Currency Forecasts

Pound to Euro & US Dollar Rates very good.

Pound to Euro
Last week saw Sterling continue to march back towards the 1.20 mark, moving up as high as 1.18 on the mid-market. The run continued yesterday, however now seems to have leveled off in anticipation of the data releases from the UK…

This week sees a very active calendar, with major releases on every single day. Yesterday morning saw the manufacturing PMI from the UK and Eurozone, which saw all figures higher than expected, with the UK figures a massive 6% better than forecast. This supported sterling and we briefly saw highs of 1.1815 shortly after the release, extremely positive news for anyone buying Euros.

Tuesday sees PPI inflation data for the Eurozone from June, which is likely to provide a further indication of their position in the current economic cycle, and how soon they are likely to see recovery. On Wednesday we see the services side of the PMI data released, with forecasts suggesting that again, the UK will be stronger than the Eurozone, and also Retail Sales figures from the continent for the month of July.

These are more indicative of consumer confidence in the economy, and an increase would indicate a shorter timescale for recovery on the high street.

Thursday sees interest rate announcements for both the UK and the Eurozone. Whilst both central banks are highly likely to hold base rates at their current levels, it is the prospects of further Quantitative Easing which is likely to move the markets.

Any further QE announcements are likely to undermine their currencies, and opinion is split on the likelihood of further easing from both banks. Most participants favour no further action from either the BOE or ECB, however, it is unquestionable that we will see some market movement if there are any surprises.

Friday morning sees PPI inflation from the UK, which has read negative in previous months, but is likely to be fractionally positive, showing a slight increase in prices, suggesting the economy may be starting to improve.

Pound to US Dollar
GBP/USD cross hits highest levels of 2009 (since 23rd October 2008) on Friday and looks to continue rally.

On Friday we had the release of Quarter 2 US GDP figures which showed the economy contracted by 1.0%, but was better than the expected 1.5% decline. This was closely followed by the Chicago Purchasing Managers Index (a monthly measure of US business conditions) which was better than expectations.

This caused a rally in global risk appetite amongst investors and helped Cable to reach a Mid-Market level of 1.6733 before European markets closed. Monday has seen better than expected manufacturing data from both sides of the Atlantic, and more importantly some very encouraging figures from UK banks with Barclays announcing a profit increase of 8% to £3bn, and HSBC reporting a rise of 5.1%.

Couple this with an equity market rally which has helped the FTSE hit it’s highest level since October, and it’s hard to see the rally in risk abating.

What does this mean? As we see signs of a global economic recovery, the US Dollar will suffer as investors move their money out of the Greenback (seen as a safe-haven currency or somewhere investors will keep funds in times of market turmoil) and into riskier assets.

The Pound is currently seen as a high risk currency and therefore as UK and US figures get better, GBP/USD will move twice as quickly as funds are moved from USD to GBP, hence the jump from 1.63 last week to a high if 1.6930 today.

Later this week the Bank of England will announce its decisions on interest rates for this month which will most likely be to hold them again at 0.5%. They are then expected by most analysts to announce a halt to its quantitative easing program and a slightly higher inflation projection than before which will help to further underpin Sterling.

Finally on Friday all eyes will be on the release of Non-Farm Payrolls data for July, with the forecast for a further decline from -467K to -345K, which although is slightly reduced, still indicates a slowing US economy.

Non-farm payrolls is the most closely watched indicator in the employment situation in the US and is considered the most comprehensive measure of job creation in the US. With all of the above releases in mind there is a distinct possibility that we could see Cable trading above 1.70 for the first time in over 9 months.

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Sterling Euro Exchange Rate Outlook August 2009

Last Weeks Trading
Very interesting week last week, with the pound surging against the USD, EUR and most other major currencies. The rise can be mainly attributed to better than expected house price data, which helped push GBP/EUR to 1 month highs. It may have even gone higher, but the pound was pulled back slightly after Fitch ratings agency confirmed its ‘AAA’ rating with a stable outlook on the UK and warned on UK’s high levels of debt.

Market Snapshot @ 08:30am

  • GBPEUR 1.1768
  • GBPUSD 1.6735
  • GBPAUD 2.0010
  • GBPNZD 2.5218

UK Debt

Fitch said Britain “faces one of the most serious post-crisis fiscal adjustment challenges among ‘AAA’ governments” and warned fiscal policy needs to be more aggressive in aiming to bring down the deficit.”The Fitch statement focused attention on the deteriorating UK fiscal situation,” BNP Paribas currency strategist Ian Stannard said.

However, investors took some encouragement from the latest GfK/NOP survey showing UK consumer confidence held steady in July, with Britons taking a more upbeat view of the economy as a whole.

This Weeks Data

This week, we have an extremely busy one in terms of data releases. it’s also a very important one for any client with an imminent need to convert currency…

For the UK we have house price information, GDP Estimates, Consumer Confidence, and of course the Bank of England Interest Rate decision. Watch these releases closely, as we may well see Sterlings current strength come to an end. If the BoE make any further announcements with regards to Quantitative Easing, then expect the pound to suffer. If they decide to shelve the asset buying scheme, then the markets may look on this positively.

