Currency Forecasts

Sterling under pressure

Sterling exchange rates have remained under pressure today following the latest Bank of England interest rate meeting.

As very much expected the central bank held its base rate on hold at 0.75% but it was the post decision press release which has caused the pound to fall. At the time of writing GBP/EUR has fallen from 1.11 to 1.1060 and GBP/USD from 1.27 to 1.2665.

In the post decision press conference Bank of England Governor Mark Carney downgraded cut its forecast for UK growth and warned that a lack of Brexit clarity is weighing on the economy.

Uncertainty over the UK’s departure from the EU had “intensified considerably” over the past month, the Bank said as it announced it was not changing interest rates. It said the economy was likely to grow by 0.2% in the final quarter of 2018, from previous expectations of 0.3%.

This does not bode well for the pound. Over the Christmas period it is expected that the pound is likely to remain relatively stable, however I would expect some significant market volatility as we head towards the important parliamentary vote on the 21st January.

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What could affect GBP in the coming weeks?

Good morning. The Pound has steadied a little, after Theresa May has delayed the meaningful vote in parliament until mid-January. This gives her a little more time to try and seek concessions from the EU, in order for Parliament to vote through the deal. If nothing changes, then the deal won’t get through, leaving the options of a ‘No Deal’ brexit or another referendum.

How would a ‘No Deal’ or new referendum affect Sterling?

I think that a No Deal brexit would send the Pound much lower than it is now. I also think that many in parliament think that if they vote down the deal they can force another referendum. There’s no way of knowing how this could affect the Pound. On the one hand another referendum could help the Pound rise due to avoiding a hard brexit. However my view is that it would only make things worse, increasing divisions and uncertainty both politically and in the economy. In any case, what would the question be, and if the result is as close as all the polls suggest, then it wouldn’t change anything anyway.

Ultimately I think that a softer Brexit will be voted through, but we have several months to wait to see if that will be the case. So, until January and more is known about what May can negotiate with the EU, it’s unlikely that we’ll see much progress. This brings us to the other things that move exchange rates, namely economic data releases, of which there are several in the coming days that could move Sterling exchange rates. I’ll list the upcoming data below. If you want to have a chat with an expert about how rates are moving and get a quote, get in touch today.

This weeks economic data releases

Tuesday 18th December 2018 – There’s not much today that could move rates other than German data that has already been released, so in the absence of any Brexit developments, today is likely to be rather quiet for Sterling.

Wednesday 19th December 2018 – At 09:30am this morning we’ll see various UK inflation numbers released which can affect interest rates; a higher than expected reading would help the Pound. The numbers are expected to show CPI at 2.3%.

Elsewhere we have lunchtime data from Canada (Inflation) that could affect GBPCAD. The US this evening releases it’s announcements on interest rates and policy, and this is an important release that can affect all major currencies. If they announce a pause in their interest rate hiking which I think is likely, the USD will weaken pushing GBP/USD up and GBP/EUR down due to the inverse relationship between the Dollar and the Euro.

Thursday 20th December 2018 – Another important day for Sterling, at 09:30am we’ll see the latest UK Retail Sales numbers. This is a good overall barometer of how the economy is performing and so can affect the Pound. Also today we have the BoE interest rate decision. While no change is expected, any comments in the minutes or from the Governor can affect the Pound depending how they are interpreted. Usually when Carney speaks he causes the Pound to fall. The US releases jobless numbers at lunchtime that could affect GBPUSD.

Friday 21st December 2018 – We end the week with UK GDP numbers released at 09:30am. Growth measures often move the Pound higher or lower depending how close they are to forecast. We’ll also see UK Public Sector net borrowing numbers at the same time.

The USA also has it’s GDP numbers today so GBP/USD could also have a choppy day. Other than that, the only release in focus is GDP and Retail Numbers from Canada, which could move Pound/CAD.

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Pound steadies as May wins confidence vote; what next for Sterling?

