Monthly Archives: May 2011
A look at the most heavily traded Currency Pair – EUR/USD
EUR/USD is the most heavily traded Currency Pair worldwide and as a result can see some very major swings. One of the reasons for the extravagant swings in either direction is that often investment will pour out of one of the currencies and into the other as they offer very different attraction to investment.
The USD is historically considered ‘the safe haven’ currency (although perhaps at the minute it is second string to the Swiss Franc). This means that worldwide Global uncertainty, political unrest or natural disasters can really work in the Greenback’s favour. Unusually with any other currency good news on the American economy can even have an adverse effect on USD rates. How? Well, as the largest worldwide economy American strength means that investors are likely to lean towards a ‘risky’ attitude, as the American economy is considered an overall indicator of global economics.
Often then when speculators are feeling ‘risky’ they will remove funds from the ‘safe’ US Dollar and pour these funds into percieved riskier options, such as the Aussie Dollar, the Kiwi, the Pound or the Euro. Recently the Euro has been the currency of choice when funds have been withdrawn from the Greenback. Whilst the Aussie Dollar continues to look bullish in general the Euro offers a polar opposite attraction to the USD and will gain from injected investment that has been removed from the States. Despite more medium – long term debt fears in the Short term the ECB still appear likely to hike interest rates for the second time in a short period and thus are a more attractive option to fellow ‘risky’ currency – Pound Sterling.
This morning the EUR/USD has already moved over half a percent, which seems predominantly from Dollar weakness. This is something that is actually against recent trend as the Dollar has gained over 5% in the last three weeks against the single currency. The Dollar is such a heavily traded currency and America such a large economy that US data-sets can really impact other currency pairs over and above EUR/USD.
If you have a Euro requirement either to buy the Single Currency or sell then please do not hesitate to get in touch, by gathering as much information as you can on what can move the markets you should give yourself the best chance to maximise your Currency Exchange. Whilst no-one has a crystal ball in the markets you can only make a very educated guess. So keep in touch by emailing the author directly on jfm@currencies.co.uk.
BANK HOLIDAY IN THE UK ON MONDAY
Please be aware that the UK has a Bank Holiday on Monday which will affect currency exchanges and money transfers if you are exposed to the pound. Here we can offer clients same day and next day transfers allowing funds to be in place before the weekend. For more information feel free to contact us.
China pushes euro up
Many clients watching the rates over the last 36 hours have had a smile on their face until they saw the 0.8% gain in the value of the euro over night. Greek debt had been the concern for the initial gains along with German consumer climate data that showed a downturn. Plus yesterday there were rumours that large UK banks were buying sterling again. This helped sterling reach a 9 week high through yesterday afternoon.
Overnight however China showed a huge interest in European bonds which added confidence that money would be available. Similar to bonds that individual get offered both banks and government offer bonds in an effort to raise revenue and the uptake of these gives an indication of the confidence by the majority, this is turn adds to speculation and gets priced into the market. What is unknown however is the long term as this was just interest so if Moody downgrades another member of the single currency it could all change again.
2 month high buying Euros
I am just blogging to advise our readers of some very favourable movements on the GBPEUR exchange rate lately. The interbank level is currently at 1.1570, a big improvement on recent trends. This is breeching a 2 month high and a big improvement from the low of 1.1070 earlier this month.
This appears to be due to the current Greek debt crisis putting pressure on the strength of the euro. As we know from the last two years such events can as quickly escalate as they can be resoloved. All it needs is a new concensus by the ECB on how to tackle the problem and investors will be reminded of the many strong points for those holding Euros, high interest rates being the primary factor.
The market is impersonal and moves for a wide variety of reasons. To speak to foreign currency experts who offer their clients access to the sharpest commercial rates of exchange around, feel free to email me direct on jmw@currencies.co.uk or fill in the contact form on this page.
Jonny
Eurozone: Divided
The Eurozone remains very much as divided as it ever has been today. Whilst the Northern states continue to lead the way in terms of economic growth and data, the Southern States face very much opposite circumstances.
Eurozone:Divided could well be a movie title and one could be associated with the tagline – in the face of economic meltdown. The Germans continue to look stronger and stronger and have had some promising business conditions figures this morning and look very much suited to rising European interest rates.
Comparably Italys’ credit rating was downgraded on Saturday by Standard & Poor and Spanish rioting does not bode well for their own economy. Although Greek debt has yet to have a significant effect on the market, Italy and Spain are the third and fourth biggest economies in the zone respectively and debt problems in either state could possibly threaten the Single Currency and the zone’s prosperity as a whole.
