Tag Archives: monetary policy

BoE and ECB

The Euro has retreated today after the European Central Bank kept rates unchanged at 0.75% and slashed its growth forecasts for 2013. Projected Eurozone growth is now expected to range between -0.9% and +0.3% suggesting that it is more than likely that the Eurozone economy will contract next year.

In the UK, the Bank of England as expected kept interest rates at 0.50% and the Bank’s Quantitative Easing Asset Purchase Programme was also maintained at £375bn.

As a result the Pound is up against the Euro by nearly 1 cent and currently trades at 1.2395 (0.8068) and the Euro is down 1 cent against the US Dollar at 1.2980. The Pound trades relatively flat against the US Dollar currently at 1.6090 on the interbank market.

Matthew Porter 15:15 06/12/12

From One Vote to Another

From one vote to another. Markets today will be bracing themselves once again for potential turmoil in the run up to another key vote, one that could cause much more movement than the US presidential election ever threatened.

We have become accustomed to leaders pleading and begging for votes over the last couple of weeks, however it is now a different leader in this position; Greek Prime Minister Antonis Samaras. As I have mentioned in previous blogs, Greece could face bankruptcy by the end of the month should they not secure further financial assistance. In order to obtain such funding the Greek government must vote to approve tough austerity measures that have been agreed with the Troika, with the first step of this process taking place today. Should this vote not be passed substantial uncertainty is likely to be seen within the markets with the Euro likely to suffer heavily as talks of a Greek exit will inevitably resurface.

The dollar is slightly down this morning against the Euro and Sterling following Barack Obamas re-election as US President. This may well be the result of market participants beginning to move away from the safety of the US dollar as uncertainty has now been reduced and risk appetite invariably increases. The Dollar has also potentially weakened based on the belief that President Obama’s win has paved the way for further monetary easing, that said however, round three of Quantitative Easing did not do much to weaken the Dollar as such policies have become to be expected and therefore are already priced in.

In comparison to the importance of the Greek austerity measures vote, there is little economic data out today of any real significance. However so far this morning EU retail sales figures have been released recording a drop of -0.8% which is slightly better than the market expectation of -1%. We will also see German Industrial Production figures released at 11:00 GMT which could move the markets slightly, however make no mistake, the key event today will be the outcome of the vote in Greece which has the potential to cause significant movement in the markets.

Mark Webster

UK Economy Emerges from Recession

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.

Mark Webster
25/10/12

Currency Update

Yesterday Wednesday 15th saw Greece’s troubles resurface. With Greece facing a deepening recession, the Greek Prime Minister is set to meet with his French, German and Luxemburg counterparts next week to persuade Eurozone leaders to extend the period of austerity from two to four years, essentially planning to reduce the Greek budget deficit by 1.5% of GDP annually compared to the previous agreement of 2.5%. Due to the slower pace of deficit reduction it is believed an additional £20bn of funding would be required to support Greece.

In the UK, yesterday’s jobs figures continued to defy the recession with unemployment down to 8% and the claimant count dropping by 5,900 in July. Minutes released by the Bank of England also confirmed that the Monetary Policy Committee was unanimous in its decision to leave the bank rate unchanged at 0.5% and to maintain its Quantitative Easing Asset Purchase Programme at its current level of £375bn. Unlike in previous meetings, the bank did not hint towards a bias of further rate cuts giving Sterling a further boost. It is expected that the Bank will gauge the impact of the new Funding for Lending Scheme and the completion of its current £50bn extension of QE in November before it makes a decision on more monetary easing. Today, UK retail sales also beat market expectations growing by 2.8% year on year.

The better than expected news from the UK, coupled with the Eurozone’s on-going troubles has pushed GBPEUR higher towards 1.28, currently trading at 1.2793 (EURGBP 0.7817).

Elsewhere the Pound trades between 1.56-1.57 against the US Dollar and the Euro trades at 1.23-1.24 against the US Dollar on the interbank market.

Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for a live quote or for advice and tailored solutions to your currency requirements.

16/08/12 10:30

Contraction in UK GDP

The Pound has fallen back below 1.28 against the Euro and back below 1.55 against the US Dollar following this morning’s preliminary UK GDP data release. The data showed that the UK economy contracted much more than many economists expected.

In the second quarter UK economic output plummeted, contracting -0.7% quarter on quarter and contracting -0.8% year on year compared to a median forecast of -0.2% QoQ and -0.3% YoY. Whilst factors including the poor weather and the Jubilee bank holidays may have exaggerated the fall in GDP, underlying economic growth is expected to be close to flat or declining over 2012 despite a predicted improvement in the third quarter.

With UK inflation falling back towards the target of 2% (currently at 2.4%) and the economy in contraction, the likelihood of further Quantitative Easing and an even greater prolonged period of low Bank of England interest rates (currently 0.5%)has increased.

