Tuesday, 25 July 2017

What could move Pound/Euro rates this week?

It's been a pretty quiet start to the week, with most major exchange rates largely unchanged. Pound/Euro rates have managed to recover slightly from €1.11 to €1.12, due to slightly worse than expected EU PMI numbers yesterday, making the single currency cheaper to buy. We're still some way off the €1.14 of a week ago however.

Will Pound/Euro rates go up or down this week?


Today is pretty quiet in terms of economic data that could move rates, however as we progress through the week there are several releases that could affect GBP/EUR. We start this evening at 6pm when one of the Bank of England's MPC members gives a speech. If he gives any indication that interest rates may rise it has the potential to push the Pound higher.

Tomorrow things get a bit more interesting, as we will see the latest UK GDP numbers, which are expected to show quarterly growth of 0.3%. If the actual release is higher or lower than this, the Pound will go up or down accordingly. We also have Mortgage approval numbers which can also affect Sterling.

Thursday is quiet from the UK and EU, so rates will be drive from data from the states. USD and EUR rates often move inversely, so any good news from the states has the potential to weaken the Euro and push GBP/EUR higher. Thursday sees US Jobless Claims, Trade Balance & Durable Goods orders, and if numbers miss forecasts then there could be movement in both GBP/USD and GBP/EUR.

We have a busy end to the week with UK consumer confidence & Housing Price data. EU data includes various confidence measures that could affect the single currency.  US GDP numbers are the last major release, an we expect a number of about 1.3% quarterly growth.

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Thursday, 20 July 2017

Pound/Euro falls into the €1.11's

It's not been a particularly good week for Sterling, with it starting at €1.14, and today falling into the €1.11's. Despite better than expected UK Retail Sales numbers, the Pound fell due to concerns over Brexit negotiations, with Liam Fox stating that we could have a 'Hard Brexit' with no deal. This sent Sterling lower against other currencies.

Brexit talks weaken the Pound


With seemingly little progress made in talks this week, it seems there isn't much negotiating going on in these negotiations, but rather the EU still digging their heals in and refusing to make any concessions with regards to the jurisdiction of the ECJ on EU residents of the UK, which both sides have said is a 'red line'. One side will need to make concessions, as otherwise there will be a stalemate, and this increases the chance of the UK leaving without a deal, weakening the Pound due to the uncertainty it would cause for business.

Euro strengthens, despite ECB efforts


Elsewhere, the ECB left rates on hold as expected, and also indicated that there would be no change to it's QE programme. Initially this seemed to weaken the Euro but after Mario Draghi gave his press conference, the single currency gained against the Pound and US Dollar, sending GBP/EUR down into the €1.11's. This is a strange one, as he said that they would not set a date for tapering their stimulus programme and may even extend it if necessary. This should logically have weakened the Euro, but the exact opposite has happened. I think that he made these statements on purpose, as they don't want a strong currency, they want the Euro to be weak in order to be more competitive. Markets seem to have seen through this and decided that despite what he said, tapering will happen later this year, and that's strengthened the single currency and made it more expensive to buy.

What next for Pound/Euro rates?


Tomorrow, the only UK release of note is Public Sector net borrowing, however there may well be further soundbites from the UK and EU regarding Brexit, which could drive GBP/EUR. Elsewhere, GBP/CAD rates could move if the latest Canadian data differs from forecast. At lunchtime Canada will release Retail Sales and Inflation numbers.

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Wednesday, 19 July 2017

Outlook for Sterling/Euro

As I mentioned in yesterday's post, GBP/EUR rates have settled at €1.13, falling due to the softer inflation numbers which in turn mean it's unlikely that interest rates will rise this year.

In today's post I'll look at the key events in the next few days that could affect Sterling/Euro rates.

UK Retail Sales figures


These are due to be released on Thursday at 09:30am and are forecast to show a 0.4% rise. Consumer spending has been surprisingly robust over the last year and it will be interesting to see if the number is above the forecast. If so, expect the Pound to rise against the Euro. If the number disappoints then it's likely to send GBP/EUR down into the €1.12's.

ECB Policy statement


Tomorrow at 12:45pm the European Central Bank (ECB) announce their interest rate decision, and it's widely expected they will leave rates where they are at 0%. What could move rates however, is the press conference and policy statement due at 13:30pm. There has been talk recently of the ECB scaling back their stimulus programme (Quantitative Easing) and if they give further hints that they intend to do so, the Euro is likely to gain strength and become more expensive, sending Pound/Euro lower. However, if they don't hint at this and instead say that they will continue with current measures moving forwards, then this could weaken the Euro and push GBP/EUR back towards €1.14. Whatever happens, I think it's likely to move the rate away from it's current range.

Brexit negotiations statement


Tomorrow marks the end of the 4th and final day of the second round of Brexit negotiations. This could come to nothing, but they might give some sort of press conference highlighting what they discussed, and any successes or disagreements. Simply put, if anything comes out that indicates the talks are going well and that significant progress has been made, then I think this will be positive for the Pound. If however they are still bickering about the initial issues of rights of UK and EU nationals without having made progress, then this will probably send the Pound lower.

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Tuesday, 18 July 2017

Pound falls on inflation figures

We've just seen the latest UK inflation figures, and they came in lower than expected, sending the Pound lower against both the Euro and US Dollar. Why did the Pound fall? It's due to the lower inflation numbers taking pressure off the Bank of England to raise interest rates. Their next meeting is on the 3rd of August, and this morning figures mean it's now highly unlikely that more than 1 or 2 of the MPC members will vote for a rate hike.

Lower interest rates for longer weakens a currency due to the low return on offer, and that is now reflected in the value of Sterling, which is now at €1.13 vs the Euro and $1.30 vs the US Dollar, as you can see from the charts below.

     GBP/EUR
   
   GBP/USD

What next for the Pound?


Later this morning we have Economic sentiment measures from Europe that could further affect GBP/EUR rates if the numbers come in above or below forecast. The next main UK Release of note is Thursdays Retail Sales figures which are a good barometer of how the economy is performing. Consumers have continued to spend despite the economic uncertainty, but borrowing has also gone up, indicating consumers are simply continuing to spend but are doing so with their credit cards, which can't be sustained forever.  Also of importance this week are what indications may come from Brussels with regards to how the second round of Brexit negotiations are going.

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Friday, 14 July 2017

Sterling surges higher against Euro and US Dollar

We've seen a huge surge for Sterling this afternoon, with GBP/EUR breaking through the €1.14 barrier and GBP/USD breaking through $1.30, with both pairs continuing to rise above these levels.

    GBP/EUR

   GBP/USD

It's a very positive move for the Pound, that was as low as €1.1173 against the Euro just a few days ago.

Why has the Pound risen against Euro and US Dollar?


With no UK data of note it's other factors causing the move. Earlier today we had much worse than expected Inflation and Retail Sales data from the USA. Initially this weakened the USD and strengthened the Euro, but it seems that following the poor US data, increased risk appetite has resulted in investors deciding that Sterling is the best place to put their funds ahead of the weekend break. This has helped push the Pound higher against other major currencies.

A spike like this is often short-lived. If you need to buy currency with Sterling, and want to lock in the rate, get in touch today for a free quote. We offer a 'Forward Contract' that allows you to freeze the current rate for up to 2 years into the future, by lodging 10% of the total you want to convert.