Wednesday, 16 August 2017

UK Employment data gives Sterling a boost

This morning the Pound/Euro rate fell to €1.0930 however has now recovered back to around €1.10:

UK Employment figures help the Pound

As I mentioned in my report yesterday, this morning the UK released its latest employment data. The numbers were better than expected, helping to push Sterling higher against the Euro. Wage growth has picked up to above 2%, getting closer to the inflation number of 2.6% which is encouraging. Overall unemployment fell to 4.4%, the lowest since the 1970's which again is another positive indicator showing the underlying health of the UK economy is robust.

Sterling likely to remain low for some time

However, as regular readers will know, the Pound is under pressure due to uncertainty about our future relationship with the EU. In my view, the UK have tried to make progress with regards to citizen rights, the Irish border, and future customs arrangements, however the EU side seem unwilling to actually negotiate in these 'negotations' and this does not bode well for a swift resolution to the immediate hurdles. Until the EU actually try to  come to an agreeable solution, they have said that they will not discuss future trade arrangements, and it's this lack of clarity with regards to how the UK and EU will trade in the future that is keeping the Pound low. In the short to medium term, I think this is likely to remain the case.

Tomorrow we will see UK Retail Sales data, which is a good barometer of overall economic growth. With the summer being rather wet and miserable, it's likely the numbers will not be good as poor weather usually keeps consumers indoors!

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Tuesday, 15 August 2017

Inflation numbers weaken Sterling

This morning UK inflation came in at 2.6%, slightly less than the expected 2.7%. This might not sound like much, but it significantly decreases the chance of the Bank of England raising interest rates this year. In turn, the lower return on offer for investors mean they are seeking other places rather than the Pound to place funds, which has weakened Sterling further.

GBP/EUR has dipped into the €1.09's again and GBP/USD is in the $1.29's. (View live charts here).

The next key event for the Pound is tomorrow's UK employment numbers. Analysts expect unemployment to be at 4.5% and average earnings at 1.8%. The numbers will be key, as the BoE are holding off raising rates due to the fact that wage growth is lower than inflation, which in turn is squeezing consumers. If the numbers at 09:30am tomorrow are worse than expected, then it could send the Pound lower into the low €1.09's. If wage growth has picked up, it might give the Pound some support and send it back above the €1.10 mark again.

Whether you need to buy a foreign currency with Sterling, or convert funds back in to Pounds, the exchange rate you get makes a huge difference to what you get. Our rates are significantly better than banks offer and we can also offer better rates than your existing broker may offer. To find out more about how we can help with your currency exchange, click here or complete the form below to make a free enquiry.

Monday, 14 August 2017

Will Pound/Euro rates fall further?

Sterling/Euro fell further last week, at one point dropping as low as €1.0960. The pair has recovered slightly and now sits at around the €1.10 mark, a 10 month low and close to the lowest we've seen Pound/Euro since 2009.

It was a story of Euro strength that caused the rate to fall last week. Poor economic data from the states last week weakened the US Dollar, and when the dollar weakens the Euro often gains in strength, which is what we saw last week that caused GBP/EUR to fall that low.

What next for Pound/Euro rates?

Tomorrow will be key for what happens next for Pound/Euro. At 09:30am we will see the latest Retail Sales figures. Given the rain and poor weather of late, it's likely these may come in low which could weaken Sterling further. We will also see the latest UK inflation numbers tomorrow. Inflation is expected to come in at about 2.7%. If it's lower than this, expect the Pound to fall further. If however inflation has risen, then it will increase the chances of a interest rate hike that could help the Pound recover.

Even if we do see rates rise tomorrow however, any gains are likely to be limited. With a resurgent Euro and Brexit concerns keeping the Pound low, there isn't much to suggest that rates are going higher any time soon. In fact Morgan  Stanley are predicting that next year GBP/EUR will drop below parity which is not very encouraging.

Protecting against rates getting worse

If you need to buy Euros, for a property purchase abroad for example, then one way of protecting yourself against rates falling even further is with a 'Foward Contract. This contract allows you to freeze the current exchange rate for up to 2 years, allowing you to budget and protecting against the rate getting worse. If you would like a free quote, or to find out more about the currency services we offer, complete the form below or click here.

Tuesday, 8 August 2017

Will Pound/Euro rates go back up?

Last week a gloomy Bank of England outlook pushed Pound/Euro rates into the €1.10's, and while the rate has steadied, it hasn't as yet managed to recover the losses. Many of our clients are asking if the rate will recover, and if not, how low could the rate drop?

Why is the Pound/Euro rate so low?

There are two main reasons for the GBP/EUR rate being so low. Firstly, the EU is now growing faster than the UK, and analysts predict that the ECB will scale back their stimulus programme in a few months. This has strengthened the Euro and made it more expensive. Here in the UK, Brexit negotiations have made little progress, and this uncertainty has meant both the IMF and BoE have lowered their growth forecasts. While the BoE have indicated interest rates will rise later this year, it's not likely to happen soon, and that's keeping the Pound under pressure.

Could it drop below €1.10?

With little economic data due from the UK over the next couple of days, there isn't much that we can see that will cause rates to rise in the short term. The next key release is on Thursday when we'll see the latest Industrial & Manufacturing production figures, along with a GBP estimate and Trade Balance figures. If GDP comes in below 0.3% than the Pound could fall further. If we also see the production numbers drop into negative territory, then this could cause rates to drop below the €1.10 mark which would be close to the lowest we've seen since 2009.  The numbers could surprise to the upside however, and if that is the case then we may see a slight recovery for Sterling exchange rates.

However until we see any positive developments with regards to negotiations with the EU, it's unlikely that Sterling will rise much, and we don't expect any significant progress until 2018.

Protecting against adverse exchange rate movements

If you need to buy Euros and are worried about rates getting worse, then speak to us today about how we can help. We offer various contract types that protect you against rates getting worse, and offer rates of exchange between 1% and 3% better than banks and other currency brokers can offer. To get a quick quote or find out more about how we can help, click here or complete the form below.

Thursday, 3 August 2017

Why has Pound/Euro fallen into €1.10's?

Today's Bank of England's 'Super Thursday' has not been kind to the Pound. There was some speculation that they may hint at interest rate hikes later this year, to tighten monetary policy along with other major economies.

However, instead they left rates on hold at 0.25%, reduced the 2018 growth forecast, and Mark Carney was his usual pessimistic self. Also, only 2 of the 8 members voted for a rate hike, 1 less than at the last meeting, signalling a rate hike this year is now unlikely. The net result is clear to see on the chart below. (Correct at 13:10pm, for live graphs click here). 

In the last 3 months we've now seen the GBP/EUR pair drop from €1.18 to the €1.10's, and there are several reasons for this:

  • Euro gaining strength as EU economy improves
  • Sterling weakening due to lower chance of interest rate hike
  • The political mess caused by the election
  • Brexit Negotiations making little to no progress

The above 4 points are likely to continue in my view, so any clients that need to buy Euros, to purchase property abroad for example, may wish to explore the options we offer. For example, we have Forward contracts that enable to you to freeze the current rate for 2 years & Stop loss orders to protect you against the rate getting works. Our rates are extremely competitive so get in touch today for a free quote. I would be very surprised if we can't beat the rates you are getting from your existing broker or bank.

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