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

11:00 25/07/12

GBPEUR @ its highest level since 2008.

The Pound has appreciated following today’s Bank of England announcement that the Monetary Policy Committee has kept interest rates unchanged at 0.50% and Quantitative Easing at its current level of £325bn. Whilst this was widely expected, the possible threat of further QE always poses a threat to the value of the Pound and as such the market was reassured by the announcement and the Pound has appreciated.

Because of the continuing economic and political woes facing the Eurozone the Pound has now appreciated to its highest level against the Euro since November 2008, hitting an interbank high of 1.2496 earlier today.

Currency Matters can offer a number of products which can help you plan your future currency requirements. By using a Forward Contract it is possible to purchase currency today at a guaranteed exchange rate for settlement at a later date. A small deposit is required to secure a Forward Contract with the balance due by the agreed future value date.

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

GBPEUR 19 MONTH HIGH

The Pound has appreciated to a 19 month high against the Euro and towards recent highs against the US Dollar following the release of minutes from the Bank of England’s Monetary Policy Committee (MPC) April meeting. The minutes showed that the nine member MPC voted 8-1 in favour of keeping the Bank’s Quantitative Easing Asset Purchase Programme (QE) on hold at its current level of £325bn, with only David Miles voting for a £25bn expansion. At the previous meeting in March, two members David Miles and Adam Posen had voted for a £25bn expansion, the defection of Adam Posen to voting for no change to QE, coupled with yesterday’s higher than expected UK Consumer Price Index inflation data has reined in expectations of further QE from the Bank of England. As previously discussed, aggressive QE from the Bank of England has posed a significant threat to the value of the Pound. As this threat recedes, the Pound has appreciated.

Currency Matters can offer a number of products which can help you plan your future currency requirements. By using a Forward Contract it is possible to purchase currency today at a guaranteed exchange rate for settlement at a later date. A small deposit is required to secure a Forward Contract with the balance due by the agreed future value date.

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

11:30 18/04/12

The Pound has fallen this morning …

The Pound has fallen this morning following the release of minutes from the Bank of England Monetary Policy Committee (MPC) meeting held on the 8th and 9th February. At that meeting the Bank decided to hold interest rates at the historic low of 0.50% and extend Quantitative Easing (QE) by an additional £50bn, taking the total Asset Purchase Programme to £325bn.

The minutes showed that the MPC was split over the size of the expansion of its Quantitative Easing Asset Purchase Programme. Of the nine member strong MPC, seven members voted to expand QE by an additional £50bn whilst two members voted for a larger expansion of £75bn.

As discussed in previous blogs, the threat of further QE continues to undermine the value of the Pound.

As I am writing this GBPEUR has slipped back below interbank 1.19, to a low of 1.1859 before recovering slightly towards 1.1870. Against the US Dollar the Pound has slipped back below 1.58 and currently trades at 1.5710.

Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for further information or to discuss how Currency Matters can offer you significant savings and eliminate currency risk.

10:00 22/02/12

BoE

As expected the Bank of England has maintained interest rates at their record low of 0.50% and has voted to increase the size of its asset purchase programme, financed by the issuance of central bank reserves known as Quantitative Easing by £50billion to a total of £325 billion.

The Bank of England’s latest inflation and output projections will be published in the Inflation Report to be published at 10:30 on Wednesday 15th February and the minutes of today’s meeting will be published at 09:30am on Wednesday 22nd February.

The Pound currently trades at 1.19 against the Euro and at 1.58 against the US Dollar.

UK GDP & BoE

The Pound has recovered back above 1.20 against the Euro and continues to trade around 1.55 against the US Dollar on the interbank market.

Despite UK Gross Domestic Product (GDP) data showing that the UK economy contracted by 0.2% in the final quarter of 2011, the initial market reaction suggests that many expected the data could have been worse.

The recent UK economic data, coupled with the European debt crisis and anaemic global growth points to the UK struggling to avoid entering into another technical recession i.e. two consecutive quarters of negative GDP growth.

Whilst many analysts are hopeful of a mild or shallow recession in the UK, the fragile outlook increases the likelihood of a further expansion of the Bank of England’s Quantitative Easing Asset Purchase Programme (QE). Moreover, minutes released today from the Bank of England’s last Monetary Policy Committee (MPC) meeting held on January 12th indicated that a number of MPC members believed it was a likely a further expansion of asset purchases (QE) would be required, possibly as soon as the next MPC meeting due on the 9th February.

Aggressive QE from the Bank of England would pose a threat to the Pounds value and is one of the factors preventing the Pound forging higher against the troubled Euro. The Pound may be able to hold against a troubled Euro but could struggle against the US Dollar.

Please do not hesitate to contact the dealing team on +44 (0) 1695 581 669 for further information or to discuss how Currency Matters can offer you significant savings and eliminate currency risk.