GBPEUR

Good morning. After a tumultuous week for UK politics, Theresa May has won the vote of confidence, and the currency markets have settled down somewhat. Sterling hasn’t surged on the result, but has steadied a little from the lows we saw earlier this week. GBP/EUR is at 1.1140 and GBPUSD is just below $1.26.

In terms of Brexit negotiations, nothing much has changed, apart from the fact the Brexiteers will not now have as much sway as they once did. May is back in Brussels but they are adamant that they won’t budge or make any further concessions, and that’s why the Pound has failed to re cover its recent losses.

Will Sterling go up or down in January 2019?

If you look at the way the EU tend to negotiate, with their recent Canada trade deal for example, they tend to leave things to the last minute before making the necessary concessions to get a deal through. I think that’s what we’ll see in January.

The withdrawal agreement in it’s current form will not pass through parliament. If however they can add some legal text committing to a free trade deal, and some way for the UK to exit the backstop should that not happen, then it’s likely it will be voted through. In this scenario the UK and EU would then enter trade negotiations likely to last at least 2 years. If all of this happens in January, then I think it’s likely Sterling will recover significantly. However I can’t see how the Pound would recover from it’s current levels until January.

What if the EU don’t budge, how would the Pound react?

If the EU dig their heels in and refuse to make any concessions, then I can only see a No Deal Brexit. There is talk of a second referendum, but I can’t see how that would work in practice. Offering 3 choices of leaving with a deal, without, or remaining, then that would simply split the leave vote which wouldn’t be acceptable. If there was another binary choice, then all the polls suggest it will be just as close as last time. So if either Leave or Remain won by small margin, what then? A third referendum? A fourth?

In this scenario it’s likely that the Pound would drop significantly. So while some progress was made this week in terms of UK political uncertainty, the broad picture of Brexit uncertainty remains unchanged.

Small movements in exchange rates can make a big difference

It’s imperative that if you need to exchange currency in the coming months, you take steps to ensure you are not left exposed to the volatile currency markets. For example, the cost of purchasing a €300,000.00 property in the Eurozone has differed in cost by £13,000.00 in the last month alone, showing how important exchange rates are when buying property overseas.

Looking for the best exchange rates

We offer exceptional rates of exchange coupled with tools to enable you to avoid sharp price changes. Even if you are already using a currency broker, it’s likely we can get you a better rate. To find out more about how we can help, or to get a quick comparison quote, complete our free enquiry form here.

UK Prime Minister faces a no confidence vote

Theresa May will face a vote of no confidence in her leadership after the 48 letters required calling for a contest were delivered. 

Mrs May is expected to make a statement this morning ahead of the no confidence vote scheduled for 6-8pm this evening.

In order for her leadership to be relinquished 158 votes will be required to enable a new leader of the conservative party to be elected. If Mrs May does not win the vote she will not be able to stand in the new leadership vote. There is also a chance, that should she win,  but not by an overwhelming majority, that she may stand down.

If Mrs May is ousted as the Conservative leader she would be expected to stay on in a caretaker role until a new leader is elected, a process that could take up to 6 weeks. This would also bring into doubt whether the proposed Brexit bill that is currently on the table will be able to get through the next proposed vote in parliament scheduled for the 21st January.

Pound volatility set to continue

This ever increasing Brexit shambles is causing a big sell off for the pound. One thing a market does not like is uncertainty and this leadership vote may bring even more chaos to an already struggling pound.

Nobody knows what the next couple of weeks will mean for sterling exchange rates, but what we do know is that we’re likely to see some significant volatility in the currency markets. If you need to make a currency transfer, then you should get in touch with us today to discuss how we can help you get the best exchange rates.

In addition to being able to provide you the best exchange rates, we offer ways to protect against rates moving against you such as: Forward contracts and Stop Loss/Limit Orders.

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Detailed forecasts for: Sterling (GBP), Euro (EUR), US Dollar (USD), Australian Dollar (AUD), Canadian Dollar (CAD).

Good afternoon. Regular readers will be aware that Brexit remains the main story for Sterling exchange rates, with the political uncertainty causing the Pound to fall to 18 month lows against the Euro and US Dollar. In today’s post, I’ll take a more detailed look at how some major currencies have performed recently, including GBP, EUR, USD, AUD and CAD.

