Category Archives: Currency Updates

Sterling update

The Pound has strengthened again following yesterday’s Budget and this morning’s Bank of England minutes. The minutes showed that whilst seven members of the Monetary Policy Committee voted to keep interest rates on hold at 0.5% one member voted for a 0.25% increase. The Bank of England also voted to keep its current Quantitative Easing Asset Purchase Programme on hold at £200b.

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Currency Update – Post Election

After Sterling’s initial bounce higher following the formation of a Conservative-Liberal Democrat coalition majority government the Pound has disappointed somewhat, particularly against the US Dollar which earlier slipped below 1.45. 

The sell off in Sterling started following the Bank of England’s Quarterly Inflation Report which implied that UK interest rates would remain very low for some time to come and are likely to rise only very modestly over the next two years. Furthermore, the Bank did not rule out the possibility of further Quantitative Easing. The combination of loose monetary policy and a tightening fiscal policy in the UK, suggests it is likely that the pound could be under pressure for some time.

Further falls for Sterling against the USD are now predicted by a number of analysts, with some pointing towards a break of 1.40. The ongoing debt crisis in the Eurozone is also expected to drag the Euro lower against the US Dollar; this will also be to the detriment of the Pound against the US Dollar.

Given the difficulties facing both the UK and the Eurozone, the outlook for the Pound against the Euro remains highly uncertain. However, given the significant structural problems of the Eurozone, I would suggest that the Pound will fair better against the Euro than against the other major currencies. GBPEUR currently trades at 1.16 on the interbank market.

Next week sees the release of several important pieces of economic data across the globe. In the UK we have the Consumer Price Index and Retail Price Index, Bank of England Minutes and Retail Sales. For a full economic calendar please visit: http://www.currencymatters.co.uk/market-data/economic-calendar/

 If you would like to discuss any upcoming foreign exchange requirements, please do not hesitate to contact the dealing team.  

Currency Update

The Pound has spiked higher against the Euro, earlier breaking through interbank 1.17. Financial markets continue to be concerned that the €110 Billion Greek bailout package won’t be enough to prevent the crisis spreading to other vulnerable Eurozone states namely Portugal, Spain and Italy.

In the UK, markets will await the outcome of the general election, with the prospect of a hung parliament still possible.

Currency Update – UK CPI

The Pound has strengthened this morning (20/04) following higher than expected UK inflation data. The official measure of inflation known as the Consumer Price Index (CPI) beat market expectations coming in at 3.4% year on year. As inflation remains above target it means it is more likely that at some point the Bank of England will have to start reversing its programme of Quantitative Easing and increase interest rates which have been held at a historic low of 0.5% since March 2009.

However, the timing of any changes in monetary policy remains highly uncertain as it is likely the Bank of England will want to further secure the UK’s economic recovery from recession before we see any monetary tightening. 

The deemed threat of a hung parliament following a further narrowing in the opinion polls also adds to the uncertainty around the future direction of the Pound.

Elsewhere, the cost of Greek debt continues to climb and is putting increased pressure on the Euro. The interest rate charged by investors for ten year Greek bonds hit 7.6%, the highest level since the Euro was introduced. Germany, viewed as the safest European economy is only charged at 3%.

The financial markets will now await the outcome of the next meeting in Athens, now due on Wednesday following the disruption to flights, between officials to agree the terms of the joint European and IMF rescue package. Full details of the plan, including the rate of interest have yet to be finalised.

The following rates are shown for indicative purposes only. Please note the rate you are able to achieve will depend on the amount of currency being purchased.

 EURUSD: 1.35 

GBPEUR: 1.14

GBPUSD: 1.53

If you would like to discuss any upcoming foreign exchange requirements, please do not hesitate to contact the dealing team on 01695 581 669.

Currency Update

Earlier today (07/04) the Pound hit its highest level against the Euro since the 24th February briefly touching interbank 1.1410 before settling in the mid-high 1.13s. The Pound is also trading above 1.51 against the US Dollar.

With the upcoming general election and the prospect of a hung parliament there is still much uncertainty about the future direction of the Pound. Many analysts continue to suggest that the Pound will likely fall back below 1.50. Whilst any GBPEUR trade above 1.12 has been proven to be good value if you look at the range over the past 6 months which has seen a range of 1.06- 1.16 on the interbank market.  In fact in only 2 of the last 6 months has the GBPEUR rate been higher than its current rate.

There is a raft of UK and EMU economic data due to be released tomorrow including both The Bank of England and European Central Bank meetings. Therefore, you may deem it appropriate to secure a rate.  

If you would like to discuss any upcoming foreign exchange requirements or the information contained in this blog in more detail, please do not hesitate to contact the dealing team.  

 

 

 

 

GBP SPIKES HIGHER

The Pound has spiked higher this morning following better than expected UK employment data. The UK jobless claims change dropped at its fastest rate since November 1997.

The Bank of England Minutes also released this morning at 09:30 showed that all nine members of the Monetary Policy Committee (MPC) voted to keep UK interest rates on hold at 0.5% and furthermore were unanimous in their decision to keep the Asset Purchase Scheme known as Quantitative Easing at the current level of £200B.

Please do not hesitate to contact Currency Matters on +44 (0) 1695 581 669  for the latest exchange rates.

Currency Update – Sterling pressured

Sterling has started March under significant pressure. Monday morning saw a dramatic fall in the value of Sterling with the Pound falling as low as 1.0930 against the Euro and 1.4780 against the US Dollar. There are currently a number of factors contributing to Sterling’s sharp fall in value.

