Currency Forecasts

Interest Rates and Exchange Rates

Sterling edged down against the euro on Monday, erasing earlier gains made after data showed Britain’s services sector grew more strongly than expected. The pound remained pressured on expectations monetary policy would stay loose for some time, with no change foreseen at a Bank of England policy meeting later this week.

Last night Australia surprised the markets by raising interest rates by 0.25% to 3.25%. This was not expected, and AUD has strengthened and GBP/AUD rates have fallen as a result. Rates at 08:30am stand as follows:

  • GBP/EUR 1.0874
  • GBP/USD 1.6019
  • GBP/AUD 1.8061
  • GBP/NZD 2.1807
  • GBP/CAD 1.7087
  • GBP/CHF 1.6440
  • GBP/JPY 142.89
  • GBP/ZAR 11.966

This suprise move in Australian interest rates is a worry, as it may mean other countries are now recovered enough to do this. It’s likely other zones such as the EU and USA will also raise rates before we do in the UK, and this will keep the pound weak, and exchange rates low.

Last week saw Sterling rise against the Euro, ending 0.65% up, just above the 1.09 level, as there was a jump in sentiment regarding the UK economy and European finance officials voiced some concern about the recent strength of the continental currency. Yet, traders still voiced concern over the medium term outlook for the pound, and the currency pared its gains by the beginning of Monday morning trading.

Unexpected strong UK retail sales data for September gave some upward pressure, added to investors buying back into Sterling after taking their profits from its recent decline. Weak Euro-zone inflation figures in the year to August and unemployment figures showing that the percentage of jobless had hit a ten-year-high of 9.6% had a further positive impact on the pound.

The euro also lost ground due to comments from European Central Bank President Jean-Claude Trichet, who reiterated the view that European officials have been concerned that the strength of the currency will stem the regions recovery, as the export sector may be weakened. The head of the ECB mentioned that currency movements ‘have adverse implications’ and would be on topic at the weekends’ G7 meeting.

However, at the G7 meeting ministers stopped short of directly criticizing the strength of the euro and the weakness of other major currencies, which gave investors more confidence in the currency and caused Sterling to fall over the weekend. Expectations that the Bank of England would hold rates at a low for longer than other central banks also weighed on the pound.

The coming week sees interest rate decisions for both the BoE and the ECB. The Euro’s prospects are likely to be driven by any comments about its strength from European Central Bank President Jean-Claude Trichet following the interest-rate meeting.

The BoE is expected to maintain its current stance on asset purchases and keep interest rates at a record low, with the European Central Bank expected to keep rates on hold but may make further talk on exiting its loose monetary policy. This could cause further Sterling weakness, so contact your account executive early to discuss the possibilities of locking in current rates before the market prices in these future movements.

Today we have the following data, the most important being the GDP estimate and consumer confidence data for the UK.

Aus – Interest Rate Decision (Raised to 0.25%)
UK – Industrial Production
UK – Manufacturing Production
US – Consumer Confidence
UK – Nationwide Consumer Confidence
UK – GDP Estimate

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Sterling Exchange Rate Forecast October 2009

Good Morning, and welcome to a new week. Today we’ll have a quick look at where rates are, and then have a detailed look at what the week may hold for the pound and Sterling Exchange Rates. Pound rates are as follows @ 08:30am 5th October 2009:

  • GBP/EUR 1.0895
  • GBP/USD 1.5938
  • GBP/AUD 1.8246
  • GBP/NZD 2.2153
  • GBP/CAD 1.7161
  • GBP/CHF 1.6466
  • GBP/ZAR 12.160
  • GBP/JPY 143.12

Pound rates this morning
The pound fell slightly this morning on expectations monetary policy in Britain would remain loose for longer than in other countries as the euro zone and UK central banks meet to decide policy this week.

Sterling earlier rose against the dollar as the absence of any new commitment on currencies from the Group of Seven countries over the weekend gave traders a green light to sell the U.S. currency. A weaker US Dollar often benefits riskier currencies such as the pound.

Going forward, the BoE is expected to maintain the pace of its asset purchases and keep interest rates at a record low when it ends a policy meeting on Thursday. Analysts expect the central bank to wait until its next set of growth and inflation forecasts in November before making any alteration to monetary policy. However, there is of course the chance that the Quantitative Easing measures may be increased, which would hit the pound hard.

