All posts by mporter

COMPARING CURRENCY MATTERS WITH YOUR BANK

In a recent comparison conducted for one of our clients, Currency Matters saved them £1,579.29! Please find full details of the comparison below.

Currency Matters quote:

Client buys USD 100,000.00 @ 1.6305, client sells £61,330.88. No fees or commission charged.

High Street Bank Quote:

Client buys USD 100,000.00 @ 1.5902, client sells £62,885.17. + £25 fee = £62,910.17.

TOTAL SAVING: £1,579.29.

UK Inflation

The Pound has spiked higher this morning (17/05/11) following the release of higher than expected UK inflation data. The Consumer Price Index was up month on month at 1.0% and up year on year at 4.5%, compared to 0.3% and 4.0% respectively last month. UK inflation remains stubbornly above the 2% target and the Bank of England has suggested it could reach 5% before falling back in 2012.

Continued high inflation readings increase the probability of interest rate hikes from the Bank of England. Typically, as a central bank increases interest rates their currency will appreciate as global investors seek a higher yielding currency.

The Pound is up on the interbank market against the US Dollar at 1.62, against the Euro the Pound trades at 1.14. Please note the rate you are able to achieve will depend on the amount of currency being purchased. Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.

Interest Rates

Today (07/04/11) as expected the European Central Bank (ECB) has raised its benchmark interest rate by 0.25% to 1.25%, the first such increase since July 2008. The Bank of England has kept interest rates on hold for the 25th month at their historic low of 0.5% and the Bank’s Quantitative Easing Asset Purchase Programme remains at £200bn.

 The focus will now shift to the release of the minutes (due 20th April) of today’s BoE Monetary Policy Committee (MPC) meeting to see if any further MPC members have been swayed to the rate hike camp. At the previous meeting in March, six members voted to keep rates on hold whilst three members voted for an increase in interest rates. The conflict between above target inflation coupled with weak economic growth making the Bank’s decision difficult. The market will also seek further clarity on the future direction of ECB interest rates as there had been some suggestions that the hike today may be the first of a gradual increase in ECB interest rates.

Typically, as a central bank increases interest rates their currency will appreciate as global investors seek a higher yielding currency. The widening interest rate differential between the BoE and ECB has been a major contributing factor to Sterling’s relative weakness against the Euro despite the ongoing European sovereign debt crisis.

Comparative World Interest Rates

Bank of Japan: 0.1%

Federal Reserve (USA): 0.25%

Swiss National Bank: 0.25%

Bank of England: 0.5%

Bank of Canada: 1%

European Central Bank: 1.25%

The Reserve Bank of Australia: 4.75%

People’s Bank of China: 6.06%

Brazil: 11.75%

Stronger than expected UK PMI Services data

Sterling has spiked higher today (05/04/11) following the release of stronger than expected Purchasing Manager Index (PMI) Services data. The PMI Services data is an indicator of the economic situation in the UK service sector. The reading of 57.1 was better than the expected reading of 52.5 and better than the previous reading of 52.6. A reading above 50 signals expansion, whilst a reading below 50 signals a contraction in the UK service sector.

This week sees a raft of economic data releases and announcements. Later today the minutes of the Federal Open Market Committee are released which should give an insight into future US monetary policy. On Thursday both the Bank of England (BoE) and the European Central Bank (ECB) are set to announce their latest interest rate decision. The BoE is expected to keep interest rates on hold at their current historic low of 0.5% whilst the ECB is widely expected to hike rates. It is the expectation of rate hikes from the ECB which has contributed to recent relative Euro strength despite the ongoing sovereign debt crisis facing the Eurozone.

The Pound is up on the interbank market against the Euro at 1.14 and up against the US Dollar at 1.62. Please note the rate you are able to achieve will depend on the amount of currency being purchased, please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.

Currency Matters

The Pound has fallen today 23/03 following the release of minutes from the Bank of England showing that no further Monetary Policy Committee (MPC) members shifted to the rate hike camp at the March meeting of the MPC. Despite the higher than expected inflation reading released yesterday, there is still some uncertainty surrounding how quickly the Bank will increase interest rates from their historic lows. On the interbank market the Pound trades below 1.15 against the Euro and at 1.62 against the US Dollar.

In the UK Budget, as expected chancellor George Osborne announced that the Office for Budget Responsibility cut its growth forecast for 2011 from 2.1% to 1.7%. For 2012 the forecast was also cut from 2.6% to 2.5% with growth expected at 2.9% throughout 2013-2014 and at 2.8% in 2015. The Office for Budget Responsibility also acknowledged inflation would remain significantly above the 2% target, remaining between 4-5% this year before dropping to 2.5% next year and back to target in two years.

Regarding government borrowing; the forecast for this year is £146 billion, £2.5bn lower than the previous target. Borrowing is also forecasted to fall in 2012 to £122bn, then £101bn in 2012/13, £70bn in 2013/14, £46bn in 2014/15 and £29bn in 2015/16.

