Currency Forecasts

Exchange Rates Currency Forecast 2009

Good Morning

Let’s take a look at where currencies moved yesterday and the end of last week.

EUR
The Euro again fell to a 2009 low against Sterling, as a combination of internal member state stresses, banking sector fears and concerns that the Euro zone might lag the UK in recovery weighed on the single currency.

The latest economic data also suggested that the Euro zone recession could be more protracted than previously envisaged; industrial production plunged a record 21.6% in April from the same month a year earlier, in stark contrast with other economies where there have been encouraging signs that the worst of the recession might have passed.

The GBP/EUR rate closed today 3.5% higher than that of a week ago at 1.1837, from 1.1437 a week earlier, benefiting those converting Sterling into Euros.

The German ZEW think-tank’s survey of German economic conditions and Euro zone inflation data, both due to be released on Tuesday, will be the focus of attention this week. The Euro could lose further support if the inflation data suggest greater scope to lower Euro zone interest rates.

Paul Krugman the winner of the 2008 Nobel Prize for Economics has stated, “the UK’s economy is, the best in Europe at the moment” this news had capped off a week where sterling has risen to its highest value this year.

Professor Krugman went on to say, “If the government can hold off having an election until next year, Labour might well be able to run us, ‘we’re the people who brought Britain out of the slump’. This supportive announcement may help strengthen sterling value as it covers two key points of the currency compass, the economy and politics (the other being terrorism and acts of god).

USD
Last week saw the GBP-USD rate hit lows of 1.5801 before climbing back above 1.66 briefly towards the end of the week.

We have since had US consumer confidence rise for a fourth straight month and have also heard comments from finance ministers in Russia and Japan which have supported the Dollars status as the worlds top reserve.

Russia’s finance minister, Kudrin, said that he has confidence in the US Dollar and that it is too early for an alternative to the USD as the global reserve currency. Both of these facts supported the Dollar and forced the rate back down to 1.63 today.

The Pound still looks to have the ability to advance further still against the Dollar with signs that the UK economy is recovering from the recession earlier than expected, and there are some expectations that we could see growth in 2010. house price figures released last week from the RICS showed that only 44.1% of their surveyors reported a further drop in prices in their area last month, better than the expected 52%, which is another indication that the UK housing market may have bottomed out. We also saw UK industry and manufacturing figures grow for the first time in over a year.

This week we should see both UK & US CPI increase slightly and the BoE minutes from their last meeting are released on Wednesday. Both of these will probably come out as expected and therefore we don’t expect to see quite as much volatility as last week and will most likely see Cable remain range bound between 1.6150 & 1.66.

Before we look at this weeks data, just to let regular readers know that Le Mans 2009 was excellent – would recommend it to anyone who has even the mildest interest in cars or motorsport!

This Weeks Data
Lots of data from the EU, US and UK this week. The most significant data is listed below, but the main events to watch for are:

UK There is a string of headline data releases from the UK this week, with both inflation measures being shown on Tuesday and the retail sales figures following on Thursday. These could underpin a wave of Sterling positive optimism amid reports that the UK may be the first of the major economies to break free of recession.

EZ Inflation figures out on the same day as the UK counterpart figures will give an insight to the ongoing issues in Euro Land. Problems in the French banking sector have been blamed for recent shifts in the GBP –EUR cross.

US On what is a busy day for inflationary data releases, the US follows suit releas9nf MoM and YoY figures for May, as well, crucially, as the new Housing Starts for May. Look to these for further signs of the ‘green shoot of recovery.’

Jun 15
European Monetary Union Employment
United States NY Empire State Manufacturing Index (Jun)
United States Treasury’s Geithner Speech

Jun 16
United Kingdom Consumer Price Index (MoM) (May)
United Kingdom Consumer Price Index (YoY) (May)
United Kingdom Core Consumer Price Index (YoY) (May)
United Kingdom Retail Price Index (MoM) (May)
United Kingdom Retail Price Index (YoY) (May)
European Monetary Union Consumer Price Index – Core (YoY) (May)
European Monetary Union Consumer Price Index (MoM) (May)
European Monetary Union Consumer Price Index (YoY) (May)
United States Housing Starts (YoY) (May)
United States Producer Price Index (MoM) (May)
United States Producer Price Index ex Food & Energy (MoM) (May)
United States Producer Price Index ex Food & Energy (YoY) (May)

Jun 17
United States Consumer Price Index (MoM) (May)
United States Consumer Price Index (YoY) (May)
United States Fed’s Bernanke Speech

Jun 18
United Kingdom Retail Sales (MoM) (May)
United Kingdom Retail Sales (YoY) (May)
United States Leading Indicators (MoM) (May)
United States Philadelphia Fed Manufacturing Survey (Jun)

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Sterling rates climb to new highs

In trading Wednesday afternoon, rates for the Euro got close to 1.17, which is the highest level since November last year.