The bank of englands dovish stance has as of late contrasted with that of other central banks, and it is this that is making the pound much weaker than the other major currencies like US Dollar and Euro.

The European Central Bank also meets to decide policy on Thursday. It is expected to keep rates on hold but may make further talk on exiting its extremely easy monetary policy. If they do, then markets will likely treat this as positive for the Euro, making the currency strengthen and become more expensive to purchase.

Pressure on Sterling has been exacerbated since BoE Governor Mervyn King said last month sterling’s fall against major currencies was helping a much needed rebalancing of the British economy towards exports (which as I said at the time, is very odd as we are a nation of exporters, and dont really manufacure and export that much these days)

So, the Euro may well strengthen this week, and the pound remains weak and could well fall further if the BoE continue to pump money into the economy that doesnt exist. It’s going to be an interesting week, but the pound will struggle to recover, and will most likely continue its downward trend. For this reason, if you have an imminent requirement to purchase a foreign currency with Sterling, then open an account with us today for free to benefit from the commercial exchange rates we offer. You may wish to consider locking in a rate before the announcements by the Bank of England, to protect you against any continued fall in the rate.

This Weeks Data
For the UK we have some house price data and various inflationary measures, however the most important data release is the interest rate decision by the Bank of England. They will also announce any further expansion of the recent Quantitative Easing methods. We expect rates to be left on hold at 0.5%, however there if there is any expansion of the QE programme, the pound will likely weaken and exchange rates may fall. We also have a Gross Domestic Product Estimate. This is a report that comes out a month before the official announce. The report is highly reliable and would influence the UK monetary policy, and thus has an impact on the value of the pound.

For the EU we also have an interest rate decision, where rates are expected to be left on hold at 1%. It is likely in coming months that this may rise, which would strengthen the Euro making it more expensive to purchase. Also for the EU there are some inflationary measures, Gross Domestic Product, and a speech by the ECB president Trichet. He gives a press conference as to how the ECB observes the current European economy and the value of EUR. His comments may determine a short-term positive or negative trend. ]

For the US there is some information on consumer confidence, several different measures of unemployment, and a speech by the Fed chairman where gives a press conference as to how the Fed observes the current US economy and the value of USD. His comments may determine a short-term positive or negative trend.

Elsewhere, we have an interest rate decision from Australia. Again, rates will likely be left on hold. We also have various commodity price measures from Australia and New Zealand. As commodities have a big effect on the value of these currencies, expect some volatility here.

Aus – Commodity Prices
Ger – Purchasing Managers Index
EU – Purchasing Managers Index
EU – Investor Confidence
EU – Retail Sales
UK – Purchasing Managers Index


Aus – Interest Rate Decision
UK – Industrial Production
UK – Manufacturing Production
US – Consumer Confidence
UK – Nationwide Consumer Confidence
UK – GDP Estimate


Swi – Unemployment
EU – Gross Domestic Product
UK – BRC Shop Price Index
Ger – Factory Orders
US – Budget Statement

Aus – Employment & Unemployment
Ger – Industrial Production
UK – Interest Rate Decision
EU – Interest Rate Decision
US – Jobless Claims

Ger – Consumer Price Index
UK – Halifax House Prices
UK – Producer Price Index
UK – Trade Balance
EU – ECN Trichet Speech
Can – Unemployment

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Sterling remains weak.

Sterling gained against a broadly weaker euro on Thursday as European officials expressed discomfort over the single currency’s recent rise.The euro extended losses against the pound after European Central Bank President Jean-Claude Trichet said excess currency moves have adverse implications. Earlier in the week, he said it was “extremely important” to have a strong dollar. Rates however have already started to drop from yesterdays levels, and the dollar has also strenghtned, causing Cable to fall. At 08;30am rates stand as follows:

  • GBP/EUR 1.0919
  • GBP/USD 1.5871
  • GBP/AUD 1.8288
  • GBP/NZD 2.2276
  • GBP/ZAR 12.312
  • GBP/JPY 141.87
  • GBP/CAD 1.7290

UK House Prices
This morning we had the Nationwide House Price data. UK house prices have now recovered to the same level as a year ago, according to the latest Nationwide figures.
The average price of a home last month was equal to September 2008, it said.
The building society said that UK house prices rose by 0.9% in September compared with August, the fifth consecutive monthly increase.
Nationwide said the price rises suggested that the worst of the recession was over. But it warned the rate of price increases may now slow.

