Category Archives: Currency News

Currency Matters: EURO

Currency Matters: EURO

The Euro has fallen across the board over the weekend as Italians voted “No” in a referendum rejecting Prime Minister Renzi’s constitutional reforms, prompting his resignation. The anti EU and populist 5 Star Movement campaigned hard for a “No” vote and the outcome will be seen as  an indication of growing support of Italy’s populist anti EU Movement and is seen as confirmation of growing anti-establishment/anti EU sentiment across Europe.  However, it is worth noting that in the short term a grand coalition will likely be formed keeping 5 Star away from power and most Italians do continue to support Euro membership. Moreover, in Austria the electorate voted for Pro-European Alexander Van der Bellen against the anti EU and far right candidate Norbert Hofer.

The markets reacted clearly, pushing the Euro sharply lower through a 12 month low to 1.0507 against the Dollar. Against the Pound the Euro fell to its lowest level since the BREXIT Referendum result to 0.8305 (GBP/EUR 1.2041).

In the UK, today marks the start of the key landmark legal hearing by the Supreme Court on whether Parliament’s consent is required before the Government can trigger Article 50 – the formal process of leaving the EU. This follows the election of pro-EU Liberal Democrat Sarah Olney in the Richmond Park by-election following Zac Goldsmith’s, a prominent “Leave” supporter, decision to quit the Conservative party and run again as an independent following the Conservative Government’s decision to expand Heathrow.

The European Central Bank (ECB) meeting on Thursday will be seen as the key event this week. Policymakers are set to decide on the future of the EUR 80b a month asset purchase program, which is scheduled to end in March. The result of the Italian referendum will heighten the need for the ECB to extend the program. Meanwhile, depending on market reactions to the referendum, the ECB could also tilt the program towards Italian government bonds to stabilize any volatility. Markets are currently expecting a six month extension to the program. The Euro would be vulnerable to deeper falls if the ECB announce something greater than that.

The Euro could continue to fall and the next level of support against the US Dollar is 1.0461 and 0.8116 (GBP/EUR 1.23) against the Pound.

Please do not hesitate to contact the dealing team on telephone +44 (0) 1695 581 669 to discuss how upcoming events could have a bearing on the cost of your foreign currency payments and how Currency Matters can save you time and money.

GBP/EUR 3 Month High

The Pound has appreciated to a 3 month high of 1.1947 against the Euro and appreciated against the US Dollar to 1.2695 following hints from UK BREXIT Minister that the UK wanted to get the best possible access for goods and services suggesting paying for access to the Single Market may be an option.

This Sunday Italy holds its referendum on constitutional reform with Prime Minister Renzi pledging to resign if voters don’t vote for his proposals. Whilst this is not a vote on EU membership there will be significant implications if Renzi resigns as a new caretaker government would likely be appointed and new elections could follow as early as next year. This could open the door to the election of the Five Star Movement a populist, anti-establishment party that has said in the past it wants to call a referendum on membership of the Euro.

Please do not hesitate to contact the dealing team on telephone +44 (0) 1695 581 669 to discuss how upcoming events could have a bearing on the cost of your foreign currency payments and how Currency Matters can save you time and money.

US Election Day

The USD remains supported as the US go to the polls today to elect the 45th President as Hillary Clinton holds a narrow lead in the opinion polls. It is the general consensus that a Clinton win would provide continuity in fiscal and monetary policies and therefore it is highly likely that the Federal Reserve would hike interest rates at their next meeting in December following a Clinton win. On the other hand it is suggested a Trump win would result in uncertainty which could result in a weaker USD.

The USD currently trades at:

GBP/USD 1.2415, EUR/USD 1.1046, USD/CHF 0.9746, USD/JPY 104.43.

Pound Lower on BREXIT

The Pound has started the week sharply lower as markets react to UK Prime Minister Theresa May’s announcement that the UK will trigger Article 50 of the Lisbon Treaty (the formal Brexit negotiation process) by the end of March 2017 putting the UK on course to leave the EU by the summer of 2019. The government is expected to make immigration controls a red line which makes it less likely that the UK will retain free access to the European Single Market. The possible imposition of tariffs on UK exports into Europe and the potential loss of UK financial services European passporting would likely have a negative impact on UK economic growth.