Sterling could go either way, so in order you maximise your exchange rate and dont be caught out of rates move suddenly, then contact us to discuss Stop Loss and Limit Orders.

For the EU we also have an interest rate announcement, and also various inflationary measures. Also watch for Retail Sales which gives an indication of consumer confidence.

For the US we have expenditure information, confidence data, Jobless info, and Output measures. Watch these closely, as even if your requirement is for AUD or EUR for example, US economic information is very important, as it is this that drives risk sentiment – if US data is good, and investors feel confident and are happy to take a risk, then currencies like GBP and AUD can benefit, and vice versa.


This will be a very important week for the currency markets, with some important data releases and announcements. If you have a requirement, then let the experts guide you through the sometimes complex world of foreign exchange. We have various tools available to help you get the best rates from the market – dont just leave it to chance and blind hope that rates will move your way! Get in touch for a free consultation on how we can help.

Ger – Retail Sales
Ger – Purchasing Managers Index
UK – Halifax House Prices
EU – Purchasing Managers Index
US – Construction Spending

Aus – House Price Index
Aus – RBA Interest Rate Decision
NZ – Commodity Prices
EU – Producer Price Index
US – Personal Income
US – Consumption Expenditure
UK – BRC Shop Price Index
UK – Nationwide Consumer Confidence

UK – Services PMI
UK – Industrial and Manufacturing Production
EU – Retail Sales
EU – Services PMI
US – Factory Orders
US – Energy Stocks

UK – GDP Estimate
UK – Interest Rate Decision
US – Jobless Claims

UK – Producer Price Index
UK – Input and Output
Ger – Industrial Production
US – Payrolls & Unemployment
US – Consumer Credit

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Sterling 1 month high against Euro

Sterling’s gains…
We have seen a good run for the pound all week, and this morning rates seem stable. At 08:30am rates are as follows:

  • GBP/EUR 1.1724
  • GBP/USD 1.6558
  • GBP/NZD 2.5227
  • GBP/AUD 1.9980
  • GPP/CAD 1.7874
  • GBP/CHF 1.7972
  • GBP/ZAR 12.834
  • GBP/JPY 158.21

The pound is at 1 month highs against the Euro and US Dollar, and not far away from the highest rate all year. The rise is after data showing rising UK house prices suggested property prices have stabilised from a steep fall, as outlined in yesterdays report.

Broad losses in the dollar also helped to prop up sterling, which recovered from two days of losses as a rise in UK share prices helped to stoke demand for currencies considered to be higher-risk.

It recovered from losses over the past two days when a pause in risk demand had stung the currency. Despite Thursday’s gains, sterling is on track to end the month more or less flat against the dollar and the euro, and some analysts are sceptical about whether the UK currency will significantly extend its rally from earlier in the year.

Others in the market point out that the UK’s weak fiscal position will haunt the currency, while the dollar may appreciate later this year as speculation heats up regarding the timing of an exit policy to the Federal Reserve’s quantitative easing measures.

US Dollar
As I have mentioned several times here, we often see data from the US and US Dollar movements directly affect Sterling. Why is this? Well, USD is seen as a safe haven currency. When investors are worries about the global economy, or when there is bad news, we see investors flock to the dollar, which strengthens it and weakens other currencies such as Sterling.

When risk appetite returns, and there is good news from the US, you would expect it to strengthen the dollar. However, in turbulent times like we have now, good news from the states increases risk appetite among investors, and we see more move towards higher risk currencies such as the pound.

So where are rates headed?
In the short term, we may see the recent run in Sterling come to an end as more data is released by the Bank of England next week. If you have a requirement in the next 3 months, consider fixing rates now as the market is very uncertain.

Longer term, investors do expect the pound to continue rising, and rates should steadily climb to year end. this is medium to long term however.

If you are trading up to £10k, then you should open an online trading facility. You can view rates and purchase currency yourself 24 hours a day 7 days a week, and it’s very simple.

If your requirement is above £10k, then a normal trading facility will be best for you. This is where you place your order over the telephone, and we source commercial rates for you and you can lock in rates in just a few minutes.

Opening an account is free, does not obligate you, and give you the opportunity to have a discussion with a senior trader to help you get the best possile exchange rates. Get in touch today to find out more.

Todays Data
EU – Consumer Price Index
EU – Unemployment Rate
Canada – Gross Domestic Product
US – Gross Domestic Product
US – Personal Consumption Expenditures
US – Purchasing Managers Index

Enjoy your weekend…

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Sterling pushes higher, but may not last

Sterling July 2009
The pound has pushed much higher this morning following corporate earnings data yesterday, and better than expected house price information for the UK early this morning. As you can see from the snapshot below of rates at 08:30am, we have significantly better levels than yesterday:

GBPEUR 1.1710
GBPUSD 1.6467
GBPNZD 2.5220
GBPAUD 2.0041
GBPCAD 1.7877
GBPCHF 1.7901
GBPZAR 12.892
GBPJPY 156.15

House Prices
The UK’s largest building society believes there is a reasonable chance that house prices could end the year higher than they started 2009.