Eurozone Unemployment rises
The unemployment rate across the 16 countries that use the euro has risen again as the effects of the recession continue to be felt. August’s seasonally adjusted rate rose to 9.6%, compared with 9.5% in the previous month, official figures show. The number of people without a job in the eurozone is now 15.2 million.

Despite the fact that many eurozone economies are recovering from recession, economists expect unemployment rates to continue rising. This would usually mean a weaker Euro and higher exchange rates, however the state of the UK economy is a bigger factor, as so rates are still below the €1.10 level.

US Consumer Confidence Drops
US consumer confidence fell unexpectedly in September, suggesting Americans are not as convinced as US policymakers of an economic recovery. The closely-watched Consumer Confidence Index from the Conference Board business organisation slipped to 53.1 from a revised 54.5 in August. Economists were expecting confidence to improve after it rose in August.

Despite poor economic data from both the Eurozone and US that would usually cause rates to rise, exchange rates remain under pressure with the dollar not able to get through $1.60 and the Euro not able to get through €1.10. This is because the markets are waiting see how the Bank of England and UK Government will attempt to tackle the huge levels of government debt.

While this continues, rates will remain low. This may well be the case now until the general election, as the current governments policy of spending their way out of the recession is clearly not working, however they continue to follow this policy.

Enjoy your weekend.

Todays Data
UK – Nationwide House Prices
UK – PMI Construction
EU – Producer Prices
US – Non Farm Payrolls
US – Unemployment

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Exchange Rate Forecast Oct, Nov, Dec 2009

Sterlings rise has been shortlived, and the pound fell yesterday, reversing early gains against the Dollar and Euro after a weak reading of U.S. manufacturing activity triggered some safe-haven flows into the U.S. currency. Before we look at rates, here is our latest slot on CNBC, where our Dealing Director talks about the US Dollar. If you can’t view the video, click here to watch it on You Tube.

Rates at 08:30am 1st October are as follows:

  • GBP/EUR 1.0945
  • GBP/USD 1.5978
  • GBP/AUD 1.8093
  • GBP/NZD 2.2089
  • GBP/CHF 1.6606
  • GBP/JPY 143.84
  • GBP/ZAR 12.054

The pound initially climbed 1 % against the US Dollar, boosted by data showing a jump in UK consumer sentiment and signals from the previous day that the Bank of England may not cut its bank reserves deposit rate anytime soon.

Sterling relinquished those gains after a reading of business activity in the USA failed to return to growth in September as expected, raising concerns about the recovery prospects of the U.S. economy, which cut risk demand and weighed on the pound.

While the strong UK data suggested sentiment about the UK economy was improving, analysts said the economy remained weak, and that recent weakness in the pound would continue on the view that UK interest rates will remain low for some time to come.

The pound is likely to remain under pressure, as the Bank of England keep their Quantitative Easing programme in place. Rates will recover, however this is not likely to be until 2010. If you need to purchase currency in the next three months until the end of the year, then consider protecting yourself from the volatile currency markets by fixing your rate on a Forward Contract. Contact us to discuss this. Remember, FCG rates are up to 4% better than the bank offer, and so the savings we can show you are huge.

Why not open an account. It’s free and does not obligate you. It simply means you can get a quote to compare with your bank and see how much you can save!

Global Recovery
The global economy is expanding again and financial conditions have improved significantly, the International Monetary Fund (IMF) has said. But in its latest World Economic Outlook, the IMF said the “pace of recovery is expected to be slow”.

It added that the recovery is likely to be “insufficient to decrease unemployment for quite some time”. On Wednesday, the IMF cut its forecast for the amount that banks are likely to lose in bad loans and investments. This will probably benefit other currencies before Sterling however, due to the levels of debt the government have and the way they are trying to spend their way out of the problem. So don’t expect this news to cause the pound to rocket up.

