After a minor blip for GBPEUR exchange rates yesterday following the lower than expected UK Retail Sales figures the Pound is again on the rise.
The Office for National Statistics published second quarter GDP figures which showed the economy is now 0.2% higher than the peak reached in 2008. The ONS also confirmed that the economy has grown by 3.1% over the last twelve months.
This has helped to give Sterling a boost against the single currency providing some excellent buying opportunities and trading just shy of a 2 year high during today’s trading session.
Earlier this week the Ernst & Young Item Club suggested that GDP would be high and the International Monetary Fund said yesterday that the UK would grow by 3.2% this year.
UK Mortgage approvals are due out on Monday morning at 930am and with house prices having risen to their highest on record this data release will be key as to whether we’ll see Sterling improve against the Euro for the early part of next week.
If you have a currency transfer to make and want to save money on exchange rates compared to using your own bank then contact me directly for a free quote Tom Holian email@example.com
The EUR has made gains against both GBP and the USD during Thursday morning’s trading, relieving some pressure on the single currency. GBP/EUR rates have dropped back below 1.27 on the exchange, following positive Eurozone PMI data this morning. There was also negative data for the UK, with Retail Sales figures coming out much worse than expected. This seems to have halted the Pound’s rise and it will be interesting to see whether the single currency can now start to put pressure back on 1.26 following this morning’s economic releases.
The EUR has been struggling to make any sustained inroads, particularly against GBP. GBP/EUR had crept up to a fresh two year high yesterday but the single currency found market support around that level and Sterling may well have hit a glass ceiling. I anticipate further economic difficulties for the Eurozone, so if you are holding EUR and wish to protect yourself against further market losses then one of our forward contracts can protect you from any adverse movement.
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The Euro remains under pressure with the pound still comfortably over 1.26 and the Dollar closing in on 1.35. Whilst there hasn’t been huge amounts of data out this afternoon, this morning EU inflation came in at expected levels but these are still well below a healthy level for the ECB. This is likely to keep the Euro under pressure as Mario Draghi & Co have definitely left the door open for further intervention if data doesn’t improve in their recent statements.
I cannot see the Euro clawing back much ground under its own steam as investors will be looking towards the next ECB rate meeting and nervous over the possible action by the ECB. I still think it may be a bit soon for the ECB to act, but this threat is likely to keep the Euro pegged back in the interim, unless economic data picks up sharply (hardly likely with the holiday season fast upon us!).
The only possibilities in my view of any movement in the Euros favour would really depend on weakness from either the pound or the Dollar. We are yet to see the Bank of England Minutes due out next Wednesday to know how many members voted to hold rates this month. If all 9 did then there is a chance the pound could slip fractionally in the short term as it would suggest a hike in UK interest rates is still some way off. However, if one or more members have gone against the majority it could be another big boost for the pound.
Likewise we have UK GDP for the second Quarter of this year published on the 25th. Should this figure come in weaker than the anticipated 0.8% improvement for the quarter on quarter figures, then again the pound may drop off giving Euro sellers an opportunity. More likely though in my view is that the GDP will reflect the UK is in a sturdier position of growth compared with most of our counterparts in Europe, and will likely provide the pound with more support.
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Following sterling’s strong shift this week the pound has started on the back foot against the single currency this morning but is still trading at strong levels around the 1.2650 mark. The main focus this morning will be Euro Zone inflation figures at 10:00 – forecast to stay the same and could be a slight non event, however should levels fall below the current level then expect further pressure on the Euro and a potential shift through 1.27 GBP/EUR and 1.35 EUR/USD.
Tomorrow will also see the release of the Euro Zones trade balance figures.
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UK unemployment data out this morning showed its best figure in 6 years and fell to a low of 2.12 million. The rate of unemployment fell from 6.6% to 6.5% in the three months to April which has helped boost the Pound against the Euro to its highest level since August 2012 representing excellent buying opportunities if you need to transfer Euros.
Just before the unemployment data was released it was announced that wage growth had slowed so Sterling fell for a short period before the positive news from the jobs market came out.
The rate of inflation in the UK out earlier this week showed inflation is on the rise and the highest rate since January which is likely to give Sterling a continued lift as it means that pressure will be placed on the Bank of England to raise interest rates sooner than the markets currently expect.
However, interest rates in the UK are unlikely to rise for quite some time but the rumours do help to give investors confidence by having money in the UK which in turn helped strengthen Sterling.
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Sterling Euro exchange rates close in on two year high despite average earnings dropping (Daniel Wright)
The Pound has still made further gains against the Euro in trading today, even with average earnings for the U.K dropping a little which may slightly slow the chance of an interest rate change as soon as may have been thought yesterday.
Wage growth vs inflation is one of the key factors for the Bank of England to look at raising interest rates in the U.K however this does not appear to have knocked the Sterling strength train off of its tracks and it is indeed up against the Euro for the day at the time of writing this.
An interest rate hike for an economy generally leads to a spike in value for the currency associated to it and with the markets moving on speculation as well as fact the mere rumor of a hike coming closer can strengthen a currency significantly.
This is an extremely key time for the Euro as we have not only recently had a rate cut but also the mention of the prospect of QE (Quantitative Easing) which may also damage it a little.
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The EUR had another rough ride today, as investors watched the single currency lose market position against both GBP and the USD. GBP/EUR levels have risen sharply following positive UK inflation figures releases this morning. The Pound spiked by over a cent against the EUR at today’s high, with GBP/EUR rates moving comfortably through 1.26 on the exchange and close to a two year low for the EUR.
EUR/USD levels also dropped, hitting a low of 1.3561 on the exchange during Tuesday’s trading. Whilst the USD has had struggles of its own over recent months, the same can be said for the EUR and the recent volatility on the pair is testament to the uncertainty each currency currently has with investors trying to predict their next moves.
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Euro exchange rates have clawed back some ground today gaining 0.25% against the the pound and 0.15% against the US dollar on a relatively quiet day data wise. This week the main focus as far as I can see will be Thursday’s inflation figures.
Recently inflation has been falling causing concerns over deflation and the pressures this will bring, indeed it was this concern that led to the ECB cutting interest rates in June. With little room for maneuver with interest rates it is unlikely the ECB will cut again, however falling inflation may mean other policies may have to be implemented that could put the Euro under further pressure.
Other data of note will include Wednesday’s trade balance figures.
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Yesterday’s breaking news concerning Portugal’s largest bank caused shock waves across the markets. Weak economic data from Italy and mounting concern about the future of Banco Espirito Santo drove the sell-off, spreading from southern euro nations across Europe. Banco Espirito Santo shares dived more than 17% at one stage despite government assurances the bank was solid.
As a result, the Lisbon stock exchange fell more than 4%, Madrid’s IBEX was down 2.7%, while the Paris Cac 40 and Frankfurt’s Dax were both 1.8% lower. For me this uncertainty and lack of transparency (Portugal’s central bank then ordered an audit into the group’s accounts, which uncovered “serious” accounting irregularities) will keep pressure on the Euro and this is something that should keep Euro sellers on their toes.
As further news comes out regarding Portugal’s banking woes and the market begins to digest the information I would expect some volatility for the Euro. Let us be your eyes and ears on the market. By keeping in touch with your broker we can contact you should the market reach a particular target level or indeed start falling and help mitigate your losses. Email Mike at email@example.com