Monthly Archives: July 2012
Key data and events to beware of on Euro Exchange rates this week – What will happen on the rate?
After a few weeks of consecutive losses we saw the Euro stabilise briefly towards the end of last week as Mario Draghi, President of the European Central Bank (ECB) announced the Euro would be saved at all costs. With the US, UK and China all blaming the slump in the Eurozone on poor performance of their economies, there is much pressure on the ECB to act. So just what can we expect?
‘It is highly likely Mario Draghi and the ECB will undertake or announce some kind of stimulus after his comments on Wednesday. Failure to do so would widen the gulf between Eurozone leaders and the markets, only serving to increase the uncertainty’
Will the ECB act and what will they do? Well having cut interest rates last month it is highly unlikely we will see any movement on interest rates. It is highly likely Mario Draghi will undertake or announce some kind of stimulus after his comments on Wednesday. Failure to do so would widen the gulf between the financial leaders and the markets, only serving to increase the uncertainty. So what are the options?
1 LTRO – Long Term Refinancing Operation. This project used earlier in the year helped provide extra funding for Eurozone banks via cheap long term loans.
The benefits are improved lending and a kickstart to the Eurozone economy. Arguably successful in averting crisis earlier this year. Could provide some short term gains on the Euro if announced. Despite being called long term, the drawback however is the short term nature of such measures. The measures do little to stop the debt pile mounting in Eurozone countries and would be most successful if used alongside other measures. The utilisation of such measures will simply be postponing the fundamental problems of the crisis for another day.
2 ECB – Bond Buying Programme. The ECB had been buying up the bonds of weaker member states with the intent of signalling to the markets its own confidence in the Euro.
As with the LTRO this is a short term solution which just puts the problems on the back burner for another day. Many have commented that this is one of the most likely announcements we will see on Thursday.
3 Eurobonds. Eurobonds are seen by many as a solution to the crisis. It would involve all Eurozone countries selling debt as one rather than individually. Germany (who would lose the most from this) remain opposed and I cannot see this measure being announced anytime soon.
4 Extension of ESM via the ECB. The ECB has the European Stability Mechanism which acts as a source of bailout funds. The fund has been increased over time but there is uncertainty as it could not fully contain the debt troubles of Italy and Spain. It could be extended however as the head of the Austrian Central Bank, Nowotny said last week.
So will Mario implement these this week? It is of course impossible to predict exactly but having made comments last week it would be surpising for there not to be some new news on how the ECB plans to respond to the crisis. Will it be enough? This blogger thinks not! Summit after summit has disappointed and the recent form of the Euro has not on the whole be surprising given the massive challenges ahead. Nonetheless! This is the data to beware of this week and anyone considering a transfer involving the Euro should take note.
As it is the start of a new month approaching we have the all important PMI surveys for the UK, Europe and US, and then Thursday is the all important ECB and Bank of England Interest Rate decisions.
If you are planning any currency transfers being aware of all of your options ahead of the event could well save you money. As a specialist currency broker for one of the UK’s leading foreign exchange brokers I can explain for free all of your options so you can make an informed decision.
Please feel free to contact me directly on 01494 787 478 or even email me directly on jmw@currencies.co.uk with an explanation of what you need to do.
And as always if you would like any further information on anything in this post please let me know.
Finally Euro rates finds some breathing space… How does this impact the Euro rate forecast?
After three consecutive weeks of losses the Euro has clawed back against GBP and USD. This post will look at why and whether or not we can expect it to continue.
Ewald Nowotny, head of Austria’s central bank and a member of the European Central Bank (ECB) stated yesterday he felt there was the possibility the ESM (European Stability Mechanism) could tap the ECB for funds via a banking licence. This helped the Euro gain against the pound, although a big factor was UK GDP which came in much worse than expected at -0.7% versus the expected -0.2%.
The big news today was Mario Draghi, President of the ECB announcing that the ECB will do ‘whatever it has to, to preserve the Euro’. How do we take this and what will be the real effects on the Euro?
This statement immediately lead to a sell off of USD and EURUSD has touched over 1.23. Rather than lead to a strengthening of the Euro we saw a real unwinding of USD safe haven positions which had been gathering pace lately.
The boy who cried wolf?
