Monday, 24 April 2017

Pound/Euro falls after French Elections

Pound/Euro rates fell sharply on Sunday following the first round of the French Elections. For once the pollsters seem to have got this right, with the result going exactly as expected. Le Pen and Macron will now face each other in the final round of voting in 2 weeks time.

As you can see from the chart below, as soon as markets in the far east opened, the rate dropped 2 cents from €1.1950 to €1.1750. This morning it's climbed back to around the €1.18 level:


Why has the Pound/Euro rate fallen?


There were fears that the polling would be wrong and that Le Pen might win the election. She's through the first round, but the reason the rate fell so much was because the result was as the polls had expected. This has eased market worries a little and means that if the polls are right, Le Pen won't win the next round. This strengthened the Euro significantly and made it more expensive to buy, pushing rates lower.

Will the rate recover?


We did warn last week that with rates touching €1.20 it would be wise to put some protection in place. Clients that put in place 'Stop Loss' orders were protected against the sudden drop. Look at the bigger picture though and the Pound/Euro rate is still attractive and is back to where it was this time last week before the UK election announcement. In March the rate was down in the €1.13's so the current levels are still attractive. Indeed if a client still needs to buy Euros, this weekend's movements could be an indication of what we'll see in a few weeks. If the polls are right and Le Pen does not win, expect the Euro to gain even more strength and GBP/EUR rates to fall further.

If you need to make a transfer, then get in touch for a free quote to make sure you are getting the best possible exchange rates. We also offer a free consultative service for clients with large transfers to make. We can explain your options and give our view on which way rates are heading, so that you can make an informed choice as to when to fix a rate of exchange.

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Thursday, 20 April 2017

Will Pound/Euro rise above €1.20?

The Pound has managed to hang on to the gains we saw earlier this week following Theresa May's snap election announcement on Tuesday. When there is such a large spike in exchange rates we often see a correction back down, however Sterling remains supported at €1.19+ against the Euro and $1.28+ against the Dollar, rates we haven't seen since last year.

Why has the Pound gained?


It's really down to the EU negotiations. If May wins the election, which she surely will by a huge majority, then it gives her a much stronger Mandate and a bigger majority in the Commons. This means she can make the compromises needed with the EU in order to make a smooth exit and get a better deal. (Before the election announcement, she's been having to capitulate to the 'Hard Brexiteers' in her own party.)

In other words, there is now much less chance of an extreme 'Hard Brexit' with no deal, and now there is a better chance of smoother negotiations with the 'EU 27' and much more likelihood of a deal that's going to be much better for both Britain and the EU.

The markets certainly think so anyway, which is why the Pound has strengthened, and held on to it's gains, for now.


Will Pound/Euro rates break €1.20?



I personally think this is unlikely in the short to medium term. If you look at how Pound/Euro rates have fared since the referendum, you will see that there have been 5 or 6 occasions that we've reached €1.20, however each and every time it's dropped back again. €1.20 is such a key technical level of resistance it can't seem to break through it. In the short term, I think much will depend on the French elections. It's expected that Marine Le Pen will get through the first round this weekend, but then be knocked out of the second round on the 7th of May. Assuming this is the case, then the Euro will likely strengthen and pull GBP/EUR lower again.

Of course, polling of late has been quite unreliable; if Le Pen wins and becomes president or polls start to suggest it's a possibility, then the markets are going to get very nervous indeed and the Euro is likely to weaken significantly, as it opens a Pandora's box for the EU; Frexit? Return the French Franc? A collapse of the whole EU project? It certainly wouldn't be pretty, and in this scenario, I'd expect GBP/EUR to surge to €1.25.

The here and now


Right now the Pound is much stronger than it has been, and rates to buy Euros are very good indeed, and if you need to convert Sterling to another currency, then it's worth considering fixing a rate sooner rather than later. If the French elections go as expected, we'll probably see rates drop away again.

Other options include 'Stop Loss' & 'Limit' orders, to automatically fix a rate if it drops below, or goes above, a particular level. This is very useful in volatile times as it let's you gamble on the rate getting better still, without risking a much worse rate if the market suddenly moves against you.

