Currency Forecasts

Italian budget could devalue the Euro

In an unprecedented move the European Commission has told Italy to revise its budget, a move never seen before within the European Union (EU).

Italy is currently the eurozones third largest economy but has spiraling debts amounting to 131% of national ouput. Italy’s governing populist parties have vowed to push ahead with campaign promises including a minimum income for the unemployed. Other measures include tax cuts and scrapping extensions to the retirement age – fulfilling several key campaign promises from the election in March. Italy now has has three weeks to submit a new, draft budget to Brussels.

How could this impact the Euro?

Surprisingly this news didnt have a bigger impact on euro exchange rates. Initially the euro weakened to fall as low as 1.1350 (GBP/EUR) but the euro recovered in the afternoon session. A move that was a little surprising. Although the USD did make some significant advances with EUR/USD falling to a two months low of 1.1420 with the dollar benefiting from its safe haven tag

This move by the European Commission is bold. It is something we have not seen before and has set a precedent for other EU members. It has now shown that they will not simply continue to bail countries in a move to discourage other eurozone states from breaking rules.

In response Italy have set them selves on a collision course with the EU, Deputy Prime Minister Luigi Di Maio wrote on facebook “This is the first Italian budget that the EU doesn’t like. No surprise: This is the first Italian budget written in Rome and not in Brussels!”

His co-deputy PM Matteo Salvini added: “This doesn’t change anything.”

“They’re not attacking a government but a people. These are things that will anger Italians even more,” he said.

This unprecedented move could cause some significant implications for the eurozone and hence the euro. I wouldn’t expect any significant moves for GBP/EUR due to ongoing Brexit issues, however the US dollar is likely to be the main benefactor here.

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GBP/EUR and GBP/USD forecast outlook

The Pound has recovered slightly this morning, and currently sits around €1.1325 vs the Euro and $1.30 vs the US Dollar. It seems that May has insisted that there will be no hard border in Ireland and has also pointed out that 95% of the Brexit withdrawal agreement is now signed off and agreed. For the moment that seems to have satisfied the rebels in the conservative party, and that’s helped support the Pound.

Pound/Euro stabilises after falling to 2 week low

Yesterday Sterling/Euro hit its lowest levels in 2 weeks, and this is largely down to what has happened in the last week with regards to the EU/UK negotiations. This is a fluid situation and will continue to drive the direction of the Pound for the next month at least.

Elsewhere today the EU will decide whether to reject Italy’s budget. I talked about this issue in a recent post, and the Italy problem has helped to weaken the Euro recently, which has contributed to the GBP/EUR rate remaining supported. The European Council will report on their budget at 2pm, and if they reject it then the Euro would likely weaken which could send the GBP/EUR rate a little higher this afternoon. Any gains are likely to be limited however due to the continued uncertainty about Brexit.

Pound/Dollar also drops due to safe haven USD strength

Pound/US Dollar rates dipped below $1.30 yesterday and this was largely down to a stronger US Dollar. Uncertainty in the UK and Italy increased demand for the safe haven US Dollar, pushing GBP/USD lower as the Dollar increased in value. When the Euro weakens we often see the USD strengthen due to its inverse relationship, so if the Italian budget is voted down this afternoon, it could cause a further drop in GBP/USD.

What else could move exchange rates today?

Elsewhere today we have some speeches by the BoE governor Mark Carney, and also a speech by their chief economist Haldane. Any hawkish comments from Haldane could help the Pound, but this will probably be balanced out by Carney who is not known for his optimism surrounding the UK economy.

That’s it for this morning. Remember if you are looking to achieve the best exchange rates for any major currency, then contact us today to see what rate we can offer you.


What could move exchange rates this week?

Sterling has fallen slightly today, due to the lack of any progress with Brexit. This issue is likely to continue being the main driver for which direction the Pound takes. Anything that increases the uncertainty would weaken the Pound further e.g. a challenge to Theresa May’s leadership. If however an agreement can be made, Sterling is likely to rise.

In addition to the on-going Brexit saga, scheduled economic data releases will also affect the value of the Pound. Below I’ve outlined the  main events that will affect exchange rates. For a quote or to discuss a specific currency pair, contact us today.