Firstly, the latest opinion polls are suggesting that following the UK general election, it is likely that we could see a hung parliament with no single party holding a workable majority. This political uncertainty has troubled investors as they are concerned that any new government may not be able to implement the measures needed to cut UK debt and revive the economy.

Secondly, the Bank of England has hinted recently that we could see further expansion of its asset purchase scheme known as quantitative easing (QE). Any increase in QE would likely depreciate Sterling further.

Finally, Prudential’s $35.5B bid for the Asian life insurance unit of AIG has caused large flows out of Sterling into the US Dollar.

Following Monday’s sharp falls, the pound has recovered some of its losses. This morning, the release of the latest Purchasing Manager Index (PMI) suggested that the UK service sector is recovering at a stronger rate than many analysts had expected. This has helped push Sterling back above the psychological level of 1.50 against the US Dollar and above1.10 against the Euro.

In the Eurozone, the Greek government has approved a fresh austerity package of tax rises and spending cuts worth €4.8B. This has gone a small way to help convince financial markets that Greece can pay off its massive debts. The Euro has risen against the US Dollar and currently trades above 1.36.

Elsewhere, The Reserve Bank of Australia has hiked their cash interest rate by 0.25% to 4%. The Bank of Canada left rates on hold at 0.25%. However, the Bank of Canada’s accompanying statement showed that the Bank was more upbeat on the economic outlook. This has forced Sterling to a low of 1.6491 against the Australian Dollar and 1.5387 against the Canadian Dollar.

Both the Bank of England and the European Central bank meet tomorrow at 12:00 and 12:45 respectively. The markets will eagerly await any announcement from the Bank of England regarding QE and the European Central Bank’s latest economic forecasts.

With all the uncertainty regarding the general election, the Bank of England’s QE programme and the UK’s ability to tackle the deficit, it is likely that Sterling will remain under pressure for some time.

If you have any upcoming foreign exchange requirements, please do not hesitate to contact the dealing team to discuss how best to manage your currency requirements and eliminate currency risk.

Currency Update

The US Dollar has continued to appreciate following last night’s unexpected announcement by the Federal Reserve to increase its Discount Rate by 0.25% to 0.75%. The Discount Rate is the rate US banks are charged at to borrow emergency funding from the Federal Reserve. The Target Rate that banks usually borrow at remains on hold at 0-0.25%. The move whilst largely symbolic, confirms that the Fed is starting to realise its exit strategy towards a return to more ‘traditional’ monetary policy. However, it is expected that the Fed may not tighten official monetary policy until the autumn.  Nonetheless, the US Dollar has appreciated strongly, pushing GBPUSD below 1.54, whilst EURUSD trades around 1.35 on the interbank market.

In the UK, the Pound took a fresh blow following this morning’s disappointing retail sales and yesterday’s public sector net borrowing figures, which showed that the UK government had to borrow £4.3B in January, a month which usually posts a surplus. UK tax receipts dropped by 11.8% compared with January last year. 

The debate also continues regarding the suitable timing of any UK government spending cuts. In an open letter to the Financial Times more than 60 senior economists backed Chancellor Alistair Darling’s decision to delay any government spending cuts until 2011, fearing that any earlier cuts could force the UK back into recession. This was as a direct riposte to a letter sent last weekend to The Sunday Times by a group of 20 leading economists supporting the argument that more rapid action to tackle Britain’s deficit was needed and that fiscal tightening should start this year.

Currency News

Last week the currency markets were firmly focused on the Euro with the fiscal problems of Greece and also Spain and Portugal taking the headlines. Speculation built throughout the week that the other European Monetary Union states, led by Germany, would come to Greece’s aid. However, markets were clearly disappointed that whilst a rescue package was agreed in principle, European leaders failed to set out a comprehensive package.

The Euro was also pressured following the release of disappointing Eurozone GDP data. Total Eurozone 4th quarter 2009 GDP expanded by a mere 0.1%, the market had been expecting growth of 0.3%. Noticeably, German GDP (the largest European economy) failed to expand at all, whilst Italian GDP slipped back into contraction. Spain, hit by a housing market collapse and official unemployment greater than 20% remained in recession.

As a result, the single currency fell to a low of 1.3531 against the US Dollar, its lowest level since May 2009. The US Dollar, viewed as a safe haven, appreciated across the board as investors took flight from risk as stocks and gold prices tumbled. The Pound fell to 1.5534 against the US Dollar but rose past 1.15 against the Euro.

 In the UK the Bank of England released its Quarterly Inflation Report. The report was markedly pessimistic about the UK economy, revising its growth forecasts down. UK Interest rates are expected to stay low for a protracted period of time as growth remains weak and inflation is expected to fall back below the 2% target after initially spiking higher to 3%. Moreover, the Bank of England failed to rule out the possibility of extending its asset purchase scheme know as Quantitative Easing. Consequently, the Pound is expected to stay weak for some time. However, some gains could be made against the Euro, depending on how the Greek bailout develops. Sterling’s 25% depreciation should eventually help the UK economy grow as our exports become more competitive.

 Elsewhere, the Australian Dollar rallied following better than expected employment data with GBPAUD falling to 1.76. In China concerns over potential asset bubbles, led officials to order banks to increase their levels of reserves in a bid to cool the amount of lending.