Currency Forecasts

Euro, US Dollar, Aussie Dollar, Kiwi Dollar Forecast

Good Morning. Last Friday’s data prompted investors to acknowledge it is too early for the Bank of England to remove its stimulus for the economy, and that quantitative easing may be extended as soon as next month. This caused the pound to fall. Today we’ll look at a detailed forecast for Pound to Euro, US Dollar, Aussie Dollar & Kiwi Dollar.

Sterling recouped some losses yesterday as traders adjusted short positions in the currency, but many in the market said the ongoing weakness in the UK economy would keep the pound under downward pressure. Rates @ 08:30am are as follows:

  • GBP/EUR 1.0978
  • GBP/USD 1.6323
  • GBP/AUD 1.7803
  • GBP/NZD 2.1866
  • GBP/CAD 1.7442
  • GBP/ZAR 12.390
  • GBP/JPY 150.52
  • EUR/USD 1.4887

EUR
Last week saw a very turbulent week, with Sterling starting at a low 1.0880 against the Euro, and strengthening to just over the 1.11 mark in the early part of the week, as Bank of England minutes on Wednesday morning showed unanimous support for a halt in the Quantitative Easing programme upon signs the economy was showing signs of recovery.

Sadly, this strength was to be short lived as GDP figures on Friday unexpectedly showed that the UK was still in recession for the third quarter. If the US shows positive GDP figures this week as expected, then it is likely that the United Kingdom will be the last of the major world economies to exit recession, which is likely to have catastrophic consequences for the pound.

Prime Minister Gordon Brown announced over the weekend that the UK would see a return to positive economic growth by the end of the year, although he offered no justification for his comments other than confidence in the future success of government fiscal policy.

Data releases on the continent were on the quiet side last week, with Sterling strength, then sudden weakness being the driving factor behind the GBP/EUR cross, and this is likely to remain similar for the week ahead, with housing data from the UK on Monday, and inflation data from the Eurozone on Friday the only noteworthy releases, and neither likely to have a significant effect on the market. More likely to affect the market are speeches by key policymakers such as central bank Governors Mervyn King or Jean-Claude Trichet as well as government finance ministers from the UK and Europe. Unfortunately, the markets get very little notice of such announcements, and thus they react sharply to any comments as and when they appear.

USD
The Pound started and ended the week in virtually the same place against the Dollar after anticipation of favourable GDP figures failed to result.

Sterling fell sharply against the Dollar on Friday after figures showed that the UK economy is still in recession. An advanced estimate of third-quarter Gross Domestic Product showed that the economy contracted by 0.4%, a sixth consecutive quarterly decline marking us in the longest slump since records began.

The market had been expecting positive news, especially after Wednesday’s MPC minutes showed a 9-0 vote to keep rates on hold and Cable had been making good progress reaching interbank highs of 1.67. However the disappointing figures triggered a huge Sterling sell off on Friday and into this week – Furthermore the data adds weight to the argument that the Bank of England should extend Quantitative Easing measures at its next policy meeting on 5th November.

This is a bitter blow for those Dollar purchasers who have been waiting eagerly for the 1.70 level. However those purchasers who took advantage of using a Stop Loss order after the gains earlier in the week will have minimized their losses against this recent current fluctuation.

Whilst the US Dollar’s weakness has been somewhat less visible against Sterling due to huge Sterling weakness, the currency’s relative underperformance in a global context was clear last week as the Euro’s value rose above 1.5 US Dollars for the first time in fourteen months.

The Dollar generally began to weaken off last week against a basket of currencies as investor appetite started to grow. As a result investor’s started to pulled funds from the Dollar which have been seen as a safe haven currency and moved into riskier assets. Federal committee Policy members however remained cautious, indicating that growth in 2010 would be slow. Despite these comments ‘New Homes Sales’ were still recorded as their highest monthly rise since 1999.

This week it is the turn of the US for their third-quarter preliminary estimate of GDP on Thursday. The expectation is that we will see the US returning to growth and if so we will probably see further downward pressure on Sterling, but given the upset in the UK last week the markets will be watching with interest.

For those looking at buying Dollars the cautious move would be to purchase early in the week before the results are posted. However, for those who wish to test the market a little and wait for the GDP announcement to happen, make sure you speak to you FCG Account Manager to discuss placing a Stop Loss Order and a Limit Order to protect yourself against losses if the markets fall and capitalise on your position should the market spike.

AUD
Sterling climbed against the Australian Dollar over the middle part of last week, trading above the 1.80 level, only to fall on Friday due to lower than expected GDP figures. The Pound’s initial gains came as a result of Wednesday’s decision not to add to quantitative easing by the Bank of England, despite strong commodity prices and a record annual growth in Chinese GDP (a major Australian trading partner). Having raised interest rates to 3.25% at its recent policy meeting, the Reserve Bank of Australia’s minutes noted that economic growth is expected to return to trend in 2010, fueling speculation that interest rates will continue to rise throughout the year.

