Currency Forecasts

Pound makes small gains despite drop in consumer confidence

Good Morning. Sterling has risen against both the Euro and US Dollar this morning, brushing off data showing a deterioration in UK consumer confidence. At 09:30am rates are as follows:

  • GBP/EUR 1.1147
  • GBP/USD 1.6024
  • GBP/AUD 1.7522
  • GBP/NZD 2.1847
  • GBP/CAD 1.6629
  • GBP/CHF 1.6551
  • GBP/NOK 9.1409
  • GBP/JPY 147.83
  • GBP/ZAR 11.720
  • EUR/USD 1.4373

Despite the gains this morning, few analysts expect the pound to continue rising, as the UK economy is seen lagging other major countries in pulling out of recession. Also, the Bank of England is expected to keep interest rates low for many months. Gains in the UK currency were capped due to ongoing concerns about the deeply indebted British government, while a looming general election is also expected to pressure the UK currency lower in the mid-term.

UK Manufacturing
UK manufacturing activity grew at its fastest pace in more than two years in December, a survey has indicated. The Chartered Institute of Purchasing & Supply’s purchasing managers’ index rose to 54.1 from 51.8 in November. A score above 50 indicates growth. The survey also found an increase in the new orders index to 57.4, the highest level since July 2007.

Recession
The UK is the only G20 economy still in recession. Latest figures show that the UK economy shrank by 0.2% between July and September last year. Looking ahead, some business leaders are pessimistic about prospects for the UK economy as a whole, according to a separate study released by the Institute of Directors (IoD).

Yes there could be an occasional spurt of activity, but the next two years look pretty glum

“We are very doubtful of a sharp bounce back in 2010,” said Graeme Leach of the IoD. It is predicting an L-shaped recovery, with very weak growth in 2010 and 2011. It also argues that a double-dip or even a triple-dip scenario is potentially possible, where the economy falls back into recession after expanding for a short period.

Summary
We’ve seen the pound rise and fall over a point so far this year, in only 2 trading days. The pound is very volatile due to the economic conditions, debt levels, low interest rates and the general election. It’s hard to predict where things will go, but the first 6 months of the year are likely to still be poor for UK economic figures.

Therefore, if you have a currency requirement for the first 6 months, consider the risk and contact us to discuss the different contract options we have to make sure you’re not leaving it to chance.

You’re reading this because you have an interest in getting the best exchange rates. We’re experts in the field, so take advantage of our huge knowledge of the currency markets to help you get the best rate, and the best time.

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Sterling up against USD, down against Euro

Good Morning. The pound rose against USD yesterday, boosted after better than expected UK manufacturing. Also, mortgage approvals increased optimism that the British economy is improving. Investors selling the USD helped to support the pound, however Sterling fell against the euro after a European central bank was seen buying the single currency before a bank fixing.

Rates @ 08:30am are as follows:

  • GBP/EUR 1.1118
  • GBP/USD 1.6043
  • GBP/AUD 1.7595
  • GBP/NZD 2.1873
  • GBP/ZAR 11.682
  • GBP/CAD 1.6665
  • GBP/JPY 147.52
  • GBP/NOK 9.1454
  • EUR/USD 1.4425

Pound vs Euro
After a disappointing run up to the Christmas Holidays, with the past months fluctuating market being the result of both poor UK and Euro Zone economic data releases, Sterling finally looks set to make a gain on the Euro at some point through the year. The end of 2009 has already seen a gentle rise in GBP/EUR and data yesterday showed strong readings for the UK manufacturing sector and mortgage approvals increased fuelling optimism that the British economy is improving. However, despite gains against the USD, the pound has fallen over a point against the Euro in the first trading day of the year.

The CIPS/Markit purchasing manager’s index on Monday came in at 54.1 for December, up from 51.8 in November and exceeding forecasts for 52.0. The data showed UK manufacturing activity expanded at its fastest in more than two years. Other data showed that British lenders in November approved the highest number of home mortgages since March 2008, while the Bank of England’s preferred gauge of money supply showed a significant increase.

In Europe, concerns have continued to grow over further downgrades in credit-ratings and as banks’ loan losses resurface. Warnings from the European Central Bank (ECB) that Greece needs to restore its sovereign credit-rating by the end of 2010 hindered the Euro further, reinforcing the threat for those selling Euros.

Confidence in the Euro fell further after the announcement of the nationalisation of one of the largest Austrian banks, Hypo Group Alpe Adria.

In conclusion, with slight improvements in GBP/EUR in the past week it is easy to forget the looming threat that the UK could still see it’s Sovereign Credit Rating downgraded. Finally for those buying Euros it may also important to remember that the UK Economy shrank in it’s third quarter of 2009 by a higher than expected 0.2%. The pound is still on thin ice, and it’s more likely to fall than to rise in the current climate.

