AUSSIE HITS FRESH LOWS AGAINST POUND AND EURO

Good afternoon,

It seems we continue to see the Aussie lose more ground against both the Pound and Euro as we break through 1.6830 (GBP/AUD) and 1.4360 (GBP/EUR) at mid-market. The last time we saw these levels for the Pound it was back in April 2010 and November 2011 for the AUD/EUR cross.

A typical purchase of $100,000AUD would now cost you over £8,000 less than back in March.

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GBP/AUD 2 YEAR EXCHANGE RATE


The main attributor to the jump in rates this morning was the Chinese Manufacturing PMI figures that came out at 48.3, worse than the forecast 49.4. Anything under 50 is seen as a contraction and indicates towards a slowing in growth within the Chinese economy; this could have a knock on effect on the Australian economy as China is their largest trading partner when looking at the export of goods and services.

PERCENTAGE OF AUSTRALIAN EXPORTS


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Looking forward for the rest of the week there aren’t many more data releases out of Australia but I am sure we will see further movement in the rates as we have PMI and Retail Sales figures today plus an EcoFin meeting on Friday which could affect the EUR/AUD cross.

As we have discussed previously, we are certain to see further volatility in the coming months and there are whispers that we could see another rate cut from the Reserve Bank of Australia (RBA) and further QE out of the UK. I will try my best to keep you posted and up to date as thing happen.

Take the next step and send us a free enquiry and have a consultation on all the options available to you. It’s free, it doesn’t obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Complete the enquiry form on the right to send a free enquiry now

Pound/Euro exchange rate forecast outlook 2013

Wednesday 19th June 2013 
Good afternoon. Sterling exchange rates have fallen back away from recent highs, after high UK inflation numbers and a strengthening Euro. In today’s post I’ll have a look at recent market movements in more detail, and also look at how Quantitative Easing (QE) in the UK and abroad is still driving exchange rate movements. In this weeks report: 

  • Bank of England still split on QE
  • UK Inflation higher than expected 
  • Euro gathers strength after Mario Draghi comments 
  • FED to make QE announcement this evening. 
  • Data for rest of the week that might affect rates 
  • How to get the best exchange rates 

Bank of England still split on Quantitative Easing

Earlier today the Bank of England (BoE) released its latest minutes on its decision to keep the QE programme and interest rates on hold. It showed that for the fifth month in a row, the monetary policy committee (MPC) voted 6-3 in June against increasing the programme of quantitative easing (QE). Sir Mervyn, along with Paul Fisher and David Miles, voted to increase QE by £25bn, as they have done in recent months. 

Sir Mervyn steps down from his role as BoE governor next month, to be replaced by the former governor of the Canadian central bank, Mark Carney, as I outlined in a recent post. While recent surveys of the economy had indicated an improvement in conditions, they said the outlook was no stronger than projections in the Bank’s latest inflation report. They also said that the risks from the Eurozone remained “substantial”. 

As you can see from the graph of today’s movements, initially Sterling fell as a result, however it recovered all of it’s losses and just after lunchtime, rates were back where they started, with the Euro at €1.1690 and the US Dollar at $1.5660. 

As outlined in detail in my last post, there are concerns the new Governor will push for more aggressive QE and this is what is holding the Pound back at the moment. 

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UK Inflation 

Yesterday we saw some surprising inflation numbers for the UK. The rate of consumer price index (CPI) inflation increased to 2.7% in May, up from 2.4% in April, the Office for National Statistics (ONS) said. The Bank of England has said it expects inflation to exceed 3% this year. May’s rise in inflation was higher than analysts predicted. 

Usually high inflation would strengthen a currency, as it means that interest rates could rise to combat the rise in inflation. However with interest rates expected to remain at their record lows for some time to come, this isn’t an option. My view is it really means that investors are very nervous about the BoE’s ability to keep inflation in check, and that’s why the Pound dropped immediately after the release.


Euro gains strength, pushing GBP/EUR rates lower.


Just a week or two ago GBP/EUR rates were in the €1.18’s. We have now seen rates drop by a few points, and part of this is due to a strengthening Euro. The reason it has risen in value and become more expensive to purchase was due to comments by the European Central Bank (ECB) President Mario Draghi. In a speech he said that the ECB have numerous standard interest rate policy and other non-standard measures that they can use if necessary.


What these measures are he didn’t expand on, but many think that he will do whatever it takes to protect the Euro, and this could mean negative interest rates. Markets responded positively to the news and the Euro gained strength, pushing GBP/EUR rates lower.

Looking to convert Pounds to Euros, or Euros to Pounds? Click here to send me a free no obligation enquiry and find out more about the rates I can provide. 