If you need to make an international payment and would like to see what exchange rate we can offer you, get in touch today for a free quote.

GBP Pound Sterling Forecast

The Pound was the biggest mover and shaker in currency markets last month as the UK currency experienced some major swings in movement amidst a flurry of Brexit developments. This has continued as we enter December, with Brexit uncertainty helping the Pound fall to 18-month lows.

Some of the key developments included the sign off on a controversial withdrawal deal between the UK and EU and subsequent cabinet resignations, as well as a political declaration outlining a future relationship, and a gloomy Brexit analysis from the Bank of England (BoE). This culminated in Theresa May calling off the meaningful vote, which has created even more uncertainty about the Brexit process.

The risk that the UK could crash out of the EU in a no-deal Brexit scenario is increasing, likely to result in the Pound facing considerable volatility in the coming weeks.

Those that need to convert GBP to another currency may wish to explore options to remove their exposure, such as a ‘Forward Contract’ to freeze the current rate for up to 12 months.

EUR Euro Forecast

The Euro struggled throughout the first half of November, with the single currency coming under considerable pressure due to a dispute over Italy’s 2019 budget. This led the European Commission to rule that Rome’s budget broke EU fiscal regulations and that it would begin disciplinary procedures in response.

Further dampening EUR sentiment was the release of the Eurozone’s latest GDP figures, which revealed growth in its largest economy – Germany – actually contracted in the third quarter.

While the Euro made some headway later in the month on the back of some hawkish comments from European Central Bank (ECB) President Mario Draghi, EUR ultimately remained subdued as Eurozone business growth was shown to have struck a two-year low, exacerbating fears of a slowdown in the bloc in the second half of 2018.

Looking ahead, the ECB’s December policy meeting is likely to be the main focus for investors in the coming weeks, with the bank’s tapering of its stimulus programme likely to be a key focus point for EUR investors. However markets may remain wary of this month’s PMI figures, with another slump in private sector activity likely confirming analysts’ slowdown fears.

USD US Dollar Forecast 

Outside of a small setback following the US midterm elections, the US Dollar remained in demand throughout the first half of November as growing global uncertainty led investors to flock to the safe-haven currency.

These gains were trimmed in the latter half of the month however following some dovish remarks from Federal Reserve Chair Jerome Powell, as he suggested US interest rates are nearing ‘neutral levels’.

An expected rate hike from the Fed in December is unlikely to have much of an impact on USD exchange rates having already been largely priced in by investors.

Instead the focus is expected to be on the central bank’s forward guidance for the coming year, with any confirmation of a slowdown in the pace of rate hikes likely to dampen market sentiment. However this could be offset if US economic indicators remain strong, and point to a robust start to 2019 for the US economy.

AUD Australian Dollar Forecast 

The Australian Dollar was subject to some volatility last month as shifts in market risk appetite proved to be the main catalyst for movement. This resulted in the ‘Aussie’ softening through mid-November as investor confidence was rocked by a rout in equity markets as well as flaring trade tensions between the US and China.

However AUD moved sharply higher at the turn of the month as President Trump and his Chinese counterpart President Xi agreed to a tariff truce at the G20 summit in Argentina, resulting in an easing of trade tensions.

It’s unclear whether the Australian Dollar will be able to carry this momentum forward into 2019 however, with a weaker-than-expected third quarter GDP reading leading to speculation the Reserve Bank of Australia’s next rate move could be a cut rather than a hike.

CAD Canadian Dollar Forecast

The Canadian Dollar has proved highly sensitive to movement in oil prices over the last month, leading the currency to lose out to most of its peers after the commodity was hit by a major sell-off. The blow was softened somewhat by the release of some strong domestic inflation figures, on hopes this could accelerate the Bank of Canada’s pace of monetary tightening.

However despite this the BoC voted to keep interest rates on hold in December, with the bank’s cautious tone being taken as a sign the BoC may hold off on a rate at the start of 2019 as well, an outcome that could see the ‘Loonie’ slip in the months to come.

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