This morning the Pound has fallen to a low of 1.1435 (0.8745) against the Euro, its lowest level since July 2013 and to a low of 1.2845 against the US Dollar, its lowest level since July 2016.

Bank of Japan and Federal Reserve

The Japanese Yen dropped overnight as the Bank of Japan kept its main policy rate at -0.1% but revamped its stimulus program and left its options open for further monetary easing in the future before returning to earlier levels. USD/JPY currently trades at 101.58, CHF/JPY at 103.99, EUR/JPY at 113.22 and GBP/JPY at 132.00.

In the USA the Federal Reserve meets this evening (19:00 UK) and is likely to keep rates on hold at their current 0.25-0.50% range. However, market participants will be looking for any comments which confirm the likelihood of a rate hike(s) before year end.

EUR/USD currently trades at 1.1147, GBP/USD at 1.30 and USD/CHF at 0.9770.

Elsewhere, EUR/GBP trades at 0.8575 (GBP/EUR 1.1662).

Currency Matters

The US Dollar dropped sharply yesterday in response to much weaker than expected US economic data significantly reducing the likelihood of a Federal Reserve interest rate rise in September with now only a 50% chance of a rate hike by December. GBP/USD pushed north to a high of 1.3444 and continues to trade above 1.34 this morning on the interbank market. EUR/USD also traded high hitting a high of 1.1263, EUR/USD continues to trade near these highs this morning.

The Pound also had a strong day against the Euro with GBP/EUR hitting a high of 1.1997, although the rate has receded to 1.1920 this morning.

Today sees a number of economic data releases/speeches which could move the market (summarised below):

  • 08:30 UK Halifax House Prices data
  • 09:30 UK Manufacturing Production data
  • 12:00 USA MBA Mortgage Applications data
  • 14:15 Bank of England MPC members speech
  • 14:50 Bank of England bond buying results
  • 15:00 Bank of Canada Rate decision (rate anticipated to be held at 0.50%)
  • 15:00 UK NIESR GDP Estimate data
  • 19:00 Federal Reserve Beige Book

BANK OF ENGLAND ANTICIPATED TO CUT INTEREST RATE TODAY 04TH AUGUST 12:00

Recent UK economic data including yesterday’s Markit/CIPS UK PMI Services survey reinforced expectations that the Bank of England will cut its main interest rate today at 12:00 from 0.50% to 0.25%. Yesterday’s UK PMI Services survey found that Services output and new business both fell at the fastest rates since March 2009.

Chris Williamson, Chief Economist at Markit, which compiles the survey reported that:

“The marked service sector downturn follows news from  sister  PMI  surveys  showing  construction activity  suffering  its  steepest  decline  since  mid-2009 and manufacturing output contracting at the fastest rate since  late-2012. At these levels, the PMI data are collectively signalling a 0.4% quarterly rate of decline of GDP.

It’s too early to say if the surveys will remain in such weak territory in coming months, leaving substantial uncertainty over the extent of any potential downturn. However, the unprecedented month-on-month drop in the all-sector index has undoubtedly increased the chances of the UK sliding into at least a mild recession.

Services providers are certainly bracing themselves for worse to come, with a record drop in business confidence about the year ahead leaving optimism at its lowest ebb since February 2009.

However, the extent of any downturn clearly depends to some degree on the policy response. The PMI is already deep into territory which would normally spur the Bank of England into taking action to stimulate the economy. A quarter-point cut in interest rates therefore seems to be a foregone conclusion at       tomorrow’s Monetary Policy Committee meeting, though the extent and nature of other non-standard stimulus measures remains a far greater source of uncertainty and the subject of intense speculation.”

Cuts in Central bank interest rates weaken the home currency as investors sell the associated currency to buy higher yielding currencies known as a carry trade.

Currency Matters can offer a number of products which can eliminate currency risk. Please do not hesitate to contact the dealing desk on telephone +44 (0) 1695 581 669 to discuss your upcoming currency requirements.