US FED decision on interest rates and QE


At 7pm this evening it’s the turn of the US Federal Reserve to announce its latest decision on interest rates and Quantitative Easing. I don’t expect any movement in interest rates. There has been speculation that the FED would be reducing its QE programme, so should this be the case I would expect the USD to gather strength and pull GBP/USD rates back down.


Only a few weeks ago rates were close to $1.50, but after the biggest 1 day gain in 4 years the rate shot up, and currently sits in the mid $1.56’s. Most forecasts are still suggesting that rates will fall back below $1.50, mainly due to an improving US economy and the threat of further QE in the UK.

If you need the best USD rates, click here. 


So, will Pound/Euro exchange rates rise or fall?


I’m asked this question many times each day, and the truth of the matter is I don’t know, nobody knows, and it’s impossible to predict. If anyone could then they would become very rich very quickly! What I can do is explain what is driving the market to help you make an informed decision on what to do.


On the one hand, better UK data and continued problems in the Eurozone suggest Pound/Euro rates will rise. Indeed a forecast I read this morning from Barclays suggested just that, and they are predicting that rates will soar above €1.20 this year.


On the other hand, you have robust policy from the ECB that is keeping the Euro strong, and the risk of a devaluing Pound through Quantitative Easing as outlined in my last post. So rates continue to be pulled in both directions, with no indication as to which way it will go in the medium term.

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How to protect against rates moving against you


Despite the uncertain direction of rates, there are various ways you can protect against adverse rate movements and get the best possible rate.


You could place a Stop Loss order which give you a worst case scenario while still allowing you to aim for a higher rate.


A limit order is the opposite; you place an order to buy at a higher level than the market is currently at, and should rates rise even briefly, your currency is automatically bought.


You could fix today’s rates on a Forward contract for up to 2 years, and only lodge 10 % of the total, thus guaranteeing your rate, protecting against a decline and allowing you to budget.


To discuss your particular requirements, send me a free enquiry by clicking here. I can discuss your needs, run over your options and when you decide to convert your funds, the rates we can source on your behalf are exceptional – up to 5% better than the banks. You could be surprised on how much you can save.

Have a free consultation and find out about the rates I can provide. 


Economic Data


Tomorrow we have UK Retail Sales in addition to a speech by one of the Bank of England’s monetary policy committee. This could be interesting should include anything to do with Quantitative Easing and the markets will be listening closely to what he has to say.


On Friday we have some minor Public Sector Borrowing figures, but they could still affect the value of the Pound. 

GBP/AUD STILL TRADING IN THE MID 1.60’s

There was a small respite for the Aussie Dollar on Monday as it clawed back some of the losses it has incurred over the past few weeks. Fortunately for Dollar purchasers this was short lived after the release of the RBA minutes from the interest rate meeting. For more information on live exchange rates click here.
 

 

The minutes this morning suggested that the currency may well have further to weaken and that there may well be further scope to reduce interest rates. If interest rates are reduced again we could easily see the GBP/AUD cross breach through the 1.70 mark. The Australian dollar has taken a thorough hammering over the past 6 weeks  and it is possible that this price movement has been over priced into the market. The dollar was quick to regain over a cent against the Pound as Sterling lost ground against all the major currencies following higher than expected price inflation on Tuesday morning.


The UK inflation data was important to the markets as there is a concern that the UK can’t seem to control its rising inflation whilst at the same time we have virtually flat growth. This dilemma for the Bank of England potentially increases the chances of the an extension of the QE programme when the new Governor of the Bank of England takes office on 1st July – As we have already discussed previously he is expected to have more radical and aggressive ideas on how to kick start the UK economy with QE being near the top of the list.For the best in currency exchange rates click here.
 
On Wednesday we have the highlight of the week in terms of market data with the minutes of the most recent Bank of England Interest rate decision.  In what was Mervin King’s  final meeting it will be unlikely that there will be anything ground breaking contained within the document but it will be interesting to perhaps find out more information on the split with the decision in quantitative easing for next month when mark Carney takes over.

If the 6-3 split for Quantitative Easing has changed we could see some volatility but it will depend on how the split moves and it will be interesting to see how things pan out.

To make the most of your funds, take the next step and send us a free enquiry and have a consultation on all the options available to you. It’s free, it doesn’t obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks.

Franc Strengthens as Slump in Stocks Spurs Demand

EUR/CHF Back in the 1.22’s


The Swiss Franc has reached its strongest level in almost 6 weeks against the euro as a slump in stocks has spurred demand for safer assets. Against sterling, the Franc is trading in the 1.44’s, having been up in the 1.49’s in early May. The Swiss National Bank set a ceiling of 1.20 per euro back in September 2011 to stop the currency strengthening too much as investors sought a safe-haven from the European debt crisis. Recently there has been speculation that the SNB would raise the ceiling to 1.25 in an attempt to aid competitiveness which has kept the franc’s gains in check.


