Monthly Archives: December 2011
1.20 on the markets! What for 2012?
Well today we have seen the interbank rate move to 1.20+..
An early Christmas present for many, a source of pain for many others!
I would not be suprised to see the rate dip back into the high teens, but the 1.20 barrier is an important psychological barrier for many. If the rate finds more support at such levels this may well set the pace for 2012 on GBPEUR. The pound has won favour among traders today as it is seen not as a safe haven, but as a safe ‘option’ amidst the debt crises engulfing Europe. By tackling the debt issues in the UK, the economy is being safeguarded for the future.
2012 may bring with it all sorts of movements which could affect exchange rates. Please feel free to look at our sister site www.poundsterlingforecast.com for my most recent post concerning sterling predicitons for 2012.
There is still time to trade if you are looking to make any trades still before the end of the year. Feel free to contact me directly at jmw@currencies.co.uk
GBP Rates at 11 months high against the Euro
Sterling rallied this morning to hit an 11 month high against the Euro following a greater than expected take up at the European Central Bank’s first ever three-year lending operation did little to remove concerns about the scale of the Euro zones debt as a whole. For those buying Euros I feel this certainly could be seen as somewhat of an early Christmas present as earlier in the day the Bank of England’s minutes from Decembers interest meeting indicated little chance of short-term interest rate movement but worryingly, from the pounds point of view, alluded to a possible extension of the bank’s asset purchasing programme (Quantitative Easing) as early as February 2012. In the past this has caused a significant decrease in the value of Sterling, not only against the Euro but all majors.
Currently Sterling is looking a slightly more attractive bet than the Euro, and the overriding problems in Europe are still of major concern to investors. I personally feel this trend of Euro weakness may continue short term, but feel heading into the New Year Sterling too will come under some pressure. For those buying Euros at the moment I would strongly look at your position and consider your options to take advantage of these current highs. In contrast anyone selling Euros, particularly short term, may wish to take stock and realistically assess how long you can wait. I would not be surprised to see GBP/EUR back to 1.15 but would not expect to see this until the Euro zone can come to a concrete resolution to their debt problems (if this is possible). I also feel the poor UK economic forecast, rising UK unemployment, and the potential for future QE will weigh on the pound, but this may take months, not weeks to affect the market.
To discuss this post or your future currency requirements please email me directly to mgv@currencies.co.uk
Euro Rate Forecast – Should I sell Euros now?
This is a question i am being asked almost daily by clients. GBPEUR has moved massively against all those people looking to sell Euros in the current climate and most are not hanging around.
Should I sell Euros now?
I personally see it going only one way at present and that is against you. It is not just the Euro crisis causing this. The ECB (European Central Bank) cut their interest rate by 0.25% last week. This is the second rate cut in two months and just shows the ECB desperately trying to promote growth, it is also a complete about turn from previous economic policy, they have had two rate hikes already this year! There are serious problems at the core of the Eurozone and investors are worried, as are many of our clients.
Interest Rate Differentials
Interest rates are one of the key drivers on exchange rates. A higher interest rate for a currency will attract investment and keeps the currency strong. A lower interest rate will cause investors to look for alternative investments. This is very similar to interest rates with bank accounts. Savers (investors) will generally look for the best place (highest rate) to put their money. Please excuse me if you were aware of the impact of interest rate differentials on exchange rates but this is one of the fundamental reasons the Euro has been so strong against the pound recently and why most people believe that period has now passed. Two rate cuts in two months is not common for many currencies. When it follows two rate hikes a matter of months previously alarm bells should be ringing.
Therefore the Euro is now weakening significantly and the expectation is it will continue to. Most clients in this position are not hanging around. I even have clients selling property next year booking todays rates on forward contracts. If this applies to you and you would like a no obligation discussion of all your options please contact me direct on jmw@currencies.co.uk
Is there no hope?
It is of course not totally one sided and all the problems in the UK and the loose expectation of some kind of consensus in Europe could move things in your favour. But being realistic you need a complete overhaul of the current failing policies across Europe and even if the events I mention in this paragraph do start to work in your favour, I would not expect such dramatic movement. The Euro most people believe is now in such a sorry state that emergency summits and conferences are not enough. Huge fundamental differences in the economic policies required for different member states are causing friction and serious concerns over the future. The bottom line is no one knows what will happen but it is not boding well.
