Category Archives: Currency News

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.

CURRENCY MATTERS

Email: info@currencymatters.co.uk

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EURO

Yesterday the Euro surged across the board after the European Central Bank (ECB) disappointed market expectations of significant monetary easing, keeping the main interest rate at 0.05% and only tweaking the deposit rate from -0.20% to -0.30%. The ECB also extended their €60 billion a year Quantitative Easing asset purchase program for an additional six months, to March 2017. Given the struggling Eurozone economy, the markets had expected a substantial increase to the asset purchase program or significant reductions to other ECB interest rates. The lack of any substantial moves by the ECB surprised the markets and the Euro responded with sharp gains against the US Dollar, Pound and other major currencies. EURUSD appreciated from 1.0506 to 1.0981; EURGBP appreciated from 0.7023 to 0.7251 (GBPEUR 1.4239 to 1.3791). The Pound followed the Euro higher against the US Dollar although not to the same extent with GBPUSD moving from a low of 1.4902 to 1.5158.

POUND FALLS, US DOLLAR SOARS.

Yesterday 05/11 the Pound tumbled in value following the Bank of England’s latest report which downgraded both the UK growth and inflation forecast and subsequently pushed out market expectations of a Bank of England interest rate rise. The Pound fell over 1% against all major currencies with GBP/EUR falling from 1.4199 to 1.3966 and GBP/USD falling from 1.5401 to 1.5203.

This afternoon 06/11 the US Dollar has appreciated strongly, more than 1%, following overwhelmingly strong US employment data. The US Dollar appreciated strongly against the Euro forcing EUR/USD down from an earlier high of 1.0892 to a low of 1.0707. The US Dollar also appreciated against the Pound with GBP/USD falling from 1.5219 to 1.5030. The US Dollar also appreciated against the Swiss Franc with USD/CHF appreciating from 0.9946, through parity to 1.0065. With the US Dollar appreciating more against the Euro than the Pound, GBP/EUR recovered from 1.3896 to 1.4065.

There is lots of global economic data due for release next week and we also have speeches from Bank of England Governor Mark Carney and ECB President Mario Draghi on Wednesday 11/11 which both have the potential to move the market.

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

 

 

Pound (GBP) Falls

The Pound has fallen sharply today following weak UK inflation data. The headline Consumer Price Index (CPI) reading was -0.1% year on year in September; much worse than market expectations of +0.2%.

The Pound fell more than 1% against the US Dollar and Euro hitting a low of 1.5201 and 1.3347 before recovering approx ¼ cent towards the end of the day.

Currency Matters can offer a number of products which can help you eliminate currency risk. Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for further information or for a live quote.

Forward Contract (Fixed Date): A Forward Contract is one which is agreed for settlement at some fixed point in the future, after two working days. The Forward price is based on the current Spot price and adjusted for the interest rate differential between the currencies being bought and sold. This Forward rate may be more or less than the current Spot price. A Forward Contract guarantees the exchange rate you will receive on your future requirement. A small deposit is required to secure a Forward Contract.

Forward Contract (Variable Date): Similar to the description of the Forward Contract above, but settlement is agreed to occur between two dates, at the client’s discretion, rather than on a fixed date. This is particularly useful when you don’t know precisely when you would need to settle with your counterparty.

Market Orders: Currency Matters offer the facility to place market orders – either on a “limit” basis or on a “stop” basis. For example, you can place a limit order to buy your currency at a predetermined price, above the current rate. Alternatively you can place a stop order to buy your currency at a predetermined rate, below the current rate. We can also work orders on a “one cancels other” basis, so if you have both a limit and a stop order in place, and one is executed, the remaining order is automatically cancelled.