Sterling jumped to its highest level of the year against the euro on Wednesday after positive UK industrial output data helped to reinforce the belief that the economy may be emerging from the worst of the recession.

Sterling’s rise was also partly a result of heavy initial selling of the dollar after Russia announced a plan to cut its share of U.S. Treasuries in its reserves and buy International Monetary Fund bonds.

Some analysts said that sterling gains were capped after Bank of England policymaker Kate Barker said UK interest rates could stay low for some time and that it was still not clear whether the current pick-up in the economy would be sustained. So, it may go higher, or it could tumble as it did last week!

Analysts nevertheless believe the pound will continue to benefit from signs the UK economy is finally emerging from a deep recession, with some pointing to the prospect that the economy could record growth before the end of the year.

So, mid to long term forecasts suggest the pound will continue to rise. However, short term data releases may cause fluctuation to the downside.

Rest of this weeks data:

Thursday
AUS – Employment & Unemployment
EU – ECB Monthly Report
US – Retail Sales
US – Jobless Claims
NZ – Retail Sales

Friday
G8 Meeting
EU – Industrial Production
EU – Trichet Speech
US – Import Prices
EU – Trichet Speech

No Blog Updates for 2 days

Apologies to regular readers and subscribers, however this blog will not be updated tomorrow (Friday) or Monday.

This is due to, errr site maintenance…….. Ok, I’ll be honest – it’s due to me going to Le Mans to watch the 24 hrs race!
Tourist Cash
Despite being a currency trader, I have to source my Euros at tourist rates like everbody else – 1.0950 from the post office today despite being 1.1688 on mid market level.
Ouch.

For some advice though on small Euro cash amounts – bank with Nationwide. In most Euro countries they actually give you interbank rates at ATMs. Best deal out there. If you dont bank with Nationwide, M&S or Post office tend to be ok. Of the other high street banks, HSBC and 1st Direct are at the top end, with Natwest and RBS at the bottom end.
Site updates will continue as normal from Tuesday. In the meantime, please refer to our main site for market updates:

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Sterling Euro rates close to 6 month high

Pound Gains
Sterling rose sharply against a broadly weaker dollar and gained versus the euro on Tuesday, helped by further signs the UK housing market is stabilising. The pound was also buoyed by a calmer UK political vista, with Labour Party parliamentarians on Monday offering their support to Prime Minister Gordon Brown.

“Sterling is better bid. It got a boost from housing data falling less than expected and from Gordon Brown gaining some support from MPs,” RBC currency strategist Christian Lawrence said.

Bank of England Deputy Governor Paul Tucker warned on Tuesday, however, that although surveys have pointed to some improvement in the British economy, the medium-term outlook remained “highly uncertain”.

Pound to Euro
Rates here climbed and levelled off just above 1.16 – back almost to the 6 month highs of last week. Partly this was due to the above, partly it was due to weak German data that weakened the Euro and cause rates to rise.

German exports fell 28.7% in April compared with April 2008, according to the Federal Statistics Office.It was the biggest fall since the recession began, suggesting the economy has some way to go before it recovers. But the ministry’s statement stressed that “the downward trend has slowed noticeably”. “The odds that industrial production has hit its lowest point have improved due to stabilising demand,” the statement added. But analysts were not impressed by the trade figures.

It caused a sell off of Euros that weakened the single currency, helping to push rates back above the 1.16.

What next for the pound?
As the last few weeks have demonstrated, rates can climb to a spike and then suddenly drop off. Rates can also recover very quickly as we have seen this week. It’s impossible to predict which way things will go, however rates for the Euro are close to the 6 month highs we saw last week.