This week’s economic data releases

Monday 22nd October – It’s been a very quiet start to the week with nothing much of interest on the calendar.

Tuesday 23rd October – The only UK data of note are speeches by Bank of England (BoE) members including the governor Mark Carney. If he continues with his pessimistic tone about the effects of Brexit, this could push the Pound lower. Elsewhere we also have a speech by a FED member that could affect the US Dollar.

Wednesday 24th October – It’s quiet in terms of UK data with nothing of note. There’s plenty from elsewhere that could still affect exchange rates though. In Germany and the EU we have measures of inflation – a high reading would strengthen the Euro making it more expensive to buy. Canada has an interest rate decision, and I think they’ll push rates up to 1.75%. If they do, expect the CAD to strengthen and GBP/CAD rates fall.

Thursday 25th October – Today we see the ECB interest rate decision. While no change is expected to interest rates, comments in the press conference at 12:45pm often moves GBP/EUR rates. Anything that suggests ECB stimulus could be coming to and end would strengthen the Euro.

Friday 26th October – We end the week with US GDP numbers and a speech by the ECB president Mario Draghi.

Getting the best exchange rates

If you need to make a transfer get in touch today. We can provide you a free quote and also provide you with expert market commentary to explain what is moving the exchange rate.

Sterling stalls as Brexit negotiations flounder

Sterling exchange rates have slipped back following a slow down in Brexit negotiations in which Theresa May has hinted that the post-Brexit transition period will be extended.

The current length of the transition period – designed to smooth the path from Brexit to the UK and EU’s future permanent relationship – is 21 months. But with the two sides failing to reach a deal yet, UK Prime Minister Theresa May has suggested extending this arrangement “for a few months”. It would appear the EU are prepared to allow thgis extension although it has been suggested there will be financial penalties imposed on the UK as a result.

What now for the pound if Brexit drags on?

With the divorce bill supposedly being agreed by today, a number of key “Brexiteers” have been left wholly unimpressed. With the Brexit can being firmly kicked down the road we are set for a continuation of uncertainty and clarity as to what will happen for the pound. This whole Brexit process is becoming quite tiresome and unfortunately we do not seem to be getting any closer to reaching an agreement that works for both sides. For those buying Euros does it mean you have missed the boat? Potentially, yes. We briefly touched 1.1480 last week, the highest in 4 months and once again the pound is trickling back down with current levels at 1.1373. It is now highly likely the “divorce” process will be delayed and we as a result we could easily see the pound fall back towards the 1.12 level.

Do you need to exchange currency or make a transfer?

As you can see above, there are lots of things happening at the moment that can affect exchange rates. If you need to move money overseas, to purchase property for example, then you should be speaking to an expert currency broker to understand what effect the above could have on the cost of your currency.

Here at we offer a free consultation to any private or business client that have an exposure to the currency markets. We can help you understand what is moving the rate, which direction it could take, and the options you can consider to protect you against the rate moving against you. We can also offer you a free quote so you can see what rate we could offer; typically our rates are up to 3% better than your bank or existing broker might offer and you could save thousands of Pounds.

Contact us today for a chat or a quick quote.


Pound falls slightly ahead of Brexit meeting

Good morning. Sterling has fallen slightly today ahead of the key EU Brexit meeting that starts today. The reason however was due to old fashioned economic data. UK inflation numbers were released this morning, coming in quite a bit below forecast. We were expecting a reading of +2.8% however the actual result was +2.4%.

The lower inflation reading means there is now less chance of the Bank of England (BoE) raising interest rates. This in turn has weakened the Pound slightly. This is because when interest rates are expected to rise, so does the currency concerned due to the higher return on offer for investors. Conversely when an interest rate rise is less likely, it weakens the currency, which is what has happened this morning.

Elsewhere, EU data came in slightly mixed but their inflation numbers were largely as expected. All eyes are now on the EU summit which runs today and tomorrow. You can read my detailed post from yesterday with regards to what effect this might have on exchange rates. Personally I think the next 24 hours are very important for Sterling exchange rates and those that need to convert currency.

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