Monthly Archives: August 2012
Where next for GBP/EUR?
The euro has continued to gain strength against Sterling despite the on-going concerns surrounding Spain and Greece. Currently the focus seems to have shifted onto the UK and as highlighted in my previous blogs this was always going to bring about a negative reaction in the markets, due to the problems our own economy continues to face. Quite frankly, it seems as if the UK is moving backwards, or at best stagnating. The warning signs have been there for months, as PMI data has been consistently poor and the Bank of England cut growth forecasts on what seemed like a monthly basis. We have seen multiple rounds of Quantitative Easing to try and boost lending but with our banking sector causing more problems than they are solving, it seems to have made little difference. Add to this continuing high unemployment and the widest trade deficit since records began and you can see why analysts are predicting the pound to come under increasing pressure over the coming months. However, despite all of these negative points mentioned above we are still only 2 cents away from the four year highs that we experienced only recently on GBP/EUR exchange rates and to me this still presents an excellent buying opportunity.
I feel it is paramount to understand where Europe may be heading next before we can really understand which direction GBP/EUR rates might take over the coming months. The answer to that question may be easier to answer after September, which could well prove to be a defining month for the EU. With the Spanish banking system in need of further bailouts, it is the handling of this situation and the repercussions of any further monetary assistance, that could prove pivotal to one of the EU’s largest economies dragging itself above water. We also have Greece coming under the spotlight once again and any decision on an extension to their debt programme or elimination from the EU, will have a significant impact on GBP/EUR exchange rates and could provide Sterling strength, if not handled with the up-most caution by EU leaders.
Personally i feel that anyone buying euro and waiting for 1.30 may be left dissapointed, unless their is a shift in public perception on the UK economy and/or further fallout in the EU. I feel the EUR will find resistance at 1.25, whilst any move through 1.28 will not come until we hear further reports from Spain and Greece.
EUR/USD moving away from all-time low
The EUR has continued to move away from the all-time lows it had experienced during its darkest hours. Concerns were rife that the USD would push below the 1.20 level, which was at least providing some kind of resistance. Thankfully for all those holding the single currency it has actually continued to rally away from this low and today pushed through the 1.26 barrier for the first time in months. The USD has not performed well across the board as fears grow that further rounds of Quantitative Easing are on the cards and with market unrest due to the upcoming presidential elections, I feel a move through 1.30 is feasible providing Spain and Greece don’t find themselves in further trouble over the coming weeks.
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Both Angela Merkel and Mario Monti are holding crisis talks at the moment as Spain continues to suffer financially and the worry that Greece will not be able to keep up with its austerity measures to keep it within the Euro zone. Spain has recently announced that its economy has shrunk by 1.3% in the second quarter and one of its largest economic areas Catalonia has asked for €5bn from Madrid. However, on a positive note for the Euro zone Mario Monti has announced that Italy does not, at least for now, need a bailout. Italian bond auctions have seen costs falling, which is good news for Italy.
The next key summit is due to take place on October 18th as well as many other meetings due over the next few weeks. The main aim of the next summit is to decide what to do with Spain. Catalonia accounts to a fifth of Spanish economic output and so the recent news that it is struggling is bad news for the country. With the high borrowing costs set to continue even after their €100bn bailout in June it is likely that they will need further bailout during the year is out. This could provide some very good buying opportunities for those needing to buy Euros.
With Sterling Euro exchange rates dropping last week from 1.28 into the 1.25 region we have seen a mild increase early this week to levels approaching 1.26. If you do have a currency requirement and would like to ask me any questions please feel free to do so by sending me an email Tom Holian email@example.com
As August comes to an end, it is safe to say that our summer has been fraught with excitement and anguish in equal measures. Whether it was Mo Farah storming to double Olympic victory, or our monthly dose of doom and gloom as Bank of England governor Mervyn King discussed the fragility of the UK economy, it has become apparent that no one quite knows what the remaining months of 2012 will hold for GBP/EUR and EUR/USD exchange rates.
What is clear to me is that September is sure to be a defining month for the EU, with Greece and Spain once again making the headlines. The outcome of these two scenarios is key for the long-term stability of the EU and in turn the short-term forecasting of the euro against its major counterparts. We have already seen the single currency move approx 3 cents away from its 4 year low against Sterling and almost 5 cents away from its all time low against the USD. In fact the euro does seem to be gaining some momentum and made further gains against both GBP and the USD during Tuesdays trading. The single currency has been severely hampered during most of 2012, predominently by the on-going EU crisis. Whilst these problems continue to persist, it is conceivable that the recent inroads made by the euro may be short-lived and for that reason it is important to stay in contact with your currency broker, to ensure you can be reactive to any market movements.
