Currency Forecasts

Draghi comments help Euro/US dollar through 0.89


This afternoon Euro exchange rates have fallen heavily against both the pound and US dollar following comments made by European Central Bank (ECB) Governor Mario Draghi.

At the central banks latest meeting the ECB hinted that interest rates in the eurozone will not rise until next year at the earliest amid evidence of a slowdown in the 19 countries using the single currency.

In his statement he said economic growth in the euro area was now expected to be 1.1% against the previous forecast of 1.7%. Inflation is expected to be 1.2% down from the earlier forecast of 1.6% – reducing pressure for any monetary policy stimulus.

Following these comments GBP/EUR pushed through 1.1670 but the big move was seen for USD/EUR which rallied to its highest level since July 2017 to push through 0.89/1.1230.

Will the USD/EUR rally continue?

The ECB’s concerns regarding a slowdown in growth follows a similar trend to that of the Federal Reserve. Both have taken a less hawkish tones in recent months with regards to interest rate movements but the lack of positive date from within the eurozone is likely to keep the Euro weak in the short term. But what about the longer term view?

The US economy hasn’t been setting the world alight and many now believe the Fed will keep rates on hold for the remainder of 2019. This combined with the on-going trade war with China and I believe the dollar could be set for a correction. We have seen a significant rally for the dollar in the last year. In April 208 rates were at 0.8060/1.24 some 11% lower than the current levels. I for one feel the dollar is overvalued and believe a move back toward 0.87/1.15 will be seen in the next few weeks.

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GBP/AUD forecast – highest in nearly 3 years

GBPAUD Forecast

In this morning’s post we’ll take a look at the GBP/AUD forecast as this currency pair has risen significantly recently. After the UK referendum, as I’m sure all readers are aware, the Pound fell in value significantly. This cause the GBP/AUD rate to fall from $2.00 to the Pound to as low as $1.60. However throughout the course of the last few years, the rate has been recovering most of these losses.

Why has the GBP/AUD rate been rising recently?

The most recent gains are due to Sterling gaining ground as speculation mounts that progress could be made with Brexit negotiations. This has helped the Pound become one of the strongest performing currencies of 2019 so far, although most will agree Sterling had a low starting point!

The link between Australia and China

The other reason for the GBP/AUD rate recovering is the way Australia’s economy is so reliant on China. Australia’s main export is Iron Ore, the majority of which is exported to China to fuel their building boom. Thus, their economies are inexorably linked. The Chinese economy has been slowing of late, recently lowering it’s economic growth targets, which have been impacted by the trade tensions between China and the USA, the worlds largest economy. Their growth is still very impressive – 6% last year – which is much higher than western economies, and double what the IMF expect global growth to be this year. However a drop in consumption is slowing things, and this has reduced demand for Australia’s Iron Ore.

Could the Aussie weaken further?

This means that the Reserve Bank of Australia could well choose to cut interest rates later this year, which has weakened the Aussie Dollar which has become cheaper to purchase. As you can see from the chart below, GBP/AUD has risen by almost 8% in the last 3 months, reaching a high this morning of $1.8700.

GBP/AUD rates since December 2018

Will GBP/AUD go up or down in 2019?

If May can get a Brexit deal agreed, then the Pound is likely to strengthen further. If Australia does cut interest rates, then this could mean a further gain for GBP/AUD rates. However given the rise in recent months, those clients that need to convert funds to AUD and don’t want to miss out on the best rates in nearly 3 years may wish to fix a rate now. If you have time on your side and want to see if rates rise further, then consider a ‘Stop Loss’ order to protect you against rates coming back down in the event of a ‘No Deal’ Brexit.

Those selling Australian Dollars to another currency will have been watching the rate move against them in dismay. AUD sellers therefore may wish to cut their losses and move out of the Aussie Dollar to protect against a further weakening of the currency.

Looking for the best GBP/AUD or AUD/GBP rates?

If you need to buy or sell Australian Dollars and want the best possible rate of exchange, then get in touch with us today for a free consultation. We can run over your options and provide you with a quote so you can see how much you can save.

Sterling falls on signs of slowing economy

It looks like the Pound’s rally has finally run out of steam. A significant rise throughout the year so far has seen GBP/EUR rates reach as high as €1.17+ which is the best we have seen in over 21 months. However this week we have seen Sterling level off, dropping into the mid €1.16’s.