GDP/AUD closed at 1.7671, down 0.96% from 1.7842 a week earlier, showing further improvements for those selling Australian Dollars this week and indicating to those looking to do so in the future that it may be beneficial to take advantage of today’s rates and discuss the possibility of a forward contract with their Account Executive.
Finally, this week sees the release of consumer price inflation data on Wednesday. A threat of further rises in inflation is likely to make the case for further increases in interest rates. Ultimately, any further rise in interest rates will lead to a strengthening in the Australian currency and a fall in exchange rates. This simply highlights that it may be advisable for those looking to buy Australian Dollars to do so before rates fall further.

NZD
GBP/NZD traded above the 2.20 level at both the early and late stages of last week, lacking general direction, with only slight market movement upon Friday’s GDP release, causing Sterling weakness and lows under the 2.17 level.

Last week saw an absence of major economic data releases from New Zealand with only indications of strong commodity prices and robust Chinese growth data (a major trading partner) underpinning support for the NZD, speculating that interest rates could rise sooner than expected.

GBP/NZD closed at 2.1604, down 2.16% from the previous week, benefiting those looking to convert New Zealand Dollars into Sterling.

The Reserve Bank of New Zealand will announce its interest rate decision on Wednesday. Despite a widely expected no-change announcement, there is likelihood that this will cause speculation that any further rises would be likely within the first, rather than the second half of 2010. In conclusion this should highlight to those buying the New Zealand Dollar that whatever Wednesday’s decision the currency looks set to strengthen and rates to fall further.

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Sterling Exchange Rate Forecast Oct Nov Dec 2009

Good Morning. Today we’ll look at last weeks events and how these affect exchange rates. A look at our Director of Foreign Exchange giving his views on the currency markets on CNBC, and as usual on a Monday, a full breakdown of the weeks data and possible effects on the currency markets. So to kick off, lets watch our recent slot on CNBC. If you cant see the video, watch it on YouTube here.

At 09:00am this morning, rates are as follows:

  • GBP/EUR 1.0834
  • GBP/USD 1.6296
  • GBP/AUD 1.7619
  • GBP/NZD 2.1581
  • GBP/CAD 1.7164
  • GBP/CHF 1.6402
  • GBP/ZAR 12.179
  • EUR/USD 1.5036

Last week, the pound made some gains after the Bank of England released their minutes. These showed a positive outlook for the UK economy, and they said that further Quantitative Easing is on hold for the time being. The pound rose on the back of this news, and we saw good exchange rates. This BBC article published on the day, shows how the pound soared on the news.

It was not to last however, as Fridays GDP figures confirmed we are now in the longest recession since records began over 50 years ago. We are now one of the only countries still in recession, and the news means we are likely to see more QE from the BoE. This in turn has caused lots of Sterling weakness, as the UK economy is performing so badly, and this is what caused rates to tumble.

It is the first time UK gross domestic product (GDP) has contracted for six consecutive quarters, since quarterly figures were first recorded in 1955. The pound fell sharply after the figures were released, reflecting the fact that many observers had expected the UK to have grown during the quarter.

The Prime Minister has said that the economy will return to growth by the turn of the year, in his first reaction to news that the UK is still in recession. Read about his comments here.

This Weeks Data
Last week demonstrated how data releases can dramtically affect exchange rates, and cause your currency purchase to be much more expensive than necessary. The better than expected Retail Saels Data caused the pound to rise, along with a bullish view of UK recovery by the Bank of England. Last week also showed how short lived spikes like this can be, with the poor GDP figures on Friday causing Sterling to fall across the board.

This week for the UK we have various house price measures that will indicate current movements in the housing market, and that is considered as a sensitive factor to the UK’s economy so can affect the value of the pound.

For the EU, we have unemployment data on Friday, which is a leading indicator for the European Economy. If the rate is up, it indicates a lack of expansion within the European lobar market. As a result, a rise leads to weaken the European economy and thus the Euro. There is also Consumer Sentiment & Business Climate data from Europe.

From the United States, Thursday sees Gross Domestic Product & Personal Consumption data.

Elsewhere we have Business Confidence and an interest rate decision for New Zealand. There is an interest rate decision in Japan, and Consumer Price Index from Australia.

For more information on how these data releases can affect your curreny requirement, contact us today for a free consultation.

Monday
UK – Hometrack Housing Survey
US – Manufacturing
Aus – Producer Price Index
Ger – Consumer Confidence

Tuesday
US – Consumer Confidence
Jap – Retail Sales
UK – CBI Survey

Wednesday
Aus – Consumer Price Index
NZ – Business Confidence
NZ – Interest Rate Decision
Ger – Consumer Price Index
US – New Home Sales

Thursday
Ger – Import Prices
US – Gross Domestic Product
US – Personal Consumption
EU – Consumer Sentiment
EU – Business Climate
US – Jobless Claims

Friday
EU – Unemployment
UK – GfK Survey
UK – Nationwide House Prices
US – Employment
Jap – Interest Rate Decision
Ger – Retail Sales

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Update – Pound plummets

*** UPDATE ***

GDP monthly drop of 0.4% against forecast of 0.2% gain – the pound is dropping in a BIG way. In the few minutes since the announcement, the pound has fallen over a cent against the EUR and USD.