Draghi’s statement leads us to think that perhaps the ECB have something up their sleeve which is something anyone buying Euros may wish to take on board. The current uncertainty however clearly remains and I would be surprised to see the Euro make any particular inroads whilst there are no concrete plans put on the table. How many Eurozone Summits have we had in the past where nothing tangible is offered to the markets?
Spain and Italy are in deep financial crises and it is hard to see what they plan to do to stave off the crisis. The ECB’s options are fairly limited at short notice, but we may see some further liquidity easing measures just like we saw earlier in the year. But these measures are only short term in impact and are simply pushing the problem further down the line. The real solution whereby the ECB acts as a lender of last resort is blocked as Germany are seriously opposed to this particular avenue.
’The Euro will remain weak and anyone selling should be perched ready to take advantage of the spikes since the longer term trend still apears to be negative.’
Despite Draghi’s comments being Euro positive, I think this rally will be shortlived. Markets are so fickle and so much new news is coming out, that we will all probably be discussing somehting completely different soon. My position is that with no real positive news on the horizon, the Euro will remain weak and anyone selling should be perched ready to take advantage of the spikes since the longer term trend still apears to be negative.
Looking ahead we have the US GDP data tomorrow which will direct attention away from Europe (albeit briefly) and any negative news on the US economy could well provide some further speculation on QE for the US which may push EURUSD even higher.
Today’s movements of over 2 cents on EURUSD show just how quickly things can turn on the markets. Making sensible preparation and contingency in this kind of market is essential and part of the service we can provide is to explain all of your options as well as provide a forecast so you can capitalise and react quickly to sudden changes in the market.
If you would like more information about your particular transaction you can speak to me directly on email jmw@currencies.co.uk or phone 00 44 1494 787 478. I can assure you of the very best rates of exchange and service at all times.
Should I sell Euros now? Make sure you use a broker to get the most out of your exchange
For many the burning question at the moment is should I sell my Euros? As you will see a number of the authors on this site have been saying for a little while that the Euro zone problems are showing very little sign of resolving anytime soon and the recent trends we have seen (ie significant Euro weakness) is a trend that is likely to continue in my opinion. We have seen GBP/EUR rates rally past 1.28 (I feel a further move towards 1.30 is likely), EUR/USD is creeping towards 1.20 (although I feel t his will see resistance at this level) and EUR/AUD are at near record highs. Overnight the news that Moody’s have warned Germany (Europe’s superpower) that they risk losing their triple AAA credit rating and have placed them to a negative outlook for the first time – these are worrying times. For anyone holding Euros, whether you have sold a property, get paid in Euros or have invoices paid in Euros and need to repatriate the funds, I would seriously consider your options in the current climate.
Here at currencies.co.uk we have a number of different contracts available allowing you to fix and guarantee your rate before the funds are fully available, this is particularly useful should you have agreed a sale of your property and you are looking to guarantee the exchange in advance of completion, or you have just committed to a long term contract being paid in Euros and you wish to know exactly how much you will earning in GBP or USD (or any other major currency for the that matter). When exchanging your funds it is important you get the right information, the best way to do this is to utilise the services of a specialist foreign exchange broker. This gives you access to many more contracts and options than typically offered by the high street banks, we can also give you up to date market knowledge and analysis to help you make the best and most informed decision about your exchange.
To run through the current market conditions and data sets that might affect your position then please email Mike at mgv@currencies.co.uk or call 01494 787478 and I will gladly be of assistance.
Why is the Euro so weak? Key things to beware of if Selling Euros
Are you selling Euros and holding out for improvements on your exchange rate to buy sterling or dollars? I am afraid to say that the future does not look good for you. Exchange rates move every second and there will always be small improvements to take advantage of but anyone holding out for a large move in their favour may continue to be disappointed.
So why is the Euro so weak?
Aside from the rather obvious explanation of debt problems in Spain there is a more fundamental reason that regular readers will surely be aware of by now. And that is Interest Rates. Interest rates affect a currency in the same way a higher or lower interest rate affects a bank account. The higher the rate, the more investment that bank account (or currency) will receive. The ECB (European Central Bank) recently cut interest rates which has had the effect of weakening the Euro. Regular readers and anyone with an interest in exchange rate movements will know the importance of interest rates on currency pairings. If you would like more of an explanation on this topic or any other relating to currency transfers please feel free to speak to me directly on jmw@currencies.co.uk. I have been one of the chief contributors on this site for over two years now and have helped many clients save money on their currency transfers through a better understanding of the markets and a much better exchange rate.