The Stoxx 600 index has continued to slide today, on track for a fourth successive day of losses. The index has lost almost 4% this month alone, with investors concerned that the major central banks may start curtailing their stimulus measures which have been credited for the sharp rally earlier in the year.

“We’re still in a world where the main driver for market direction is what central banks are saying and doing, and you can’t ignore that. The past two-to-three weeks prove that,” said Neil Wilkinson, senior fund manager at Royal London Asset Management.

“The corporate news flow is quiet after the first-quarter earnings season ended, and with a lack of hard data, markets are prone to speculate about the Fed. Another key point is that volumes are thin, hence any moves are amplified,“ he added.

One of the major losers has been the Royal Bank of Scotland whose share price dropped 4.2% on Thursday, effectively wiping off £2 billion, after it was announced late on Wednesday night that Stephen Hester would be stepping down as CEO. Shares in other banks followed suit with the Spanish Banco Popular losing 4% and SocGen losing 1%.



As RBS is a publically owned institution, the news came as a blow to all taxpayers as a fall of that degree means the total value of all taxpayers shares has fallen by nearly £2 billion. To add insult to injury, the bank also announced that it would be cutting 2,000 from its investment arm. Investors are up in arms over the handling of Mr. Hester’s departure, with Investec analyst Ian Gordon saying:

“Despite a wholly unhelpful political and regulatory backdrop, Hester and van Saun have done an admirable job in terms of the ‘repair’ and restructuring of RBS.”

As s result, the Swiss currency gained support from a generally defensive mood surrounding global equity markets, tracking movements in the Japanese Yen which has also gained as a result of its status as a safe-haven. Interestingly, the Franc has remained resilient even as commodities prices have started to recover.

If you need to buy or sell Swiss Francs, or any other major currency, contact me today for a free consultation by filling out the form on the right.

Franc Strengthens as Slump in Stocks Spurs Demand

EUR/CHF Back in the 1.22’s


The Swiss Franc has reached its strongest level in almost 6 weeks against the euro as a slump in stocks has spurred demand for safer assets. Against sterling, the Franc is trading in the 1.44’s, having been up in the 1.49’s in early May. The Swiss National Bank set a ceiling of 1.20 per euro back in September 2011 to stop the currency strengthening too much as investors sought a safe-haven from the European debt crisis. Recently there has been speculation that the SNB would raise the ceiling to 1.25 in an attempt to aid competitiveness which has kept the franc’s gains in check.


The Stoxx 600 index has continued to slide today, on track for a fourth successive day of losses. The index has lost almost 4% this month alone, with investors concerned that the major central banks may start curtailing their stimulus measures which have been credited for the sharp rally earlier in the year.

“We’re still in a world where the main driver for market direction is what central banks are saying and doing, and you can’t ignore that. The past two-to-three weeks prove that,” said Neil Wilkinson, senior fund manager at Royal London Asset Management.

“The corporate news flow is quiet after the first-quarter earnings season ended, and with a lack of hard data, markets are prone to speculate about the Fed. Another key point is that volumes are thin, hence any moves are amplified,“ he added.

One of the major losers has been the Royal Bank of Scotland whose share price dropped 4.2% on Thursday, effectively wiping off £2 billion, after it was announced late on Wednesday night that Stephen Hester would be stepping down as CEO. Shares in other banks followed suit with the Spanish Banco Popular losing 4% and SocGen losing 1%.



As RBS is a publically owned institution, the news came as a blow to all taxpayers as a fall of that degree means the total value of all taxpayers shares has fallen by nearly £2 billion. To add insult to injury, the bank also announced that it would be cutting 2,000 from its investment arm. Investors are up in arms over the handling of Mr. Hester’s departure, with Investec analyst Ian Gordon saying:

“Despite a wholly unhelpful political and regulatory backdrop, Hester and van Saun have done an admirable job in terms of the ‘repair’ and restructuring of RBS.”

As s result, the Swiss currency gained support from a generally defensive mood surrounding global equity markets, tracking movements in the Japanese Yen which has also gained as a result of its status as a safe-haven. Interestingly, the Franc has remained resilient even as commodities prices have started to recover.

If you need to buy or sell Swiss Francs, or any other major currency, contact me today for a free consultation by filling out the form on the right.

