Tag Archives: Pound

Currency Matters: EURO

Currency Matters: EURO

The Euro has fallen across the board over the weekend as Italians voted “No” in a referendum rejecting Prime Minister Renzi’s constitutional reforms, prompting his resignation. The anti EU and populist 5 Star Movement campaigned hard for a “No” vote and the outcome will be seen as  an indication of growing support of Italy’s populist anti EU Movement and is seen as confirmation of growing anti-establishment/anti EU sentiment across Europe.  However, it is worth noting that in the short term a grand coalition will likely be formed keeping 5 Star away from power and most Italians do continue to support Euro membership. Moreover, in Austria the electorate voted for Pro-European Alexander Van der Bellen against the anti EU and far right candidate Norbert Hofer.

The markets reacted clearly, pushing the Euro sharply lower through a 12 month low to 1.0507 against the Dollar. Against the Pound the Euro fell to its lowest level since the BREXIT Referendum result to 0.8305 (GBP/EUR 1.2041).

In the UK, today marks the start of the key landmark legal hearing by the Supreme Court on whether Parliament’s consent is required before the Government can trigger Article 50 – the formal process of leaving the EU. This follows the election of pro-EU Liberal Democrat Sarah Olney in the Richmond Park by-election following Zac Goldsmith’s, a prominent “Leave” supporter, decision to quit the Conservative party and run again as an independent following the Conservative Government’s decision to expand Heathrow.

The European Central Bank (ECB) meeting on Thursday will be seen as the key event this week. Policymakers are set to decide on the future of the EUR 80b a month asset purchase program, which is scheduled to end in March. The result of the Italian referendum will heighten the need for the ECB to extend the program. Meanwhile, depending on market reactions to the referendum, the ECB could also tilt the program towards Italian government bonds to stabilize any volatility. Markets are currently expecting a six month extension to the program. The Euro would be vulnerable to deeper falls if the ECB announce something greater than that.

The Euro could continue to fall and the next level of support against the US Dollar is 1.0461 and 0.8116 (GBP/EUR 1.23) against the Pound.

Please do not hesitate to contact the dealing team on telephone +44 (0) 1695 581 669 to discuss how upcoming events could have a bearing on the cost of your foreign currency payments and how Currency Matters can save you time and money.

GBP/EUR 3 Month High

The Pound has appreciated to a 3 month high of 1.1947 against the Euro and appreciated against the US Dollar to 1.2695 following hints from UK BREXIT Minister that the UK wanted to get the best possible access for goods and services suggesting paying for access to the Single Market may be an option.

This Sunday Italy holds its referendum on constitutional reform with Prime Minister Renzi pledging to resign if voters don’t vote for his proposals. Whilst this is not a vote on EU membership there will be significant implications if Renzi resigns as a new caretaker government would likely be appointed and new elections could follow as early as next year. This could open the door to the election of the Five Star Movement a populist, anti-establishment party that has said in the past it wants to call a referendum on membership of the Euro.

Please do not hesitate to contact the dealing team on telephone +44 (0) 1695 581 669 to discuss how upcoming events could have a bearing on the cost of your foreign currency payments and how Currency Matters can save you time and money.

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.

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.

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).

GBP Higher

The Pound has appreciated following better than expected UK earnings data as earnings increased by 2.7%. Moreover, minutes released by the Bank of England showed that the Bank was unanimous in voting to hold its interest rate at 0.50% and its asset purchase facility at £375bn. Notably the Bank is now expecting UK consumer prices to pick up pace by the end of the year. This has pushed the Pound through 1.57 against the US Dollar and through 1.39 against the Euro.

Pound Climbs following Conservative Overall Majority in UK General Election

UK financial markets rallied on Friday as election results pointed to an outright victory for the Conservative Party, wiping away the uncertainty of a hung parliament.

The Pound has rallied across the board and was up 2% against the Euro, pushing EUR/GBP down to 0.7226p (GBP/EUR 1.3839). This put sterling on course for its biggest one-day rise against the single currency since early 2009.

The Pound rose against the US Dollar hitting a high of 1.5521 before settling back to trade around 1.5450.

Whilst the short term risks of a hung parliament have diminished, longer term risks remain namely the proposed referendum on the UK remaining in the EU and the possibility of another Scottish independence referendum following the Scottish National Party’s victory in Scotland.