Such an outcome was unthinkable a few months ago, the Nationwide’s chief economist said.
The Nationwide’s latest house price survey showed prices rose by 1.3% in July compared with the previous month. The result was alot better than anaylsts predictions, meaning it has helped push the pound through 1.17 against the Euro.

Another reason for the rise is German consumer prices – they fell for the first time in 22 years in July, official figures have shown yesterday. Prices fell 0.6% in July from a year earlier – the first fall since March 1987, when they declined by 0.3%.

The decline was largely due to falls in energy prices, which peaked in summer 2008, and analysts said Germany was unlikely to see a deflationary spiral.

As Germany is the largest economy in the EU, these negative figures have weakened the Euro, and combined with Sterling strength has given an opportunity to Euro buyers to buy at very close to the highest rates all year.

Will it last?
Hard to tell. Most eyes now will be on any further comments by the Bank of England next week. If there is any further news of more Quantitative Easing which many are predicting, then expect a weaker pound.

So, for Euro buyers, consider taking advantage of a Forward Contract to fix these rates now while they are here. You only have to pay a 10% deposit, and you can then draw the funds up to 2 years into the future.

For Euro Sellers that need to convert funds back to Sterling, then it’s also important to note the medium term forecast for the pound. This says that things will continue to go up in the medium to long term, and so again a Forward contract will allow you to remove any risk of rates going the wrong way.

Get in touch today to discuss how we can help you achieve the best possible exchange rate for your transfer.

Today’s Data
We have already had Nationwide House Prices for the UK, which were much better than expected, helping push the pound higher against Euro and US Dollar. Later on we have the GFK Consumer Confidence at midnight tonight. It is a leading index that measures the level of consumer confidence in economic activity. A high level of consumer confidence stimulates economic expansion while a low level drives to economic downturn.

Just before 9am we have unemployment data from Germany. Consumer Confidence for the EU comes a bit later this morning.

From the US we have core personal consumption, Employment Cost, Gross Domestic Product and the Chigao Purchasing Managers Index.

This US Data will be very important due to risk sentiment. If figures are good, then it can help boost the pound which is seen as a high risk currency, and in bouyant times it increases demand, so watch this data closely.

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Pound falls. Lots of UK data today

Market Snapshot, 30 July 2009 @ 08:30am :

  • GBPEUR 1.1560
  • GBPUSD 1.6375
  • GBPNZD 2.4932
  • GBPAUD 1.9950
  • GBPCAD 1.7778
  • GBPCHF 1.7596
  • GBPZAR 12.924
  • GBPJPY 153.91

Trading Yesterday:

Sterling fell yesterday, retreating from earlier gains made earlier this week against both EUR and USD. It was as Britain’s main stock index turned negative and data showed UK retail sales fell faster than expected in July that caused the fall.

Adarsh Sinha, a currency analyst at Barclays Capital said the pound slipped in line with equities but was more generally struggling to keep in step with gains in other pro-cyclical units following a strong performance earlier in the summer.

“Sterling has sort of been underperforming the other more risky currencies in general,” he said. “What really matters for sterling is what happens in banking stocks.”

The currency edged down a touch after data from the Confederation of British Industry showing British retail sales fell faster than expected in July but slower than in June. Overall, the pound’s reaction to the data was limited. Sterling came under further pressure after weaker-than-expected U.S. consumer confidence data.

There was some recovery however, after a senior UK Treasury source told Reuters inflation could become a problem once again when the global economy recovers, adding the threat of deflation has receded.

Australia gives the pound a heling hand…
Despite sterling’s slide, the currency was supported by a climb in the Australian dollar after comments early on Tuesday from the governor of the Reserve Bank of Australia. He suggested that interest rates in the UK may rise.

Higher rates mean a better return for investors, and so more of these investors purchase Sterling, pushing the value higher. It’s the recent cuts and low rates here in the UK that have helped to weaken the pound so much over the last 9 months.

Todays UK Data
As I pointed out on Monday, today has lots of UK data, most released at 09:30am. Expect rates to change from the snapshot above, as investors move Sterling depending on how good or bad the figures are. Let’s take a detailed look at what this data actually is…

M4 Money Supply – measures all the sterling in circulation, encompassing notes and coins as well as money held in bank accounts. It is considered as an important indicator of inflation, as monetary expansion adds pressure to the exchange rates. An acceleration of the M4 money is considered as positive for the GBP, whereas a decline is negative.

Consumer Credit – is an amount of money that individuals borrowed in the previous month. It shows if consumers can afford large expenses, which can fuel economic growth. However, a high figure may also indicate that the economy is overheating, as consumers borrow in order to live beyond their means

Mortgage Approvals – The Bank of England presents the number of various Mortgage Approvals. It is considered as a leading indicator of the UK Housing Market. A Mortgage growth represents a healthy housing market that stimulates the overall UK economy.

Elsewhere, we have some info from the USA this afternoon; Mortgage Applications, Durable Goods Orders & Crude Oil Stocks.

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