I warned only two weeks ago that anyone buying or selling Euros should make contingency plans ahead of the Interest rate decisions. Now that the rate has pushed very comfortably through the 1.25 mark, it makes any fightback to sub 1.25 extremely unlikely in the short term. There will be tremendous resistance at this point, as there will be at 1.30. Important levels of resistance will also be seen on EURUSD at 1.20, although we have broken through the 1.2150 mark today which is 4.4621 on EURAED.
The problems in Spain and Italy are capturing the headlines and no one is buying Euros. The lower interest rate has caused a sell off and makes the chance of investors buying the Euro lower. Global economic concerns have today caused the dollar to find favour and this is one of the reasons EURUSD hit a high of 1.2066.
Looking ahead to this week the key data is Wednesday UK GDP (Gross Domestic Product) and US GDP data Friday. As with the last couple of weeks the overriding factor on Euro rates will be the uncertainty surrounding Spain and the very high borrowing costs it is now paying.
If you are considering any currency transfers soon and want to find out more about what is driving your rate and how you can protect yourself please feel free to speak to me directly on 01494 787 478 or email jmw@currencies.co.uk
I am more than happy to run through or answer any questions on the markets and am confident I will be able to offer you a much better rate of exchange.
As the Euro continues to weaken there are options that can help assist you to achieve the best Euro exchange rates.
Well what a week it has been for the single currency!!! On a daily basis the Euro seemed to be losing value as traders were selling the Euro like their was no tomorrow.
We witnessed Euro exchange rates weaken to a fresh 4 year low against the British pound while also trading at the lowest levels this year against the US Dollar and all time lows against the Australian Dollar.
The continual Euro zone debt crisis has caused the Euro to lose an average of 7% over the course of this year. On Friday these losses continued as worries about Spanish debt hit the single currency and also sent the Madrid stock market plunging. Spanish 10-year bonds surged to 7.1 per cent and the Valencia region asked the Madrid government for a bailout to repay its debt.
At present their seems to be no end to the Euro’s woes. I personally feel that we will see the Euro spike at around the 1.30 level before retracting back down to about 1.27. You may see a similar trend against the US Dollar and the southern hemisphere currencies.
I have said for a long time that if you are holding onto Euro’s, but have a requirement to sell them you should be acting sooner rather than later. The longer you leave your exchange the less you are achieving. Over the last month I have had many new clients contact me to help them exchange their Euro’s to sterling and US Dollars. While the rate of exchange has gone significantly against them I was able to make sure that they maximised their exchange as much as possible. They compared our rate with their high street bank and were pleasantly surprised at the saving they made. After all while you have lost so much to the market you should at least make sure you get the best rate of exchange. Email me at bma@currencies.co.uk with your requirement and contact details and I will contact you to discuss how we can help limit your losses to your currency exchange.
For those of you that need to buy Euro’s, as rates are so attractive you may wish to secure a percentage of the funds that you need. By you hedging your bets you are guaranteeing yourself of trading at a specific high point with the hope that it will rise further. If it does drop slightly at least you would have got part of your funds at a better rate. Lots of my clients have been capitalising on the fantastic levels with this option. If you would like to know more options that you have from limit orders, stop losses to forward buying then please feel free to contact me at bma@currencies.co.uk and I will go over all the options that are available to you.
With lots of data out over the next week for the Euro zone don’t get caught out by sudden movement that may cost you.
Ben Amrany
GBPEUR appears to be going in one direction only, 1.28 rates reached on GBPEUR
Spanish bond yields shot past 7% again today reminding investors of the significant challenge ahead for the Euro. Normally we look to economic data releases for indications of where things may go, but currently the fundamental issues relating to the debt crisis are causing the movements we are seeing.
Investors seem to have almost given up hope and any challenge for the Euro against the pound and the dollar looks unlikely. As I highlighted to all my clients and readers of the blog it looks like Monday was the day to sell your Euros as the market has moved well over a cent since then.