Pound vs US Dollar
The past week has seen the Dollar forge higher against Sterling benefiting from failing economic data; however the first week of the New Year is packed with important economic events which should help shake up current exchange rates. Broad selling in the USD yesterday coupled with Sterling strength has caused rates to climb slightly.

The more significant events for longer-term direction of the Dollar will come later in the week. The highlights are likely to be Wednesday’s release of the FOMC Minutes; this latest set of minutes from the December meeting may give us a little more clarity on whether the Fed is at all inclined to begin normalizing interest rates in the coming year which would prove positive for those wishing to sell their Dollars.

Friday’s Non Farm Payrolls and Unemployment Rate is the other must watch economic event this week, The unexpected drop in US unemployment at the start of November was the catalyst for the recent turnaround in the Dollars weakening trend; and since that point the upside surprises in other US data include Retail Sales and Consumer Price Index which have led to further appreciation of the Dollar.

Weather you are looking to buy or sell currencies, this first week of 2010 could be a volatile one, contact us today to discuss the options available to you to safeguard your interests and manage any potential losses.

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Sterling Exchange Rate Outlook 2010

Good Morning and welcome to a New Year in the currency markets. The pound had a good run at the end of the year due to thin trading volumes exaggerating the price. At 08:30am on the 4th January 2010 rates are as follows:

  • GBP/EUR 1.1271
  • GBP/USD 1.6141
  • GBP/CAD 1.6833
  • GBP/AUD 1.7865
  • GBP/NZD 2.2234
  • GBP/CHF 1.6759
  • GBP/ZAR 11.869
  • GBP/JPY 149.95
  • GBP/NOK 9.3215
  • EUR/USD 1.4318

So will the pound rise through 2010?
Many analysts believe Sterling could come under pressure early in 2010, however, due to jitters about its huge debt burden ahead of a UK general election, although the currency is broadly seen as undervalued on a longer term horizon. Over the next couple of months the market will have to take into account the potential implications of the election and this could prove negative for the pound. Investors are concerned about the possibility of the election resulting in a hung parliament, which may make it difficult for the government to take steps to reduce the UK’s ballooning budget deficit.

So, for the longer term, rates will rise at some point throughout the year. When this will happen is very hard to predict. Most analysts think there won’t be a decent recovery until the second half of the year, after the General Election.

Finance Chiefs confident
Finance chiefs at the biggest companies in the UK are in their most confident mood for two years, a report has said. The appetite for risk among chief financial officers (CFOs) is at its highest since the beginning of 2008, financial services firm Deloitte said. However, 48% said the economy was their biggest concern in 2010 as they expect any recovery to be weak.

The UK has been in recession for a record six consecutive quarters but is expected to have returned to growth in the final three months of 2009. When we see the GDP figures, we’ll know for sure and if so, this may be the start of recovery for Sterling, however as mentioned above, fears over UK debt could well hinder this into the latter part of the year.

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This Weeks Data
We’re back to normal in terms of data releases, and the week is a very busy one. If any of the below data releases have figures different than forecast, then expect exchange rates to be affected. Let’s look at each economic area in turn:

For the UK, the most important data releases to watch for are the Purchasing Managers Index for Manufacturing and Services. This is is an indicator of the economic situation in the UK services sector. It captures an overview of the condition of sales and employment. It is worth noting that the UK service sector does not influence, either positively or negatively, the GDP as much as the Manufacturing PMI does. Traders want the highest possible reading as that will be taken as positive for the GBP. We also have an interest rate decision. We expect rates to be left on hold, but watch for any comment on further Quantitative Easing.

For the EU, we also have Purchasing Managers Index measures, unemployment data and Gross Domestic Product. This is a measure of the total value of all goods and services produced by the Eurozone. The GDP is considered as a broad measure of the Eurozone economic activity and health. We expect a rise of 0.4% – if it’s higher than this, GBP/EUR rates may drop and vice versa.

For the US, we have unemployment measures and on Friday the non-farm Payrolls. Unemployment is expected to be at around 10%, and the non farm payrolls is one of the most important data releases. The report presents the number of people on the payrolls of all non-agricultural businesses. The monthly changes in payrolls can be excessively volatile and therefore hard to predict.