It’s uncertain whether Theresa May will be able to get her deal through parliament later this month, so any further gains for the Pound will likely await the next round of voting in mid-March. Until then, in the absence of any Brexit news, investors will be focusing on economic data and it’s this that will drive the Pound over the course of this week.

What economic data could affect the Pound this week?

Already this week we have seen the UK construction sector show signs of contraction after posting poor figures. Later this morning at 09:30 am we will see the latest Services PMI data. Services form a huge part of the UK economy and so the release could have an impact on GBP exchange rates. The expected result is around 49.9 (anything above 50 indicates growth, anything below indicates contraction). If the number is lower than the expected the Sterling will fall. A higher number should cause gains for the Pound.

Elsewhere we have speeches by Bank of England members this week that could also affect the Pound. On Thursday, we have the latest ECB interest rate decision. The EU economy has been slowing recently and if the ECB hint at further stimulus measures, it could weaken the Euro and keep GBP/EUR rates supported. On Friday, GBP/USD could be affected by the latest US jobs numbers.

Looking for the best exchange rates?

For a free consultation with a currency expert, contact us today. We can discuss your requirements, explain how our service works, and provide you with a free quotation on the rate we can offer you. Typically our rates are up to 3% better than banks or other brokers may be able to offer you, potentially saving you thousands on a large exchange.

Contact us today for a free quote

Pound/Dollar rates up to 1.33

Pound/Dollar exchange rates have seen somewhat of a rally in the last few weeks with the pound having rallied just under 4% since mid February. This has pushed sterling to its highest level against the greenback since June 2018.

This has been a significant run for the pound a trend that I believe could well continue throughout the course of the year. This bodes well for anyone buying US dollars but should you need to sell dollars then this trend should be concerning. Progress with Brexit along with reduced optimism from the Federal Reserve regarding future US growth and a more hawkish stance to interest rates and we could begin to see continued US dollar losses.

Is a ‘no deal’ off the cards?

A rally for the pound has come following developments with Brexit which appears that a scenario of a ‘no deal’ Brexit is becoming increasingly more unlikely, although not totally off the cards. Today MP’s will head to Parliament to vote one further amendments. Speaker John Bercow makes the final call on which amendments are put to a vote, and we won’t know which ones he has chosen until later on Wednesday. Voting is likely to take place around 19:00 GMT

Other key dates for the diary are clearly explained in the below graphic courtesy of a very in depth article on the BBC website

As you can see there is still someway to go and the overriding consensus is that PM Theresa May’s deal will not get through. In my view the most likely outcome will be an extension of Article 50 by 3-6 months. In all cases I would expect the pound to gain traction, and if her vote was to be passed, then I would expect a strong surge for sterling. I don’t think this will happen so I would expect the markets to settle down in the short term.

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Pound/Euro surges to €1.16


Pound/Euro surges to €1.16, best in almost 2 years

This morning we have seen Sterling/Euro rise to the highest level in nearly 2 years. The reason the Pound has gone up is news that the Brexit process could be delayed, significantly reducing the chances of the UK leaving with ‘No Deal’ next month. There are also rumours that she will rule out the UK leaving without some sort of deal.

The PM is still trying to get some concessions on the Back Stop in order to get her deal voted through on the 12th of March. If she doesn’t achieve this, then a delay is the likely option. All of these events have made the Pound much more attractive to investors, causing it to rise in value. Conversely the Euro has less appeal as major EU economies like Italy and Germany face stagnant growth.

In other news Labour have said they would back a second referendum, if a customs union is ruled out. I think this option would prolong uncertainty and is unlikely to get a majority in parliament.

Will the Pound rise further?

I think it’s unlikely. The markets are now pricing in a slight delay. If the PM succeeds in getting a deal voted through in a few weeks, then yes the Pound is likely to rise further. A delay, while avoiding ‘No Deal’ really just kicks the can a little further down the road, so in this scenario I’d expect the Pound to stay steady rather than rise.

For those buying property overseas, the last few months have saved you a lot of money. Purchasing a €300,000.00 property in Europe is £14,000.00 cheaper today compared to early January. The current levels are around the best we’ve seen since April 2017. Previously when rates have reached these levels, they have dropped away again.

If you need to buy Euros and want the best rates, get in touch today to discuss how we can help. Our rates are significantly better than your bank or existing broker may offer. We can also provide the option to freeze the current rates for up to 12 months by lodging a small deposit; ideal for budgeting for an overseas property purchase.

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