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Pound down on Retail Sales – GDP figures today.

Good Morning. The pound fell yesterday after the Retail Sales figures were slightly worse than expected & a Bank of England policymaker said quantitative easing could be extended if necessary. Sterling has risen again this morning. Rates at 08:30am stand as follows:

  • GBP/EUR 1.1101
  • GBP/USD 1.6690
  • GBP/AUD 1.7996
  • GBP/NZD 2.2048
  • GBP/CHF 1.6779
  • GBP/CAD 1.7520
  • GBP/ZAR 12.378
  • GBP/JPY 153.12
  • EUR/USD 1.5029

Retail Sales

Retail sales showed no growth in September, confounding expectations for a 0.5 % increase, while the annual rise of 2.4 %was below forecasts of a 2.8 percent increase. The worse than expected figures caused Sterling to fall from 1 month highs against the US Dollar and Euro.

Bank of England

Bank of England figures also released on Thursday showed that lending to businesses improved sharply in August but still remained negative. Some analysts reckon the sluggish lending and demand for credit, together with a bleak outlook for the public finances means sterling’s upside should be limited.

“The retail sales number speaks volumes to me and the state of this economy is getting worse. Forget any rise in rates anytime soon as inflation is way in the future,” said Maurice Pomery, managing director at Strategic Alpha in London.

Sterling hit its one-month highs versus the dollar and euro this week in part boosted by BoE policy meeting minutes which investors had viewed as a sign that an extension of its 175 billion pound quantitative easing next month was less likely.

The minutes were seen as consistent with comments from BoE Governor Mervyn King, who was quoted on Wednesday in Scottish newspaper The Herald as saying rates could not stay at record lows indefinitely and would have to return to more normal levels eventually. However, BoE Deputy Governor Paul Tucker’s comments in an interview with The Scotsman newspaper on Thursday gave a market that is still broadly bearish on the pound an excuse to sell again.

Gross Domestic Product

The Gross Domestic Product figures are released at 09:30am this morning. It is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity and health.

We expect the figures to show that Quarter on Quarter, the economy grew by 0.2%. The year on year figure is expected to show a decline of -4.6%. If the figures are better than this, then the pound may gain further. If figures are worse however, we could see the recent gains for the pound wiped out.

GDP often causes big swings in exchange rates as it shows if the economy is growing. The Twitter update sidebar in this blog is updated several times throughout the day, so do check back to see what the figures were, and what effect this has on exchange rates.

If you would like to fix a rate before this data, and protect yourself against adverse movements, then Open an account with us today. It’s free to do, without obligation, and you can then challenge us to get you a better deal than your bank or other insititutions.

Enjoy your weekend.

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Sterling gains on BoE News

The pound rose across the board yesterday, after the minutes from the recent Bank of England meeting showed that all 9 members voted to keep the Quantitative Easing measures on hold, for the time being. Rates this morning are as follows:

  • GBP/EUR 1.1073
  • GBP/USD 1.6597
  • GBP/AUD 1.7959
  • GBP/NZD 2.1964
  • GBP/CAD 1.7370
  • GBP/CHF 1.6732
  • GBP/JPY 151.68
  • GBP/ZAR 11.172
  • EUR/USD 1.4981

Bank of England Minutes
The pound has rallied after the Bank of England said its monetary policy committee voted 9-0 earlier this month not to pump more cash into the economy.The MPC was also unanimous in agreeing to keep interest rates on hold at 0.5%.

The decision not to inject more money was seen as a positive sign that the UK economy was recovering and did not need further help from the central bank. The committee said that QE had had a “substantial” impact, but all members agreed that “recent developments were not sufficiently compelling to justify revising the target level of asset purchases that had been agreed in August”.

The Bank raised the total amount of funds for QE by £50bn to £175bn in August, although Governor Mervyn King and two other policymakers had argued for a £75bn extension. The Bank publishes the minutes of its meetings on monetary policy two weeks after the event.

Gross Domestic Product
Figures out tomorrow could show that the UK has exited recession. The Gross Domestic Product (GDP) is a measure of the total value of all goods and services produced by the UK. The GDP is considered as a broad measure of the UK economic activity and health.

This is the next main piece of UK data that will affect exchange rates. We expect the figures to show that Quarter on Quarter, the economy grew by 0.2%. The year on year figure is expected to show a decline of -4.6%. If the figures are better than this, then the pound may gain further. If figures are worse however, we could see the recent gains for the pound wiped out.

Todays Data
The main news from the UK will be the retail sales figures. This measures the total receipts of retail stores. Monthly percent changes reflect the rate of changes of such sales. Changes in Retail Sales are widely followed as an indicator of consumer spending. A high reading is seen as positive, or bullish for the GBP, while a low reading is seen as negative or bearish.

UK – Retail Sales
US – Jobless Claims
Can – Retail Sales
US – House Price Index
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