Swiss Franc Benefits from Safe-Haven Demand

GBP/CHF Falls As Risk Appetite Shifts

The last couple of days have seen a marginal increase in Franc demand, triggered by weakness in commodities prices and falling equity markets. The ongoing speculation that the Swiss National Bank may raise the minimum euro level is having little impact in weakening the Swiss currency, although market players remain on high alert for any hints at a policy shift.

 
Sterling’s had a rough couple of days after weak manufacturing production data revealed a 0.2% contraction in the manufacturing sector over the last month. The figures are a leading indicator of overall economic health as production reacts quickly to ups and downs in the business cycle and is correlated with consumer conditions such as employment levels and average earnings.
 
 
 
The figures published by the Office for National Statistics dented hopes that a pick-up in industry would encourage balanced growth in the UK. The main factors behind the monthly drop, according to the ONS, were falls in transport equipment, wood and paper products and metals. However, they did say that in the three months to April manufacturing was actually up by 0.5% year on year and this should be considered a more accurate indicator of the underlying trend.
 
However, it wasn’t all doom and gloom as employment data on Wednesday revealed that jobless numbers declined by 5,000 in the three months to April as the economy returned to marginal growth. Figures released by the ONS showed that the total jobless number had fallen to 2.51 million and that the total number of people in employment had risen to 29.76 million, up 432,000 on a year ago.
 
 
 
As a result, sterling gained around 0.4% against the Franc after the figures were released but gains were quickly erased with profit taking pushing sterling back down to the low 1.44’s.
 
Sterling has actually traded relatively flat against the Franc and the Euro over the last 3 months, remaining within a two cent range against the euro. We were expecting some market movement last Thursday with meetings by both the Bank of England and the European Central Bank but even a speech by Mario Draghi failed to cause any sort of significant movement. The European Central Bank announced that they would be keeping the interest rate at 0.5%, but would consider a negative deposit rate should conditions deteriorate further. Draghi was fairly pessimistic about the economic recovery in the eurozone but market reaction was muted. The Bank of England announced that they too would be keeping interest rates on hold and would not be increasing the level of monetary easing. The meeting was Mervyn King’s last at the helm with Mark Carney taking the reins early in July.
 
 
 
If you need to buy or sell Swiss Francs, or any other currency, contact me today for a free, no obligation consultation by filling out the enquiry form on the right.


 
 
 
 
 

Swiss Franc Benefits from Safe-Haven Demand

GBP/CHF Falls As Risk Appetite Shifts

The last couple of days have seen a marginal increase in Franc demand, triggered by weakness in commodities prices and falling equity markets. The ongoing speculation that the Swiss National Bank may raise the minimum euro level is having little impact in weakening the Swiss currency, although market players remain on high alert for any hints at a policy shift.

 
Sterling’s had a rough couple of days after weak manufacturing production data revealed a 0.2% contraction in the manufacturing sector over the last month. The figures are a leading indicator of overall economic health as production reacts quickly to ups and downs in the business cycle and is correlated with consumer conditions such as employment levels and average earnings.
 
 
 
The figures published by the Office for National Statistics dented hopes that a pick-up in industry would encourage balanced growth in the UK. The main factors behind the monthly drop, according to the ONS, were falls in transport equipment, wood and paper products and metals. However, they did say that in the three months to April manufacturing was actually up by 0.5% year on year and this should be considered a more accurate indicator of the underlying trend.
 
However, it wasn’t all doom and gloom as employment data on Wednesday revealed that jobless numbers declined by 5,000 in the three months to April as the economy returned to marginal growth. Figures released by the ONS showed that the total jobless number had fallen to 2.51 million and that the total number of people in employment had risen to 29.76 million, up 432,000 on a year ago.
 
 
 
As a result, sterling gained around 0.4% against the Franc after the figures were released but gains were quickly erased with profit taking pushing sterling back down to the low 1.44’s.
 
Sterling has actually traded relatively flat against the Franc and the Euro over the last 3 months, remaining within a two cent range against the euro. We were expecting some market movement last Thursday with meetings by both the Bank of England and the European Central Bank but even a speech by Mario Draghi failed to cause any sort of significant movement. The European Central Bank announced that they would be keeping the interest rate at 0.5%, but would consider a negative deposit rate should conditions deteriorate further. Draghi was fairly pessimistic about the economic recovery in the eurozone but market reaction was muted. The Bank of England announced that they too would be keeping interest rates on hold and would not be increasing the level of monetary easing. The meeting was Mervyn King’s last at the helm with Mark Carney taking the reins early in July.
 
 
 
If you need to buy or sell Swiss Francs, or any other currency, contact me today for a free, no obligation consultation by filling out the enquiry form on the right.