Central Banks

The US Dollar (USD) weakened overnight as the Federal Open Market Committee (FOMC) left its key interest rate unchanged at 0.50% and pared the outlook for more rate hikes this year. The market expectation is now that there will likely only be two 0.25% rate hikes this year, down from December’s prediction of four.

Whilst the Federal Reserve acknowledged that the US economy was expanding at a moderate pace, economic projections were downgraded with Real GDP forecast at 2.2% this year down from earlier predictions of 2.4%. The Federal Reserve acknowledged the growing risks of a weakening global economic outlook.

Today the market will focus on interest rate decisions from the Swiss National Bank (SNB) at 08:30, Norges Bank (Central Bank of Norway) at 09:00 and the Bank of England (BoE) at 12:00.

Opinions on what the SNB will do today are divided. There are some expectations that in response to the European Central Bank’s (ECB) easing the SNB might cut the range of its 3 month LIBOR rate to -0.50% and -1.50% from the current -0.25% and -1.25% range. However, as EUR/CHF is held well inside recent range and the ECB have ruled out more rate cuts, the pressure on the SNB to deliver lower rates today is limited so the SNB might opt to hold rates at current levels. Nonetheless, the SNB could have a dovish tone in the accompanying statement. EUR/CHF currently trades @ 1.0990, USD/CHF @ 0.9745 and GBP/CHF @ 1.3920.

The Norges Bank today is forecast to cut its key rate by 0.25% to 0.50% and the rate outlook is also likely to be revised down. EUR/NOK currently trades @ 9.46, USD/NOK @ 8.39 and GBP/NOK @ 11.99.

The Bank of England is expected to hold rates at 0.50% and its asset purchase facility at £375bn. It is unlikely the Bank of England will tighten its monetary policy in advance of the UK referendum on whether Britain should remain in the European Union due June 23rd. The prospect of a possible BREXIT means that the Pound is likely to remain under pressure and prevent any significant gains in the Pound. GBP/USD currently trades @ 1.4273, GBP/EUR @ 1.2660 (0.79p) and GBP/JPY @ 159.32.

POUND CONTINUES TO FALL ON FEAR OF BREXIT

The Pound (GBP) has fallen again today breaking below 1.40 against the US Dollar (USD) for the first time since March 2009 with the current low at 1.3880. Against the Euro the Pound has also fallen hitting a low so far of 1.2646(0.7908) on the interbank market.

29 out of 34 economists surveyed by Bloomberg anticipate the GBP/USD rate to fall to 1.35 (low 2009) or below in the event of a BREXIT. The last time GBP/USD traded below 1.35 was in 1985.
Please do not hesitate to contact the dealing team on telephone 01695 581 669 or by email info@currencymatters.co.uk for further information or for a live quote.

Currency Matters

Do you have any currency requirements in 2016?

The outlook in the currency markets is highly uncertain. The sharp fall in oil prices, high levels of volatility in global financial markets and concerns about a slowing global economy, particularly in China are fuelling currency volatility.

The US Dollar has appreciated sharply as the US economy continues to perform relatively well and the Federal Reserve became the first major central bank to start increasing interest rates. The US Dollar is also the main beneficiary of falling oil prices and investors seeking to avoid risk.

On the other hand the European Central Bank continues to ease its monetary policy as the European economies continue to face significant challenges. In the UK it seems increasingly unlikely that the Bank of England will increase interest rates until late 2016 earliest due to recent poor UK economic data and concerns about the wider global economy. This has caused the Pound to lose most of the gains it made in 2015. The prospect of a referendum on the UK’s continued membership of the European Union is also beginning to weigh on the Pound (as with the Scottish independence referendum and the prospect of a hung parliament at the last two general elections the market doesn’t react well to political uncertainty and the Pound usually weakens in the short term at least).

The current consensus for Sterling’s (GBP) outlook is negative or neutral at best. Currency Matters can offer a number of products which help eliminate currency risk. If you need to budget with confidence, you can fix the exchange rate in advance of the transaction by using a Forward Contract.

Please do not hesitate to contact the dealing team on telephone +44 (0) 1695 581 669 or by email to discuss your currency requirements or for a live quote.

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