Tag Archives: bank of england

Currency Update

Following the release of minutes from the Bank of England Monetary Policy Committee (MPC) and the Government’s Spending Review, the Pound has remained relatively stable near its current levels in the region of 1.13 against the Euro and 1.57 against the US Dollar.

The Bank of England Minutes confirmed that there was a three way split in the nine member MPC October meeting. Seven members voted to keep interest rates and quantitative easing (QE) on hold, whilst one member voted for a 0.25% interest rate hike, whereas Mr Posen voted for a £50 billion extension of QE.

The minutes indicated that whilst the clear majority of MPC members did not see the case for further QE at present, they did indicate that the chance of further QE in the future had increased. Going forward the prospect of further QE and low interest rates will continue to weigh on Sterling’s value.

During the UK Spending Review, Chancellor George Osbourne unveiled the largest UK spending cuts since World War II. Departmental budget cuts averaged 19%, which was less severe than the 25% cuts expected, largely thanks to an additional £7 billion found in savings to the welfare budget. The Spending Review aims to cut £81 billion from public spending over four years.

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

Sterling

This week we have seen the Pound fall further against the Euro as the probability of further Quantitative Easing (QE) from the Bank of England increased. Earlier in the week Mr Posen a member of the Bank’s Monetary Policy Committee (MPC) became the first member of the MPC to openly call for further QE since November. However, today his tone seems to have softened suggesting that the other MPC members may be able to convince him that his calls for further QE are premature.

Whilst further QE is by no means a foregone conclusion, the increased risk of further QE has weighed significantly on the Pound. Despite a raft of bad news from the Euro-zone; including the downgrading of Spain’s credit rating from AAA to AA1 and the mounting costs of  the Irish bailout of Anglo Irish bank, the Euro has appreciated strongly against the Pound, trading above 0.86p (GBPEUR 1.15).

Further falls in Sterling could be seen, particularly if support for further QE gains momentum. Many analysts are now predicting that GBPEUR could fall further, with 1.12 being noted as the next downside level.

Given the current uncertainty surrounding the Pound, you may deem it appropriate to hedge against any future falls in the Pound’s value. Currency Matters can suggest a number of products and strategies which can eliminate currency risk. Please do not hesitate to contact the dealing team to discuss any upcoming currency requirements.

The exchange rates mentioned in the above email 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

 The US Dollar has continued to fall following Tuesday’s meeting of the Federal Reserve. At the meeting the Federal Reserve kept interest rates on hold at 0.00-0.25% and kept quantitative easing at current levels. However, the Federal Reserve opened the door to the possibility of additional quantitative easing indicating that it would be prepared to provide additional accommodation if needed to support a fragile economic recovery.

 On the interbank market GBPUSD currently trades above 1.56 whilst EURUSD trades at 1.33.

 In the UK, Sterling has come under some downward pressure following the release of recent disappointing economic data including poor retail sales and higher than expected government borrowing, which totalled £15.3 billion in August. The Bank of England Minutes released this week showed that the Monetary Policy Committee voted to keep both interest rates on hold at 0.5% and its Quantitative Easing Asset Purchase Scheme at £200 billion. The minutes made no clear indication that further Quantitative Easing (Q.E.) would be needed however many analysts interpreted that the chances of further Q.E. had increased since the previous meeting. The Bank of England remains torn between trying to support a fragile economic recovery, whilst trying to anchor inflation which remains stubbornly above the 2% target.

 As a result of the above, extreme volatility has been seen in the GBPEUR exchange rate, yesterday hitting its lowest level since May before recovering slightly today. The current GBPEUR interbank rate trades at 1.17.

 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.

Bank of England

The Bank of England has today kept UK interest rates on hold at 0.5% and the Bank’s current asset purchase scheme known as quantitative easing also remains on hold at £200 billion.

The Pound continues to look firm against the US Dollar trading above 1.58 on the interbank market and against the Euro the pound trades near 1.20.

The market will now await the European Central Bank announcement later today and on Friday the latest US employment data will be released.

Please do not hesitate to contact Currency Matters for a live quote. Please note the exchange rate you are able to achieve will depend on the amount being exchanged.

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.

Please do not hesitate to contact Currency Matters for a live quote.

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 – 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.