A key question I suppose is are the strong states (i.e. Germany and France) as strong as the weak states are weak (i.e. PIIGS)? It could be argued either way, but personally I think that with interest rates likely to rise this division is only likely to expand.
For a more in depth look at exactly how rising interest rates will effect each economy and thus the Single Currency as a whole feel free to contact the author directly on jfm@currencies.co.uk
IMF replacement speculation drives the Euro
The euro reached week highs against sterling this afternoon as confidence went up in the single currency. This was found after rumours emerged that the French Financial Minister was by far the front runner to head the IMF. Many speculate that a European head would be more supportive of the fragile countries like Portugal, Greece and Ireland that many imagine will need to restructure their debt in the next 18 months. Previously others had been mentioned as in the running including ministers from Mexico, South America and Asia that many think would not be as supportive.
Euro ended the session 0.5% up against the dollar and 0.25% against sterling with a spread of over a cent against the euro and dollar.
For more information on the profile of the French Finance Minister Christine Lagarde visit: http://www.bbc.co.uk/news/business-13452436
Contact me at hse@currencies.co.uk
Is the Euro a ticking time bomb?
As discussed in the post below by Jonny it seems that the Euro is performing relatively well as of late, particularly against the Pound and Dollar and the outlook for the short term looks fairly good.
So what about the debt crisis right?! It hasn’t really moved the market so far and Greece’s debt looks like it is well on its way to a successful ‘reprofiling’, so could the Euro continue to gain and gain in the more medium and long term?
Personally I doubt it. The ‘reprofiling of Greek debt’ in effect means that there loans will be extended and a vast amount of debt written off. Despite this providing hope to the Greek public, giving them some (and not complete) hope of clawing their way out of debt, the majority of exposure is to France and Germany, fellow Eurozone states. On a slight tangent, although it doesn’t seem the Strauss-Kahn affair is moving the markets it is a worrying uncertainty whilst Portugal agree their bailout and speculation remains rife as to Ireland and Portugal eventually following in reprofiled Greek footsteps. More worrying still is that Spain loom large on the horizon, a country that will really test IMF and European Financial stability fund purse strings to breaking point.
If, and this isn’t by any means a 100% guarantee Spain do require a bailout then I would expect a significant market reaction, more so than the Irish crisis in the back end of 2010. Furthermore if restructuring or ‘reprofiling’ (as it is fashionably termed) is needed on Irish or Portuguese debt then rather than really pushing the Euro forward it will weigh on the future outlook for France and Germany as funds are re-distributed around the zone. It is important to note here that Sterling could also suffer as it has such large exposure to Irish debt.
I am sure in the long term that this will be a major issue for the Euro, especially when interest rates are on the rise, something good for the Germans and French but rather unsettling for the PIGS (and particularly for the Spanish who have such a high proportion of their funds in variable mortgages).
In conclusion it is something to consider when making your Currency Transfer that whilst the Euro seems fairly bullish in the short term that their is a major threat on the horizon and a threat unparalleled in the UK or US. If you are looking to make a large currency transfer soon and are searching for professional opinion on market movement or award winning Currency rates then please do not hesitate to contact James on jfm@currencies.co.uk.
How much of a threat is Strauss-Kahn to the Euro?
Mr. Strauss-Kahn was arrested over the weekend due to allegations of serious sexual assault to a chamber maid at a hotel at which he had stayed. He was pulled off a plane which was due to fly him home before being identified in a line-up by the said chamber-maid.
This potentially could be a double blow for the Euro. Mr. Strauss-Kahn is currently head of the IMF and is attributed to brokering a majority of the bailouts handed out to Ireland, Portugal and Greece. Timing wise then whilst the IMF are now fully involved over trying to restructure Greek debt it is not ideal that there cheif is being detained. So we now have somewhat of a clouded future as a less experienced member is forced to fill Strauss-Kahn’s shoes at a highly pressurised moment in time.
The second blow is for France as an individual state where Strauss-Kahn had lead the polls to follow Sarkozy as their next Prime Minister. France is the second biggest economy in the Eurozone and any political uncertainty will threaten the strength of the Euro as a whole.
Although the Greek situation is unprecendented and we do not know the impact any withdrawal or debt restructuring will have on the Euro any uncertainty is likely to threaten especially whilst Greece remain in the zone and their future remains misty.
If you have a currency requirement in Euros then fill in one of our enquiry forms and a Euro specialist will be in touch to discuss your currency transfer in depth and try to help you make the very most out of moving money overseas.