Eurozone Prices Fall
Prices in the eurozone fell in September at a faster rate than they had in August. The inflation rate fell to -0.3% in the year to September, from -0.2% in the year to August, according to Eurostat.

It is the fourth consecutive month that the rate of inflation has been negative in the bloc of 16 European nations that use the euro as their currency. Oil prices have fallen over the past month as concerns have grown about the state of the US economy. This would usually weaken the Euro and cause rates to rise, but the BoE stance and goverment policy of ‘spend spend spend’ are keeping the pound weak. This is likely to continue.

Todays Data
Today we have House Price Data along with Purchasing Managers Index, which captures business conditions in the manufacturing sector. As the manufacturing sector dominates a large part of total GDP, the Manufacturing PMI is an important indicator of business conditions and the overall economic condition in UK.

For the EU, watch for Jobless data, it’s s a leading indicator for the European Economy. If the rate is up, it indicates a lack of expansion within the European lobar market, and so can affect the euros value.

Ger – Retail Sales
Ger – Purchasing Managers Index
UK – Halifax House Prices
UK – Purchasing Managers Index
EU – Purchasing Managers Index
EU – Unemployment
US – Jobless Claims

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Pound gains and exchange rates rise

Good Morning. Yesterday saw the pound rise against most currencues after it emerged that the Bank of England may not be planning to lower the interest rate it pays on commercial banks’ reserves any time soon, a move that would have effectively loosened monetary policy further. Rates at 08:30am stand as follows:

  • GBP/EUR 1.0998
  • GBP/USD 1.6065
  • GBP/AUD 1.8259
  • GBP/NZD 2.2286
  • GBP/CAD 1.7345
  • GBP/CHF 1.6604
  • GBP/ZAR 11.824
  • GBP/JPY 144.16
Pound Gains
The pound, which had earlier this week sunk to multi-month lows against the euro, dollar and yen, got some relief.The thinking of BoE policymakers, according to economists present at the meeting, together with Confederation of British Industry data that showed a surprise rise in retail sales caught out a market that was positioned for more sterling weakness.
Economists at the BoE seminar also indicated the Bank was unhappy with the way the currency market reacted to Governor Mervyn King’s remarks last week on the benefits of a weaker pound to the fragile economy. Sterling had been below $1.60 against the dollar, and below €1.10 against the Euro, however rates have recovered back to these levels.

Also, better retail sales and and the Confederation of British Industry data prompted a scramble to buy back sterling and drag it further up from the multi-month troughs against major currencies it struck earlier in the week.
Sales rose unexpectedly in September and stores were optimistic that sales would continue to grow in October, the CBI said. This gave the market direction it had failed to get from an earlier batch of UK economic figures on the current account, growth, mortgage lending, money supply and consumer credit. The better figures plus the BoE comments are what caused the pound to rise.

GDP Figures

The rate of contraction of the UK economy in the three months from April to June has been reduced again. Gross domestic product (GDP) fell by 0.6% compared with the previous quarter, better than the previous estimate of a 0.7% contraction.
The latest improvement came mostly from the manufacturing and construction sectors of the economy. It suggests that the UK may see more signs of recovery, and possibly even growth, in the third quarter. However, as you can see from the above chart, the economy is still in very bad shape, and there is still the risk of a double dip recession.
Rates have spiked, and usually spikes such as this are short lived. If you want to eliminate the risk of rates dropping, then you can lock in the current rates with a Forward contract for up to 2 years and only pay a 10% deposit of the total you need to secure. This protects you against a down turn in rates.
If you do want to hold out for a higher rate, then decide what you’re aiming for and place a Limit Order. This way the rate can be secured if it becomes available. At the same time, a Stop Loss order can be placed at the bottom end, so if rates don’t go your way, you give yourself a worst case scenario, and are not simply leaving things to chance.
In what will be another blow to Gordon Browns government, the Sun newspaper has this morning ‘dumped’ labour… Read the story here.

Todays Data
Aus – Retail Sales
Aus – Building Permits
NZ – Business Confidence
Ger – Retail Sales
Ger – Unemployment
EU – Consumer Price Index
Can – Gross Domestic Product
US – Gross Domestic Product

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