Monday
Ger – Purchasing Managers Index
UK – Money Supply
UK – Mortgage Approvals
UK – Purchasing Managers Index
US – Construction Spending

Tuesday
Aus – New Home Sales
Ger – Unemployment
EU – Consumer Price Index
Can – Industrial Production
US – Factory Orders

Wednesday
Aus – Retail Sales
Ger – Purchasing Managers Index
Eu – Purchasing Managers Index
UK – Purchasing Managers Index
EU – Industrial Orders
EU – Producer Price Index
US – Mortgage Applications
US – Employment
US – FOMC Minutes

Thursday
Aus – Retail Sales
EU – Consumer & Economic Confidence
EU – Retail Sales
UK – Interest Rate Decision
UK – House Prices
US – Jobless Claims

Friday
Ger – Trade Balance
UK – Producer Price Index
EU – Gross Domestic Product
EU – Unemployment
Ger – Industrial Production
US – Non Farm Payrolls
US – Consumer Credit

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Pound recovers at end of year.

Sterling recovered from lows against the US Dollar and Euro yesterday, caught up in the end of year flows and holiday-thinned trading volumes. Rates @08:30am are as follows:
  • GBP/EUR 1.1194
  • GBP/USD 1.6132
  • GBP/AUD 1.7931
  • GBP/NZD 2.2194
  • GBP/CAD 1.6908
  • GBP/CHF 1.6633
  • GBP/JPY 148.87
  • GBP/ZAR 11.863
  • EUR/USD 1.4406
Sterling is still weighed down by gloom over the economy and rising public debt. However, traders said late month end flows towards the end of the session helped spark a solid recovery in euro/sterling, with extremely thin volumes helping to exaggerate price movements.

This year has been challenging for the UK currency. Although sterling has appreciated by around 6 percent against the euro in 2009, this was from a record low point late in 2008 – almost exactly a year ago, when GBP/EUR rates almost reached parity. We saw a recovery to nearly €1.20, however when the Bank of England decided to create £200bn pounds in Quantitiative Easing to try and boost the economy, rates tumbled again.

Where all other major economies have exited recession this year, the UK is still lagging behind. Concerns over the level of our public debt and levels of spending mean the UK is at risk of having our credit rating downgraded, like Greece and Spain recently did.

For these reasons, going into 2010 the pound will continue to face pressure. I don’t think we’ll see a decent recovery for Sterling until the General election, be that in March or May. All the while, other economies are racing ahead, and their currencies will strengthen before ours.

All in all, 2009 was a challenging year for Sterling, however 2010 may be more so.

Daily reports will continue here as usual on Monday 4th January. Until then, I hope everyone has good New Year Celebrations, and wishing all regular readers a prosperous 2010. We can help you get the best rates possible for all your currency needs during the next year. Our rates are up to 6% better than the banks offer, and trading with us is a simply process.

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Pound still under pressure, rates down.

Good Morning. Sterling dropped against the US Dollar and Euro yesterday, but strategists said the moves were due to holiday-thinned volumes. It’s hard to be bullish on the UK economy and 2010 will be a difficult year for the UK. Any strength in sterling is just a product of it being undervalued. Rates @ 08:30am are as follows:

  • GBP/EUR 1.1078
  • GBP/USD 1.5883
  • GBP/AUD 1.7805
  • GBP/NZD 2.2150
  • GBP/CHF 1.6490
  • GBP/CAD 1.6646
  • GBP/JPY 146.36
  • GBP/ZAR 11.747
  • EUR/USD 1.4343

Good news for UK Retail Sales

Shoppers have been flocking to the High Street over the Christmas weekend, with numbers far exceeding those from this time last year, figures have shown. The number of shoppers out on Sunday, 27 December was 17.9% up on the same Sunday last year, said Experian, a research house that measures footfall. Experts said shoppers may be racing to beat the VAT increase in January.

It’s important to remember though the fact that this year, retailers did not start their sales before Christmas. Last year they slashed their prices in the week before Christmas, because they really needed to get rid of their stock. “hey’ve taken a far more measured approach to the Christmas period this year. In this regard, then, the bubble is somewhat artificial and should not be taken to mean that consumers feel the recession is behind them.

UK Unemployment
Unemployment will peak at 2.8 million in 2010, according to the latest forecast from the Chartered Institute of Personnel and Development. The business group said unemployment would continue to rise for the first six months of the new year, despite the recovery in the UK economy. The forecast is more optimistic than previous predictions, however does show that analysts don’t expect the recovery in the UK to happen until well into next year, which will hinder pound rates rising.

Bank must lend more
There should be more competition in the banking sector with more lending from non-UK banks made available to small firms, a group has said. In its new year message, the Federation of Small Businesses (FSB) called for banks to return to their “normal lending criteria”.

Despite the Quantitative Easing measures the Bank of England have been taking over the last year, banks have still not been lending, and this has also hindered recovery from recession. Until there are proper incentives for the banks to lend, this will remain unchanged.

Todays Data
not much really. From the US we have Crude Oil Stocks Change & the Purchasing Managers Index

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