Today (see below) we have lots of UK data that could push rates either way. It is times like this where currency tools become very attractive. If you are hoping rates will rise, then you can take that gamble, while at the same time placing a Stop Loss order – this means should rates move the wrong way and plummet, then your currency is automatically secured at a bottom level, minimising any loss to a certain level.

Economic Data for today
Today is the busiest of the week in terms of data releases that may affect exchange rates. Alot of the data is UK based, so expect pound to euro and pound to dollar rates to fluctuate.

So, lets take a detailed look at the UK data today, and how this may affect exchange rates:

  • Industrial Production – measures outputs of the UK factories and mines. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector.
  • Manufacturing Production – measures the manufacturing output. Manufacturing Production is significant as a short term indicator of the strength of UK manufacturing activity that dominates a large part of total GDP.
  • Trade Balance – a balance between exports and imports of total goods and services. A positive value shows trade surplus, while a negative value shows trade deficit. It is an event that generates some volatility for the GBP.
  • GDP Estimate – The report is highly reliable and would influence the UK monetary policy.

So, estimates will already have been made for the above announcements. If figures are at or close to these estimates, the dont expect much movement. If however the figures are above or below expectations, then that’s when we’ll see rates rise or fall respectively. If you have a requirement to purchase currency with Sterling, then today could be a gamble that you may win or lose. If you would prefer not to leave it to chance, then open an account with us for free by clicking the orange banner below, and talk to us about the tools we have available to protect you against falling rates.

Elsewhere we have US – Trade Balance Data and New Zealand – Interest Rate Decision
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Sterling Exchange rates recover

Sterling has climbed and recovered some of its losses following the political uncertainty at the end of last week. At the time of writing, rates are as follows:

GBP/EUR 1.1592
GBP/USD 1.6164
GBP/AUD 2.0370
GBP/NZD 2.5936
GBP/JPY 158.60

The main reason for the gains are two fold. Firstly the cabinet re-shuffle seems to have settled the ship in government, at least for the time being. The chances of a general election this year are very slim, and so the renewed stability has renewed investors confidence in the pound. There was relief too that the political troubles facing Prime Minister Gordon Brown appear to have calmed for now, with Labour Party members offering their support to his leadership on Yesterday.

Secondly, and more importantly there is renewed confidence in the UK housing market, which has really boosted the pound this morning.

UK Housing Market
A survey by the Royal Institution of Chartered Surveyors showed house prices in England and Wales falling at their slowest annual pace in November 2007. The RICS survey, which has been running since 1978, takes a snapshot of the degree of confidence in the market from surveyors and estate agents across the UK.

“On the face of it, the housing market does appear to be close to bottoming out with activity picking up in a material way and prices at last stabilising,” said Rics spokesman Ian Perry.

On 4 June, a survey by the Halifax said that UK house prices rose by 2.6% in May compared with April but activity remained low in the market. This came shortly after the Nationwide building society reported a 1.2% rise in prices in May compared with April – the second rise in three months. Further housing data today may support this, so for Euro buyers it’s good to see that the slump in recent days looks to be short lived. Euro sellers however, should take note that analysts believe the Global recession is easing, which could cause rates to continue moving the wrong way.

Global Recession.
The pace of decline of the world’s major economies is slowing, according to the Organisation for Economic Co-operation and Development (OECD). The global economy is poised for its worst year since World War II as the major economies have fallen into severe recession.

The organisation said countries not included in the OECD were still declining at a fast pace, with the exception of China and India. Both those countries showed similar signs of easing to the US and Europe.

The data points to a “reduced pace of deterioration in most of the OECD economies with stronger signals of a possible trough in Canada, France, Italy and the United Kingdom”, the OECD said.

World stock markets and Sterling have recovered from their lows in March on hopes for a global recovery, based mainly on survey data of consumer and business confidence. So, the recession is still here, and it just seems that the slowdown has eased. This doesnt mean of course that everything is suddenly rosy, it just boosts investor confidence, which for the time being is helping the pound. Of course, any negative data in these turbulent times could cause rates to drop away again as quickly as they have recovered.

If you have an imminent currency requirement, then open an account with us by clicking the orange banner below. It’s free, doesn’t obligate you, and simply means you can discuss the implications of the current market conditions, and find out about the tools we offer so you can make the most of the market, and dont leave it to chance!

