Currency Forecasts

Sterling GBP Euro EUR Exchange Rate Outlook

The main news today will be the UK Bank of England (BoE) minutes, details of which are outlined below. This often has a big impact on the currency markets, as it gives an insight into future UK interest rate movements, and therfore effects the value of the pound and can cause big movements in exchange rates.

UK Manufacturing
The government is being urged to give the same financial support to manufacturing during the recession as it has to failing UK banks. The Work Foundation think tank wants emergency state funding to help save jobs and companies.

It says the sector is “extremely important for jobs, exports and GDP”, and will offer one of the best chances for growth in an upturn. The government has pumped billions of pounds into failing UK banks. If they do indeed do the same for manufacturing, then this is likely to be viewed as negative for the beleagured UK economy, and thus the pound.

The economy is in a very fragile state at the moment, and further bad news for the economy could cause further Sterling weakness.

US Dollar
US President Barack Obama has signed his hard-fought economic stimulus plan in Denver, after Congress approved the $787bn (£548bn) package last week. Speaking at a signing ceremony he said it was “the most sweeping recovery package in our history”.

The plan is aimed at saving or creating 3.5 million jobs and boosting consumer spending and rebuilding infrastructure. If the plan does work, then it could strengthen the US Dollar. A stronger dollar will be more expensive to purchase, meaning the net effect could well be lower exchange rates.

For this reason, if you have a requirement to purchase US Dollars, and need more information on which way the GBPUSD Exchange rate may go, please Click Here to Send me an Email

Todays Data
UK 09:30 Bank of England Minutes.
The minutes of the Bank of England MPC meetings are published two weeks after the interest rate decision. The minutes give a full account of the policy discussion, including differences of view. They also record the votes of the individual members of the Committee.

Various data from the US this afternoon. We have the Import Price Index. This informs the changes in the price of imported products into the US.The higher the cost of imported goods, the stronger the effect they will have on inflation, redunding in a higher probability of a rate rise.

Therefore, a high reading should be taken as positive for the US dollar, and thus lower exchnage rates if you are buying with Sterling.

We also have US Housing data; Building permits and housing starts, so expect some volatility for GBPUSD (cable) today.

Forward Contracts
If you are worried about exchange rate fluctuations, then get in touch today to discuss Forward Contracts. This is where you can fix todays exchange rates for a future date, but only pay a small deposit of the total required.

This gives you certainty of what your currency will cost, removing the risk of rates going down and allowing you to budget more effectively.

The only data of note from the EU today is construction output. The main data other than the BoE minutes is all US based.

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Sterling Euro Best Exchange Rates

UK Inflation Data

Lots of UK data due to be released this morning. We have both the CPI Consumer Price Index Data and RPI Retail Price Index Data. Both are a good indicator of how the UK economy is performing, and also the UK inflation level. The latest figures for the rate of inflation were expected to show that it has fallen yet again.

However, the figures have just been released and show UK inflation at 3%, higher than the expected 2.7% figure.

This has strengthened the pound slightly, as higher inflation figures usually mean a lower likihood of the Bank of England cutting interest rates again. The Bank of England has already cut interest rates to 1% in an attempt to stimulate demand and the economy.

Interest Rates
What do these mean for exchange rates? Well, when a country or economic zone cuts rates, it provides less return for investors and thus weakens the currency. So, interest rate cuts for the UK will likely weaken the pound, and bring exchange rates down.

The bank of England have agressively cut rates several times in the last few months, bringing the base rate down to 1%, and severely weakening the pound and bringing rates down.

We are expecting the Bank of England to make another cut in rates in March, despite the slightly higher inflation figures.

So, if rates are indeed cut, expect lower exchange rates. For that reason, if you have a requirement to purchase foriegn currency with Sterling in the next 3 to 6 months, then consider fixing a rate with us sooner rather than later to protect you from market volatility.

As you can see from the chart, the Bank of England do have a fairly optomistic outlook for the UK economy to recover.

The markets however still view the pound as very weak. Further interest rate cuts as mentioned above, are very likely to put the pound under further pressure.

Despite the BoE forecast illustrated, most analysts do not expect Sterling to recover until well into 2010. If you cannot put your currency purchase off that long, then consider fixing your rate today using a Forward Contract.

This is where you can lock in todays exchange rates for up to 2 years, and only pay a small deposit now. This protects you from a potential downturn in rates, while giving you certainty of the cost of your currency.

Other News
Lots of US data released this afternoon that could well affect GBP USD exchange rates. For more information, please get in touch today.

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.

Just got a question? Click Here to Send me an Email

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Sterling GBP Euro EUR Exchange Rate Forecast

CBI warn of government overspend
The government will have to borrow £100bn more than anticipated during the recession, the Confederation of British Industries (CBI) says. The figure is among dire predictions it makes about the UK economy in 2009. Despite this gloomy forecast, Sterlig gas remained steady most of today. It could well be the markets wait for figures to back up this prediction.

The CBI says that the economy will contract by 3.3% this year, compared with its previous forecast in November that it would shrink by 1.7%. The CBI predicts there will be 2.9 million people unemployed by the end of 2009, topping three million in 2010.

This prediction which is worse than orginally forecast may well wiegh heavy on the pound. More government spending and higher unemployment may well result in a weakening of the pound, and thus lower exchange rates if you are buying foreign currency. If you have a requirement to purchase currency in the next 9 months, consider fixing your rate now to eliminate the risk of market fluctuations.

Brown Rules out Lloyds Nationalisation
Gordon Brown’s government does not plan to nationalise banking group Lloyds, his spokesman has said. Lloyds Banking Group shares fell 20% in morning trade in reaction to Friday’s announcement of massive losses at HBOS, but by mid-afternoon were up 0.16%.

The early slump raised concerns Lloyds, which is 43%-government owned, could need more funds or be nationalised. But a spokesman for Mr Brown said the government was giving “no active consideration to nationalising Lloyds”.

The Week Ahead
Today Sterling remained fairly steady against a basket of major currencies. The only UK data of not today was the Rightmove House Price Data provides a sample of residential property prices in the UK.

Tuesday – UK Consumer Price Index and Retail Price Index Data
GER ZEW index
US Housing Market Index

Wednesday -US Retail Sales
UK BoE Minutes (!)

Thursday – US Various Housing Data, Producer Prices, Jobless Claims

Friday – UK PMI Data
UK Retail Sales
US Consumer Prices

So, lots here that could well cause further volatility in the currency markets. This site will be updated daily with all the latest news from the Forex Markets. Check back tomorrow for a more detailed look at the days data.

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.

Just got a question? Click Here to Send me an Email

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