One further thing to point out is that current Euro rates are still historically very strong compared to say the 1.40-1.50 range. Whilst a few months ago 1.15 would have been achievable I would be really surprised to see it now considering the major change in the global economic outlook.
If you are holding onto your Euros following recent events and would like to ensure you maximise the exchange rate you achieve we can help secure commercial rates of exchange. We can also book rates forward for up to two years, so if you have business or personal Euro requirements in 2012 and are concerned about how things are shaping up, why not also get in touch. My e-mail is jmw@currencies.co.uk and I look forward to hearing from you.
Will Sterling’s run against the Euro continue?
With current levels trading at close to a 10 month high I firmly feel this could represent a strong buy opportunity. Yes in the run up to Christmas we may find the market continue with this current trend (although I believe 1.20 will be a strong resistance level), but I personally believe the market has been focusing too heavily on the Eurozone debacle and forgetting the underlying issues we have in the UK. For those waiting to see 1.20 I feel Sterling/Euro is very much like an elastic band that has the potential to snap back sharply heading into 2012. By holding on and holding on you could run the risk of missing this recent positive run, something that could make a significant difference to the cost of your Euro purchase. In a very difficult global economic climate those in a position to take advantage of spikes may find themselves in a far stronger position than those wishing the market up and with growth prospects for the UK down, interest rates likely to remain at 0.5%, unemployment rising, and not to forget the potential longer term implications of Cameron vetoing the EU treaty and the impact this could have between the UK and our biggest trading partner Europe, I personally believe we are only a matter of time from Sterling falling from this current high and see a move back to 1.15 heading into the New Year.
Should you wish to discuss your future transfer and the contracts available to safeguard your exchange then please email me directly at mgv@currencies.co.uk
What now for GBPEUR?
Well this week was predicted to be the crunch week for the Euro. So what have we seen so far? Well so far it does not look like much has been done to really deal with the core problems in the Eurozone. Quite simply what needs to be done is the weaker nations (the unfortunately named ‘PIIGS’) need to have competitive economies that are growing. In the current global climate this is not really possible, and certainly in Europe they are at a major disadvantage.
Events this weekend will try to provide a plan to convince investors that the Euro as an entity is solid and not a risk. It is not really addressing the core problems I and numerous other commentators have identified. There is also the major problem that using one economic policy to control economies at different stages of the economic cycle is inherently flawed. Euro policies do not allow for adjustments according to what each individual member requires. What is best for Germany today may not be in the best interests for Italy and Spain, indeed we can see evidence daily that this does not work. Is further integration really the answer?
Current GBPEUR trading levels are close to a 9 month high. Anyone buying Euros has been used to levels in the low to mid teens for most of this period and the outlook does not seem to be rosy. Sterling remember is under major pressure due to low growth (like in Europe, our rate of growth is slowing), unemployment is high, as is inflation. You start to wonder what is going to present that opportunity. Some clients have a blind hope that rates will suddenly peak to the 1.20-1.30 range and more. If you too have this opinion you could be waiting a very, very, very long time. Aside from the interest rate differentials (contact me for an explanation) the fact the UK does 40% of it’s trade with Europe means a weakened Eurozone (which many people feel will give rise to a weak Euro) will lead to a weak pound from reduced UK trade and the UK banking sectors exposure to the crisis. Do also remember the Bank of England has hinted at further Quantitative Easing in the New Year. This typcially leads to weakness for the currency concerned, you may find therefore the rate quickly drops to some of the more unacceptable rates witnessed this year.
So what now? Well we will all await with bated breath the outcome of yet another ‘emergency’ summit, the contents of which seem destined to provide answers to questions posed months ago. The crisis is deepening and as Eurozone GDP figures showed the economy is starting to suffer. 0.2% growth is worrying and if the Euro slips back to recession we could well find that the world re enters recession too. Indeed China has downgraded growth forecasts for next year citing the issues in Europe as a major cause for worry.
The Euro will not in my opinion collapse or just suddenly break up. Indeed if the markets like what is dealt out, we could see the Euro really strengthen. I therefore think current GBPEUR levels are very attractive. If you do too or you would like me to keep an eye on things should the market spike, please feel free to contact me on jmw@currencies.co.uk
A Good Time To Buy Euro?
I dont know what is wrong with the site this afternoon as my very lengthy and well researched post about why now is a good time to buy Euro just got wiped!!!! Gremlins in the system!