Todays Data
We have already had Trade Balance data for Germany as mentioned in yesterdays report. This was as expected, and so has not had much effect on rates. Also from Germnay, the largest economy in the EU, we have Industrial Production data at 11am. Changes in industrial production are widely followed as a major indicator of strength in the manufacturing sector. If the result is higher than expected, then GBP/EUR rates may fall. If lower, then we may see rates continuye to climb.

For the UK today, all we have is DCLG house price data, which may support the positive data from yesterday. Other than this, it is continued political developments that’s likely to effect Sterlings value.

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Pound falls on Political uncertainty

Last Weeks trading
After some weeks of continued strength for the pound, this all came to an end last week as rates dropped away again. On Wednesday last week, rates had hit 6 and 7 month highs against the Euro and US Dollar respectively. The main reason for the sudden decline Thursday and Friday was continues political uncertainty in the UK.

We had many cabinet ministers resign, following by rumours that Gordon Brown was going to resign, rumours which were quickly rubbished by number 10. Poor showings for the government in both the local and European elections have also put pressure on the pound.

The uncertain political situation encouraged investors to sell the pound, particularly as they were unsure how long it would hold on to gains of nearly 10 percent it racked up against the dollar last month — its biggest monthly gain since 1985. This sell off of Sterling is what caused the value to slide.

“The pound is suffering broad weakness due to political uncertainty,” said Neil Jones, head of European hedge fund sales at Mizuho Corporate Bank in London. “It’s not good to have no government structure,” he said, adding that political uncertainty was shifting focus away from efforts to ensure economic stability.

Sterling had been riding high in recent weeks on hopes that the worst was over for the UK economy. Some analysts said the impact on sterling from the UK’s political woes was likely to be short-lived though, so we could see a recovery this week.

“The limited scope for plausible economic policy shifts in the UK will remain unchanged irrespective of whose hands are grasping the levers of power,” said Neil Mellor, a currency strategist at Bank of New York Mellon. “The burgeoning fiscal deficit in the UK is a problem that crosses party lines and one that would invite political disaster should it be tackled prematurely,” he added.

The pound has fallen against the dollar this morning after poor European Election results, but us still close to 1.14 against the Euro after falling into the 1.12’s at the end of last week. Elsewhere, there were reminders that the UK economy is far from out of the woods yet. Data showed UK construction output tumbled by 9 percent in the first quarter, which the statistics office said will knock 0.3 percentage points off UK gross domestic product.

So, all eyes this week will continue to be focused on Political Events, and also the raft of UK economic data that will give clues as to how the UK economy is faring in the recession.

This Weeks Data
Lots of data from the EU, US and UK this week. The most significant data is listed below, but the main events to watch for are:

Germany – The largest ecomomy in the EU, figures from Germany can have a big impact on the value of the Euro and so affect GBPEUR exchange rates. Today we have Factory orders, and tomorrow Industrial Production. A good indicator of how these sectors are performing.

UK – House Price Data today, wednesday sees Trade Balance, Industrial and Manufacturing Production. This will likely affect Sterlings value, and of course ongoing political events will also continue to have an impact

New Zealand – Interest Rate decision on Wednesday, following by Retail Sales data Thursday.

EU – ECB Monthly report on Thursday, and also a speech by ECB president Trichet on Friday. Watch any comments carefully as surprise announcements could strengthen or weaken the Euro.

Monday
Ger – Factory Orders
UK – RICS House Prices
UK – BRC Retail Sales

Tuesday
UK – DCLG House Prices
Ger – Industrial Production

Wednesday
UK – Trade Balance
UK – Industrial Production
UK – Manufacturing Production
US – Mortgage Applications
US – Trade Balance
NZ – Interest Rate Decision

Thursday
AUS – Employment & Unemployment
EU – ECB Monthly Report
US – Retail Sales
US – Jobless Claims
NZ – Retail Sales

Friday
G8 Meeting
EU – Industrial Production
EU – Trichet Speech
US – Import Prices
EU – Trichet Speech

If you are looking to make a transfer abroad, and would like to find out more about Foremost Currency Group, then simply click on the link below to visit our main site.

Please quote ‘Blog’ when you call to recieve preferential exchange rates.

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