If you need to exchange currency, when buying or selling property abroad for example, then get in touch with us today to discuss how we can help. We offer exceptional rates of exchange, a range of contracts to suit different scenarios, and over a decade of experience as one of the UK's leading currency brokers to help you understand what is happening and when to fix a rate.

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Tuesday, 18 April 2017

Sterling surges higher as Theresa May calls snap election

This morning Theresa May has announced there will be a snap general election on the 8th of June. Earlier we knew she would be making an announcement and there were rumours that it could be a Royal issue or even her stepping aside due to health issues.

Due to the uncertainty, Sterling fell quite sharply by around 1%. The rumours of her calling a snap election proved to be correct, and once she made the announcement, the Pound bounced back and currently sits close to €1.19 vs the Euro, much higher now than when markets opened. 

Why has the Pound risen on the election news?


I think it makes sense politically and certainly the currency markets have reacted positively with the Pound rising a cent. There were fears that due to the French and German elections, the Brexit negotiations would have been delayed and the crucial climax would have been overshadowed by the general election. She is taking the gamble that she will win a landslide majority, clearing the way to have a firm base and mandate from the UK electorate for the next 5 years, well beyond Brexit. It's likely that she will now find things much easier domestically assuming she wins a majority. The problem is that the election will probably now be fought on a 'Stop Brexit' platform by the Lib Dems, who could garner support from ardent remainers. Currently the conservatives have a healthy lead over Labour and the Lib Dems, so it's likely her gamble will pay off. I expect the Lib Dems to make Brexit their main issue however, and will probably run their campaign on a platform of reversing the decision to leave the EU, however that's impossible as I understand it.

For the currency markets, despite an initial drop the Pound has recovered and is now sitting at pretty healthy levels against the Euros, very close to the best we've seen since the referendum. Political events over the next few months will now be key. We have French elections starting next week, a UK general election in less than 2 months, and German elections later in the year.

It could be a very volatile time ahead for the Pound, and those that need to exchange currency should get in touch to discuss the ways in which we can help protect our clients against adverse exchange rate movements, and help you achieve rates of exchange that are usually much better than your bank or existing broker may offer.

If you need to make a currency transfer in the coming months, click here to get a free quote today.

Wednesday, 12 April 2017

Best Exchange Rates GBP/EUR, GBP/USD, GBP/CAD, GBP/AUD, GBP/NZD

Sterling had risen this morning following better than expected average earnings. This came in slightly above forecast, but crucially the number is not below the inflation figure of 2.3%. Regular readers will know that rising inflation may lead to an interest rate rise in the UK, which in turn would strengthen the Pound against other currencies. Inflation is above the 2% target which under normal conditions would mean the BoE raising rates. However, there were concerns that if wage growth did not keep pace with inflation, then the BoE would not be able to act.

This mornings figures mean there is a slightly higher chance of a BoE rate hike, and that's why the Pound has risen slightly. The spike was limited however, reinforcing my view that I think for the moment Sterling has peaked and is unlikely rise much further against other currencies. The Bank of England  are unlikely to act in the short term, as they want to keep the ship steady as we enter EU negotiations. Raising rates could slow consumer spending, and that's much of what has been driving the economy along of late, and keeping the Pound supported at the same time. It will be interesting to hear what BoE governor Mark Carney has to say in his speech shortly. A dovish tone could send the Pound lower again, and he does have a habit of tending to talk Sterling down.

Let's take a quick look at how Sterling is performing against the main currencies that we trade; EUR, USD, CAD, AUD & NZD. Our rates of exchange are extremely competitive, so if you need to make a currency transfer get in touch today for a free quote to compare with your bank or existing broker, and see how much you could save. 

Pound/Euro


Sterling rose against the Euro yesterday afternoon getting close to €1.18 overnight. There weren't any eco-stats that caused the move, and the gains were attributed to a tweet by President Trump in which he warned that "North Korea is looking for trouble". The playground antics of the worlds' most powerful man caused some concern amongst investors and we saw save haven flows with market participants moving out of the Euro and USD into Sterling, causing the rise. GBP/EUR currently sits in the mid to high €1.17's, only a few percent from the best since last summer. Looking for the best Euro rates? Get a GBP/EUR quote.

