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.
Freephone: 0800 458 6736
Dealing Desk: +44 (0) 1695 581 669
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.
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
Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote.
As expected this morning UK inflation figures fell, even lower than what the markets had been expecting. UK Consumer Price Index fell to 2.4%, down from 2.8% the previous month and below market expectations of 2.6%. UK Core Consumer price index was also down 40 basis points to 2.0%, recording a figure below market expectations of 2.3%. UK Producer Price Index and UK PPI Core Output were also down at 1.1% and 0.8% respectively.
In what was a rather busy morning in terms of UK data releases, nearly every piece of economic data released concerning the UK economy was negative. As would be expected Sterling fell right across the board following these inflation figures’ release. GBP/EUR fell to a daily low of 1.1777 however remained within the approximate 1.5 cent range that the pair has been trading within for the last month. Similarly Cable fell to a daily low of 1.5163, continuing the pairs decline since early May with a further test of the 1.5157 level now likely and should this break the next area of substantial support being found at 1.5127.
Much earlier this morning we saw the Japanese Yen return to its depreciating ways following Japanese Economy Minister Akira Amari’s much more coy response regarding the potential end to the Yen’s slide against the Dollar. This comes after the Yen strengthened yesterday following the economy minister’s comment that suggested further weakening of the Yen may adversely impact upon Japanese people. The bank of Japan’s record monetary stimulus program would now appear to be having the desired effect that Japanese finance ministers had initially hoped it would. Figures released in Tokyo last week showed that Japanese GDP rose to an annualized 3.5%, suggesting that the Bank of Japan’s efforts to end a decade of inflation are actually having a positive impact on the economy. This increase in money supply has had the inevitable, yet “unintentional”, effect of depreciating the Yen, which rose to above USD/JPY 100.00 two weeks ago for the first time in over four years, and has consequently lead to a boost in exports. Data released so far suggests that BoJ Governor Haruhik Kuroda may actually be able to reach his ambitious target of reaching 2.0% inflation in just two years. USD/JPY is currently trading at 102.68 and speculation will now grow as to whether the pair will reach 105.00.
With very little data due out this afternoon, trader’s attention is likely to turn to tomorrow where we will see a number of key releases. In the early hours of tomorrow morning the Bank of Japan is set to make their interest rate decision and monetary policy statement, potentially giving the market an indication of how long their extremely loose monetary policy will continue. Moving back westwards, later tomorrow morning UK BoE minutes will be released, followed by the US FOMC minutes tomorrow evening. As Sir Mervyn King comes to the end of his tenure as governor of the BoE, it is unlikely that we will see any drastic information released in the BoE minutes, however the market will be keen to see if the FOMC minutes or Fed Governor Ben Bernanke’s press conference give any indication as to when a reduction in the Federal Reserve’s bond buying program will be brought to an end.
Christmas came early this morning for the UK as GDP figures confirmed, somewhat emphatically, that the UK has officially come out of recession. David Cameron declared yesterday during a lively Prime Minister Questions, at the end of a passionate statement regarding the strengthening UK economy to opposition leader Ed Milliband, that ‘the good news will keep coming’. Despite this statement, even the Prime Minister himself must have been pleasantly surprised this morning when the data was officially released, confirming a UK GDP Q3 increase of 1%, beating market expectations of 0.6%. This positive sentiment was conveyed in the markets as GBP/EUR jumped 35 pips in the ten minutes following the release. A large part of this increase is likely to be due to the effect the Olympics had on the economy as Olympic Games ticket sales helped revive growth. These results, whilst positive, should be considered with cautious optimism. Bank of England Governor Mervyn King commented yesterday that whilst the UK economy continues to recover, it is proceeding to do so at a ‘slow and uncertain’ pace. All of this means that the Bank of England’s Monetary Policy Committee will have a lot to think about when they meet on the 8th November to decide the UK’s monetary policy.
The economic data this morning from the UK contrasts drastically to the consistently negative information that was released yesterday morning in Europe. Between eight and nine AM yesterday nearly ten pieces of individual European economic data was released with each one being negative and failing to meet market expectations. This quite clearly hit the Euro as we saw nearly one cent fall off both EUR/GBP and EUR/USD following the data release. European leaders offered little help for the Euro either, as has come to be expected, following European Central Bank President Mario Draghi’s meeting with German lawmakers. Truth be told little was expected to come from this meeting which was more of a wooing campaign for Mr Draghi who is keen to gain the support of the German public to ensure the countries commitment to the ECB’s bond buying program which is hoped will help sure up the Eurozone.
The directors of Currency Matters Limited would like to advise all clients and counterparties that the company has been approved by the Financial Services Authority as an Authorised Payments Institution, and is entered in the FSA Register as such, with registration number 537841.
Confirmation of our registration can be found on the Financial Services Authority website at http://www.fsa.gov.uk/register/psdFirmBasicDetails.do?sid=256380 .
Please do not hesitate to contact Currency Matters Limited on 0800 458 6736 with any questions.
DIRECTOR, CURRENCY MATTERS LTD