In essence sterling has spiked massively against the Euro this afternoon and as I have said in other posts in the current climate any opportunity to buy Euros north of 1.17 to me represents a good buy given sterling’s vulnerability. There is the possibility that the ECB may cut rates tomorrow which could weaken the Euro further, however if there are other measures announced such as loosening sovereign collateral obligations required for loans from the ECB, then these may help create confidence that a solution to the Euro crisis can be found.
In my view the EU summit will find a solution (even if it only solves the problem in the short term) to avoid the imminent collapse of the Euro (far too much political and capital investment to let the project fail)- given the noises made by Merkel and Sarkozy, the fact the US Secretary to the Treasury Tim Geithner is in Europe at the minute, and the recent combined action by central banks to improve Dollar liquidity I think the markets will be a little calmer next weak and the Euro will settle down. Therefore I am in the buy now camp….let’s see what happens and whether or not I am eating my hat next week rather than mince pies!
If you have an upcoming currency transaction to carry out feel free to contact me directly cmg@currencies.co.uk and I will be happy to get you both a great rate of exchange and a fantastic level of service.
Euro rates against GBP and USD this morning
Euro rates have begun the morning on a positive note, gaining against both the USD and GBP to the tune of 0.2 and 0.25% respectively. For those currently selling Euros I personally still feel the levels are attractive, and we are currently only 6 cents away from the year low against the dollar and trading at approximately the year average against the pound. Should you have an interest in the Euro we have a busy end to the week with next emergency EU summit scheduled to begin today and the European Central Bank releasing their next interest rate decision tomorrow at 12:45. Rumours are rife that the ECB will cut interest rates by 0.25% and should this occur we may see short term losses for Euro rates. Longer term should we see an outcome following the Euro summit I personally would expect to see Euro rates strengthen not only against Sterling but also the dollar and will explain the reasons below:
EUR/USD – the USD in times on uncertainty will, as a rule, always remain the currency of choice for investors. With many major commodities priced in dollars the dollar benefits from its ‘safe haven’ tag. Following the EU summit should an agreement be made (I am still a little sceptical anything will come from it as we have been down this road many times before) then I would expect Euro strength and dollar weakness as investors become less risk averse and seek currencies offering a greater short term return.
EUR/GBP – following the Chancellor’s Autumn budget last week, the UK is bracing itself for a very rocky road ahead. With rising unemployment, low growth forecasts and increased government borrowing I firmly believe this will have a negative effect on sterling heading into 2012. For this reason anyone buying Euros should keep a close eye on any short term spikes (an opportunity could be available tomorrow should the ECB cut rates) as I personally feel the could be few and far between.
To keep up to date with current market movements then please email me direct mgv@currencies.co.uk
Will the Euro weaken? Important Events on the Euro Rate this week
With the official estimate out at 10.00 am this morning for Eurozone GDP (Gross Domestic Product) expectations are that the economy supporting the Euro grew at 0.2% in Q3 of this year. With the rate of growth shrinking this year there are fears that the countries in the Euro could be heading into recession. This release is likely to have an effect on the Euro so if you have any short term requirements do be aware of this release. To be kept up to speed with this release and it’s effects on your exchanges feel free to contact us or me personally.
In other Euro related news Standard & Poor’s the ratings agency has put on ‘credit watch’ all Eurozone members except Cyprus and Greece. The only reason Greece and Cyprus were ommitted is because they are already under credit watch by Standard & Poor’s. We saw last month Germany’s bond auction majorly undersubscribed which was one of the first signs of the crisis hitting Germany. This will come as another blow to Germany who are depserately trying to convince the world that there is a way out of the current crisis.
Thursday sees the Eurozone Interest Rate decision which could also be key in shaping the Euro rate in the coming weeks. Expectations are for a rate cut of 0.25% to 1%, which will completely undo the two rate hikes witnessed this year. The ECB’s stance of raising rates to combat inflation to me now looks out of place. How could the ECB raise rates in the face of massive debt problems by weaker nations? All it has done is raise borrowing costs and stifled growth in my opinion. Growth is really the key issues for the Eurozone, I would expect a poor showing in GDP figures this morning to really underline the need for a rate cut Thursday.
Towards the end of the week we have the crucial EU summit in Brussels between Merkozy to tackle the debt crisis. These ‘emergency’ summits are starting to sound like the boy who cried wolf, and the markets are reacting in a similair way. Italian bond yields are as high as ever and stocks and shares have still not really made recoveries from the dramatic events in the last few months.