Pound/US Dollar


Pound/Dollar rates currently sit around the $1.25 level which is only a cent below the best it's been in 6 months. It was weakness in the USD that pushed rates higher due to the tweet I've mentioned above. Trump is giving a speech at 11am this morning any any surprise comments could move the USD further. This afternoon we have a Budget statement and trade balance data. The general feeling is that if the USA raise interest rates a few more times this year then the Dollar should strengthen pulling rates back towards the $1.20 level. Given we're close to a 6 month high on GBP/USD, those that need to buy dollars may wish to consider fixing a rate while it's better than it has been. Get a GBP/USD quote.

Pound/Canadian Dollar


GBP/CAD is also looking pretty good, and the rate is 5% higher than back in January. Part of the reason is a strengthening Pound now that the Brexit process has started. The Canadian Dollar is also weak due to low oil prices. Today could be important for how the rate moves sa we have an interest rate statement (expected to be left at 0.5%) along with a policy report and press conference. If you need to buy or sell Canadian Dollars then contact us today for a free quote. Get a GBP/CAD quote.

Pound/Australian Dollar


GBP/AUD has performed very well over the last 4 weeks, rising 5% from $1.59 to $1.6650. This is all to do with Sterling. If you look at AUD/EUR for example the rate has barely moved over the last month. The Pound had been severely punished since the referendum but it now seems that all the bad news is priced in, and the recent gains are because the UK economy is performing well. Watch for how China performs as because Australia exports so much Iron ore to China when the Chinese economy is doing well, so does the AUD and if China continues to grow at the rate is has been, the AUD may regain some strength and pull rates lower again. Emigrating to Australia? Get a GBP/AUD quote.

Pound/New Zealand Dollar


GBP/NZD is at the highest since September last year having risen consistently throughout 2017 so far. The gains here are a mix of weakness in the NZ Currency and Sterling strength. As with most Sterling pairs at the moment, most of the gains have come from the Pound recovering some of it's losses following the triggering of Article 50 last month. However exchange rates will remain susceptible to how the negotiations with the EU are going. New Zealand's main export is dairy, so also keep an eye on demand and prices as this could also affect the Kiwi Dollar. Emigrating to New Zealand? Get a GBP/NZD quote.

Are you getting the best exchange rates? 


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Tuesday, 11 April 2017

Has Sterling now peaked against the Euro?

I mentioned in yesterday's post that today could move the Pound higher if UK inflation numbers were higher than forecast, and that's what we've just seen.

A short while ago we saw the PPI come in at 3.6%, and it has sent the Pound a little higher. However CPI and RPI was a touch below forecast, so gains for Sterling have been limited. House price data was also slightly lower, so while the Pound has risen slightly it's not by much and GBP/EUR remains in the low €1.17's. 

Will Pound/Euro rates move higher or have we hit the peak?


I think this reduces the chances of an interest rate hike in the UK any time in the next few months and therefore there's not much that I can see that will move the Pound higher in the short to medium term.

GBP/EUR rates have reached these level 5 or 6 times in the last 3 months and each and every time we've seen it drop back away again. We've been hovering around these levels  for a week or two and the Pound doesn't seem to be able to get any higher. Is this the peak for the time being?

It won't be long before we start to see the opening salvos fired in the Brexit negotiations, and there is a big risk that markets won't like the uncertainty and tit for tat that we're likely to see in the early stages. If you need to buy foreign currency and want to be protected against the rate dropping back away then there are 2 ways of doing so:

  • Stop Loss Order - This is a tool whereby you can instruct us to secure your currency if the rate drops below a pre-agreed level. This protects you against a sudden drop and gives you a worst case scenario should the rate plummet. If rates climb however you are still free to take advantage of any gains. This is useful if you have time on your side and you think the rate may climb. 
  • Forward Contract - This is a tool that allows you to freeze the current exchange rate for up to 2 years. This is a good option for those that are risk averse and need to budget for buying goods from overseas, or buying a property in the Eurozone or elsewhere. It removes your exposure to the currency markets and means you know exactly what you will be paying for the currency you need. 

These are just some of the ways in which we can help our clients manage their foreign exchange exposure. We also offer exceptional rates of exchange that are very close to the mid-market level, in addition to expert knowledge to help you with the timing of your trade.

If you think you would benefit from our services and would like to find out more about how we can help you or simply get a quote to compare with your bank or existing broker, get in touch for free today.