In other budget headlines, the chancellor announced an increase in the personal tax allowance of a further £630 to £8,015. The chancellor also suggested that the 50% top rate tax should be seen as a temporary measure and that the treasury would review how much the 50% rate raises. For businesses the chancellor announced that corporation tax would be cut by 2% in April but that the bank levy would be adjusted so that banks would not benefit from the reduction in corporation tax. Fuel duty is also to be cut by 1p per litre from 18:00 today whilst there are no changes to alcohol duty and tobacco duty will increase at 2% above inflation.

In Europe, the Portuguese government will this afternoon put its austerity measures to a parliamentary vote. The largest opposition party have already announced that they will present a draft resolution rejecting the austerity measures. Should the government loose the vote, it is likely the Prime Minister will resign triggering the dissolution of parliament and possibly international financial rescue and an EU bailout. The Euro is already under some downward pressure against the US Dollar and currently trades at 1.41.

Please do not hesitate to contact the dealing team on +44 (0)1695 581669 for a live quote or to discuss any of your foreign currency requirements for the coming months.

UK GDP DISAPPOINTS

The Pound has reacted negatively this morning to the revised UK GDP figures. Many analysts were hopeful that the disappointing UK GDP data numbers released at the end of January would be revised higher. However, the new data showed that the UK economy contracted by -0.6% in the final quarter of 2010 compared to the previous estimate of -0.5%.

Despite recent signs that the Bank of England Monetary policy Committee were shifting towards a hike in interest rates the highly disappointing data may mean a rise in interest rates may not come as soon as previously thought.

Currently the Pound trades in the region of 1.60 against the US Dollar and at 1.16 against the Euro.

Bank of England

Sterling has appreciated modestly this morning following the release of February’s Monetary Policy Committee (MPC) minutes by the Bank of England showing that interest rates were kept on hold by a 6-3 vote.

Bank of England chief economist Spencer Dale joined Andrew Sentance and Martin Weale in backing a rise in interest rates. Dale and Weale both voted for a 0.25% rate hike whilst Sentance strengthened his call for an interest rate hike from the Bank by voting for a 0.50% rate hike.

The remaining six MPC members voted to keep rates on hold. All members of the MPC with the exception of Adam Posen voted to keep the Bank’s Quantitative Easing (QE) programme on hold, whilst Posen voted for a further expansion in QE of £50 billion.

Whilst the Bank of England is clearly divided, the case for increasing interest rates is strengthening. The expectation of future rate hikes should help underpin Sterling’s value.

Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.

Better week for Sterling

This week has seen a number of better than expected pieces of UK economic data. The Purchasing Manager Index data released this week by Markit Economics has shown a better than expected expansion in the UK manufacturing, construction and service sectors. This data has eased concerns relating to the sustainability of the UK economic recovery and gives weight towards the prospect of an interest rate hike from the Bank of England later this year.

Elsewhere, the European Central Bank (ECB) continued to hold its interest rate at 1% and in the following press conference, ECB President Trichet was less hawkish than many analysts had expected, signalling that despite recent price rises he believed the current rate was appropriate. Any interest rate rise from the ECB in the near term now seems rather unlikely.

As a result the Pound has appreciated to 1.18 against the Euro and remains above 1.60 against the US Dollar.

The exchange rates mentioned in the above blog are based on the current interbank rate. The exchange rate you are able to achieve will depend on the amount of currency being purchased. Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.

Currency Update – UK GDP

Sterling has tumbled this morning following the release of UK GDP figures which were much worse than analysts had expected. The shock numbers showed that the UK economy shrank by 0.5% over the last 3 months of 2010.  The severe weather seen in December dramatically hit GDP, particularly in the construction and service sectors. However, according to The Office for National Statistics, even if the impact of the poor weather was excluded, economic activity would have been ‘flattish’.

The governor of the Bank of England is due to make a speech tonight, whilst the minutes from the previous Bank of England Monetary Policy Committee (MPC) meeting will be released tomorrow at 09:30. Recent calls by some economists and in particular MPC member Andrew Sentance to increase interest rates in the face of above target inflation will now be weakened.

Currently the Pound trades in the region of 1.57 against the US Dollar and at 1.15 against the Euro.

Given current market volatility, please do not hesitate to contact Currency Matters to discuss any foreign currency exchange requirement. Currency Matters can provide a number of products including Forward Contracts and Stop Loss/Limit Orders which can help you manage your foreign currency exchange risk.

The exchange rates mentioned in the above blog are based on the current interbank rate. Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.

Currency Matters

Last week the Pound appreciated strongly against the Euro rising from 1.15 on Monday 3rd January to 1.20 by close on Friday the 7th January.

Today GBPEUR continues to trade near 1.20 on the interbank market, the best rate since September 2010 and only 3 cents below the 2010 high of 1.23 seen in June. Against the US Dollar the Pound continues to trade between 1.53-1.55.

 If you have any currency exchange requirements in 2011, please do not hesitate to contact the dealing team to discuss how best to manage your currency exchange and international payments.

 The exchange rates mentioned in the above blog are based on the  interbank rate at the time of writing. Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.