This week will in my opinion will really set the pace for the Euro rate before the end of the month. It is not just the many events in Europe to be aware of, but also the UK Interest rate decision (will we see more QE?) and many more. If you have any Euro transactions to make (or indeed any other currencies) it is highly likely these events will cause the Euro rate to fluctuate. It is perfectly concievable we may see some further excellent buying opportunities but we could also see sudden downward movements due to these events. With rates moving every two seconds it may be in your interest to let us know of any expected requirements on the Euro so we can keep you posted on movements that will affect your transfer. We are specialist currency brokers who write this blog for the benefit of our clients, members of the public and anyone who needs to make currency transfers. We have won awards for our exchange rates and levels of customer service and have never had any trouble beating the banks and other currency sources. Why not try me to see?
If you would like to discuss further anything in the post or explore all the options available to you to maximise your exchange rate please feel free to make contact using the form or e-mail me directly on jmw@currencies.co.uk Please quote JMW and ERF in your enquiries.
Is this time to look at selling Euros? Will the Euro survive? Shall I sell My Euros? These are all questions I am now being asked on a daily basis… Here is my personal take on things
Yet another week goes by and once again Euro news has been in the headlines… Yes for sure there is just so much trouble within Europe and without a doubt 2012 will see some changes that have never been seen before but I cannot see that even if there is a decision to dissolve the Euro it will be done at a great pace.
When a country has moved to join the Euro in the past, it takes months and years for the powers that be to track exchange rates between the two currencies and to decide on a correct and fair level to peg the currencies at, this is why we always know well in advance that a country is going to join, yet have no idea what the pegged level will be.
In my opinion this matter alone will keep a potential break up from happening for a long time as ministers and members within Europe will not be able to just decide on exchange rates for Germany, Greece, Italy and so on overnight, it will take a huge amount of work and a lot of arguments to come up with a result that is fair for all.
Regarding selling Euros, if you are currently holding funds in Euros then I would start to become very tempted to look at converting your money back into whichever currency you will eventually need them in. There is indeed no smoke without fire, I am aware that the Euro has indeeed been on the ropes for the last few years now and managed to stay on its feet, however on pretty much a daily basis something new is in the papers, another summit is announced to find a solution to the problems or more money is injected into particular economies or funds to keep things afloat.
Sterling Euros rates have been stuck in the same range of 1.1550 to 1.1770 for the past few weeks and I believe investors are sitting back awaiting the next piece of large news – more than likely although the U.K has plenty of problems this will be something negative for the Euto that tips the balance slightly… Of course anything can happen so I may be wrong, but I feel the Euro at the moment is a ticking timebomb and everything could hit the fan at any moment over the next few months.
If you are worried about what to do I can assist you, not only by getting you the best rate of exchange when you convert your Euros but with a number of tools we have available in the market inclusive of Forward contracts (locking in to a rate of exchange for anything up to two years in advance – ideal for pending property sales and businesses) stop loss and limit orders, tools allowing you to aim at a particular rate or set a worst case scenario rate with these automatic triggers that work 24 hours a day 7 days a week at no extra cost to you.
Should you want a further explanation on how these work, or indeed want to discuss a potential transfer for you or your company (bank to bank transfers only) then do feel free to contact me, the owner and main writer on this site – Daniel Wright on djw@currencies.co.uk and I shall be more than happy to assist you with whatever your requirements are.
Euro Rates Rally in Afternoon Session
Euro exchange rates have rallied this afternoon following a successful bond auction in Spain. There was relief after Spain sold the maximum amount of debt targeted and yields stayed below the critical 7% level, although borrowing costs at the auction were still the highest in 14 years. There had been concern earlier in the week following a similar auction in Italy when yields reached nearly 8%. This has created a degree of confidence in the market and investors looked to move funds from the ‘safe haven’ of the US dollar onto the Euro, creating Euro strength in the process.
Current market conditions are very difficult to predict. With the bleak outlook for the UK economy following the Budget statement on Tuesday, we could see GBP rates struggle against the Euro in weeks to come. However with the ongoing debt crisis in Europe never far from rearing its ugly head (we have another emergency European Summit scheduled for the 8th December) it really is an almost impossible task to predict this and the Euro’s short term movements as a whole. Should you have an upcoming Euro transfer and would like to discuss the options available to safeguard your exchange rate then please email me direct at mgv@currencies.co.uk quoting ERF.