With no real data of significance I expect tomorrow to be much the same. I think the question to ask yourself if you are selling Euros holding out for major improvements is what do you think will happen to move rates back in your favour? Even the mention of a rate cut in the UK did little to dent GBPEUR and whilst Ben Bernanke discussed more QE, he made clear that we would not be seeing any unless the US situation deteriorates further.
My apologies for not updating the blog much this week, I have been very busy assisting clients with their currency transfers! If you have a currency trade to consider and are unsure about what to expect in the future please speak to me for a detailed forecast. If easier you can email your situation on jmw@currencies.co.uk
We can help with all of the information you need to make an informed decision. This includes a wide range of contract options which can help limit your exposure on the currency markets. The specialist currency brokerage we work for has won awards from The Sunday Times for our exchange rates and we are authorised by the Financial Services Authority. So if you would like to make quick, safe, secure transfers at excellent commercial rates with a highly personal service please get in touch so we can explain how it all works.
Euro remains under extreme pressure
As I predicted yesterday we saw a small spike for anyone selling Euros this morning with the rate briefly creeping under 1.27 as inflation data and Mervyn King’s speech put a focus on the UK. It was shortlived however and this afternoon the rate has weakened as Ben Bernanke, Chairman of the Federal Reserve Bank in America, testifies on his thoughts on the US economy and the global outlook.
The big currency move this afternoon was on EURUSD as Bernanke talked up the problems in Europe and discussed the prospect of more QE in the future for the US economy. As money moved out of the Euro into Dollar we saw GBPEUR affected and the rate touched the near 4 year high at 1.2769. EURUSD spiked too at 1.2188, although it is now back around 1.2250.
‘The mere hint of a rate cut for the UK would surely send sterling down and provide an excellent opportunity for anyone looking to buy the pound, firmly putting to bed the current excellent Euro buying rates’
Tomorrow looks to be the key day for me with the UK Bank of England Minutes and is well worth being aware of for both buyers and seller. We know that more QE was launched this month but how many members voted for this? Did anyone vote for an interest rate cut like Christine Lagarde, managing director of the IMF (International Monetary Fund) suggested? The mere hint of a rate cut for the UK would surely send sterling down and provide an excellent opportunity for anyone looking to buy the pound, firmly putting to bed the current excellent Euro buying rates.
In Europe today we had the ZEW survery from Germany which basically surveys economic opinion amongst investors and economists. ZEW stands for Zentrum für Europäische Wirtschaftsforschung. The survey is a good indication of sentiment on the markets and the reading was a bit worse than expected which didn’t do the Euro any favours and serves to underline the fact bleak times are probably set to remain for the Euro. There is very little data out tomorrow so the main focus will probably be on the UK Bank of England Minutes plus the Unemployment data at the same time. Today shows how currency movements can be sudden and unexpected and how being ready to reac quickly can save you thousands. If selling €500,000 this morning as I suggested rather than this afternoon you would have been £2127.45 better off. Not bad for a days work!
Thursday we see Retail Sales figures and the ECB mid-month meeting but I expect the markets to remain subdued by a declining global outlook and no signs of improvement in the Eurozone debt crisis. I am afraid to say I cannot see the Euro staging any kind of a comeback soon unless something dramatic comes out from the Bank of England tomorrow and as such anyone selling Euros holding out for major improvements to buy sterling or Dollars should probably get ready for yet more losses.
Exchange rates move every couple of seconds and this movement can become very costly. To find out your options and to discuss various strategies you can speak with me for free and at no obligation on jmw@currencies.co.uk or 01494 787 478. I am very experienced in personally assisting private clients and businesses with their currency transfers and am very confident our award winning rates and personal service will ensure you get a much better deal.
Selling Euros Strategies – What now for the EURGBP? What to look out for on EURGBP this week
Unfortunately for those selling Euros it now looks like the rate is very comfortable above 1.25 and the next stop is 1.30. The ECB rate cut has been the nail in the coffin of a few months of uncertainty as to which direction the rate will go. We hovered around 1.23-1.25 and said many times on this site that range would be critical to the future direction on rates. And so it has proved to be….