COMPARING CURRENCY MATTERS

CASE STUDY:

A corporate client in the UK needed to pay an overseas supplier USD 170,000.00. In this example the client saved GBP 4,581.28

  Bank Currency Matters
USD Purchased USD 170,000.00 USD 170,000.00
Exchange Rate @ 1.4820 @ 1.5433
GBP Cost GBP 114,709.85 GBP 110,153.57
Bank Fee GBP 25.00 GBP 0.00
Total Cost GBP 114,734.85 GBP 110,153.57
TOTAL SAVING   GBP 4,581.28

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

Currency Matters

The Euro and US Dollar generally both traded lower following quieter markets during yesterday’s US bank holiday and as markets begin to shrug of concerns of China’s slowing economy increasing risk appetite. As a result GBP/USD appreciated from a low of 1.5162 yesterday to a high so far today of 1.5404 and currently trades mid-morning at 1.5380. GBP/EUR also appreciated to a high of 1.3786 after trading as low as 1.3592 yesterday. EUR/USD continues to trade between 1.11 and 1.12 and currently trades at 1.1160.

The currency markets are extremely volatile and Currency Matters can offer a number of products which can help eliminate currency risk and get you the best exchange rate available in the market.

CURRENCY MATTERS PRODUCTS:

Very simply, Currency Matters can send or receive any deliverable currency to or from any valid bank account anywhere in the world.

Spot foreign exchange:

This is the traditional foreign exchange contract where you buy a currency for settlement in two working days. Upon settlement we will make a payment according to your instructions. We will save you money by offering you a much better exchange rate compared to your high street bank.

 

Same day / next day foreign exchange:

We can offer same day and next day settlement for some of the major currencies, depending on amount and availability. We will save you money by offering you a much better exchange rate compared to your high street bank.

 

Forward Contract (Fixed Date):

A Forward Contract is one which is agreed for settlement at some fixed point in the future, after two working days. The Forward price is based on the current Spot price and adjusted for the interest rate differential between the currencies being bought and sold. This Forward rate may be more or less than the current Spot price. A small deposit is required to secure a Forward Contract. We will save you money by offering you a much better exchange rate compared to your high street bank.

 

Forward Contract (Variable Date):

Similar to the description of the Forward Contract above, but settlement is agreed to occur between two dates, at the client’s discretion, rather than on a fixed date. This is particularly useful when you don’t know precisely when you would need to settle with your counterparty. We will save you money by offering you a much better exchange rate compared to your high street bank.

 

Market Orders:

Currency Matters offer the facility to place market orders – either on a “limit” basis or on a “stop” basis. For example, you can place a limit order to buy your currency at a predetermined price, above the current rate. Alternatively you can place a stop order to buy your currency at a predetermined rate, below the current rate. We can also work orders on a “one cancels other” basis, so if you have both a limit and a stop order in place, and one is executed, the remaining order is automatically cancelled.

Please do not hesitate to contact a member of the dealing team on telephone +44 (0) 1695 581 669 or email info@currencymatters.co.uk for further information.

 

 

POUND APPRECIATES FOLLOWING STRONGER THAN EXPECTED UK INFLATION DATA

The Pound has strengthened this morning following the release of stronger than expected UK inflation data with Core Consumer Prices rising at an annual pace of 1.2% adding weight to the argument that the Bank of England should consider increasing UK interest rates which have stood at their historic low of 0.50% for more than six years.

This follows recent comments from Bank of England Monetary Policy Committee member Kristin Forbes who argued that “Waiting too long would risk undermining the recovery – especially if interest rates then need to be increased faster than the gradual path which we expect” and comments from MPC member David Miles who said there are arguments for “stating the journey now” towards a rate hike.

An increase in interest rates makes the associated currency more attractive as global investors seek yield in a global economy with historically low interest rates. Both the Federal Reserve in the US and the Bank of England in the UK are now expected to increase rates either late in 2015 or in 2016. Most expectations are for the Federal Reserve to increase rates before the Bank of England with the Bank of England more likely to raise rates in 2016.

The Pound increased to 1.5670 against the US Dollar (from 1.5598 before the inflation data) and increased to 1.4154 against the Euro (from 1.4085 before the inflation data).