure if the US and China are able to finalise their trade deal.

Australian Dollar Forecast (AUD)

Trade in the Australian Dollar was mostly steady throughout the first half of April, drifting higher against its peers thanks to some upbeat Chinese data and rising commodity prices. However the ‘Aussie’ then fell off a cliff with the publication of Australia’s CPI figures towards the end of the month as domestic inflation slumped to a two-year low in the first quarter. This prompted significant speculation that it could force the Reserve Bank of Australia’s hand and result in interest rates being lowered to a new record low this year.

All eyes will now be on the RBA’s upcoming policy meeting at the start of May with the Australian Dollar likely to tumble further if it drops any hints that a rate cut is on the cards this summer.

Canadian Dollar Forecast (CAD)

The Canadian Dollar initially showed some resilience in April, holding its ground against its peers as oil prices struck a new 2019 high, with Brent crude passing $75 a barrel. However the jump in oil prices proved short lived, which left the ‘Loonie’ open to some sharp losses following the Bank of Canada’s latest policy meeting, where it dropped all mention of a potential rate hike in 2019 from its policy statement.

Looking ahead, the outlook for the Canadian Dollar will likely depend on domestic data, with CAD exchange rates likely to come under fire if there are any signs that domestic growth may have contracted again in March.

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