Interest rates are fundamental to the strength of a currency – Cutting interest rates has the effect of weakening the currency concerned as a higher interest rate makes a currency more attractive to investors in a similar way a higher interest rate makes a savings account more attractive. The ECB has now cut rates three times in less than a year in an effort to promote growth in Europe and the knock on effect has been 17 cents movement since the low last September. Even with all of the problems for the UK, this interest rate cut in Europe makes it very unlikely we will see any significant move back down for the GBPEUR rate. For these fundamental reasons I personally think even 1.25 on a spike may now be out of the question.
This week there is a number of important economic indicators that will affect the short term movements on the rate in the form of economic data from the UK. Following two weeks of losses for the Euro it could be time for a small fightback, although I would not get too excited. The data this week merely has the potential to move the rate slightly back in your favour in the form of a short term spike. The fundamental reasons affecting the Euro’s strength – the debt crisis and the interest rate cut remain.
Tuesday 17th July - Mervyn King’s Speech – At 09.00 am Mervyn King, Governor of the Bank of England will give a speech which may well determine short term movements on sterling. The speech is on his view of the UK economy and will be closely watched for signs of more QE.
Tuesday we also have Inflation data for the UK and some house price data, which again could affect the short term movements on sterling.
Wednesday 18th July – The Bank of England Minutes at 09.00 am. We had a further £50 bn announced for sterling two weeks ago but it did very little to the rate. In fact it appears the pound is becoming immune to any negative effects of QE. The QE and Interest rate decision takes place at the start of the month, then two weeks later we have the minutes form the meeting and this is where we find out how they voted. In recent month it has been these minutes which have been the most indicative of economic policy and hence had the most effect on rate movements.
UK Unemployment – Wednesday also sees the UK Unemployment rate data released which can have a negative effect on the rate.
Thursday 19th July – Retail Sales figures. The UK relies heavily on Retail sales for economic strength. Some 60% of the UK’s GDP (Gross Domestic Product) is from Retail Sales so again this can affect short term movements.
Regarding the rate events in Europe are still likely to dominate the stage but these economic releases could well provide some spikes in your favour. It now looks highly unlikely the rate will make any major return to the kinds of levels we saw earlier this year. Most analysts expectations take their predictions on the rate to 1.30 in the next few months.
Don’t forget we can offer a range of contract options to limit your exposure on the currency markets including a stop / loss order and a limit order. These guarantee you do not lose out in a worse case scenario.
With the Euro set to be on the back burner for the future this week may also be a great time to book a forward selling euros. For a small deposit you can book today’s rate forward for up to two years.
For a full expalanation of this post and to discuss future strategies for your currency transfers please feel free to speak with me Jonathan directly on 01494 787 478 or jmw@currencies.co.uk
Sterling breaches 1.27 aginst the Euro, is this a good time to buy? GBP/EUR forecast.
Sterling exhange rates breached 1.27 this afternoon bringing the pounds to its highest level against the single currency since November 2008. The moves against the US dollar have also been large with the Euro falling to the 1.21/22 territory for the first time since June 2010.
Personally I am not overly surprised as far as the EUR/USD is concerned, but I am a little surprised Sterling has reached the dizzy heights it has - but I am sure it is a welcome relief for many. This afternoons move follows the uncertainty now surrounding Ialy following its downgrade by Moody’s the rating agency. Moody’s cut Italy’s credit rating by two notches to Baa2 late on Thursday and warned that further cuts could be on the cards if Italy’s access to debt markets dried up, but some positivity was given back to Italy and Eurozone as the country passed a key market test hours after the downgrade, selling the planned amount in bonds at an auction that pushed the country’s three-year borrowing costs well below 5% and further away from the 7% that has seen a number of Italy’s neighbours seek a bailout.
I feel the current market prices for Euro buyers must represent a strong buy opportunity and I feel a move towards 1.25 will be seen as the added expectation of further QE (Quantitative Easing) and the still ailing UK economy takes affect on the pound.
For this reason anyone buying Euros in my opinion would do well to buy at the current price. Should you not have full availability of funds then why not consider a forward contract? To discuss this and the current market conditions in more detail then please contact me on 01494 787478 or email mgv@currencies.co.uk and I will happily pass on my opinion and run through data sets that might affect your currency transfer in the coming days and weeks.