As I mentioned in my previous blogs I did feel it was more likely that GBP/EUR would move towards 1.25 than 1.30, even when Sterling reached its recent 4 year high. My gut feeling now is that we will see GBP/EUR rates rangebound between 1.25-1.27 whilst September’s economic events unfold and EUR/USD levels could continue to move away from the lows of 1.2099 we saw towards the end of July.
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News ending the week is the confirmation that the UK economy has shrank further than expected. The negative view on the economy has a direct effect on the strength of sterling and resulted in most currency pairs falling when buying with GBP. Most readers of this blog seem to be EURO buyers, EURO Sellers, Dollar Buyers and Dollar Sellers. So they are the areas I will focus on today. If, however you are looking at any other pair please feel free to email me with your situation and I will see if I can help. My email address is email@example.com (We trade in excess of 30 different currencies and any combination between them so we should be able to help.)
Euro focus – when to trade the euro?
As mentioned in my last blog the Eurozone is waking from its August holiday and focus has quickly returned to Greece and its future in Europe. They are in the process of asking for an extension in their debt repayment of 2 years which they say they will need to stay in the Euro. Citibank now estimates that there is a 90% chance that they will be out before Christmas. So anyone with interest in the Euro should watch this story closely. In other news, watch out for the political views of France in the near future. I would not be surprised if they join Italy and Spain and ask for changes to their debt repayment from Germany in the near future. Also it is election year in Germany – so safe to say there is a lot to keep an eye out for.
If you are buying euros I would probably try and wait for early next month’s data sets, if I was a seller however I would want to move out of Euros quickly. (You can even do this through a FORWARD Contract if you don’t have access to the full euros you are looking at selling.
USD date – the driving force of the dollar
This week cable prices, (GBPUSD) has moved up by over a 2%, making a difference of over $6,000 on a £100,000 trade. The main reason for this is that recent data from the US which is continuing to show an improving picture of its economy. The US is still seen as a world barometer and most traders see a direct correlation between its profit and that of global growth . As a result it is keenly linked with trader’s appetite for risk, so as the US economy gets better, more money is moved from the dollar into risker currencies. It has been due to this additional dollar sell off that has created a near 3 month high.
On Tuesday we have more data that I would not be surprised to see continue this run of strength for USD buyers. Consumer Confidence is released at 15:00 BST and are currently forecasted to improve to.
Anyone looking to buy dollars may however want to buy before the release taking advantage of this expectation. Purely because it is misses these forecasts recent gains could to be lost quickly, 1.55 maybe.
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The continuing debt problems in the Eurozone have given rise to an excellent improvement in the GBPEUR rate to levels which anyone buying Euros in the last few years could only dream of.
The Euro has become less and less attractive as a currency but has regained favour in the last few weeks on hopes that some kind of solution will be offered to limit the borrowing costs of Italy and Spain, whilst Greece will be given more time to manage its own debt problems.
This confidence is best represented not only in the improvement of the Euro against most currency pairs, but also on USD rates. EURUSD is now over 1.25 (up from 1.21 last month), whilst GBPUSD has hit a three month high.
Many clients buying Euros are holding out for an exchange rate of 1.30 but it is important to recognise there has been a change in sentiment on the market. 1.30 is of course much better than 1.26, but whilst waiting for it to hit 1.30, you could miss out on what are still exceptionally good rates. Don’t forget the highest the rate achieved this year was 1.2880, and that was a month ago. If you are holding out for a return to this kind of level there are a number of things that need to happen, the market is very different to the one that allowed this rate to be achieved.
Greece looked likely to be leaving the Euro and Spanish and Italian borrowing costs were above 7%, the level seen as necessary for a bailout. Now there is speculation following ECB press conferences and medai leaks that these bond spreads will be capped. There has been much more positive news and this has calmed the markets. And even if we do not see these measures being implemented the current sentiment is positive for the Euro.
Don’t forget the Eurozone is one of the largest economic areas in the world and is a key partner in the global economy. It acts a gateway for the West to East, and East to West as well as a route through to Africa. Culturally and politically important on the world stage, we ignore and underestimate the strength of not only the Euro, but Eurozone leaders at our folly.
No one can tell you exactly what will happen on exchange rates, but I can offer a specialist and highly personal service, all designed to make sure you get the very best rates and are aware of all the issues surrounding your trade. That way you can make an informed decision about when to trade.
On amounts of 1000 GBP to multi million pound transactions, buying and selling currency, I can help with the above. Making an enquiry with me is absolutely free and at no obligation. If you would like to learn more please get in touch personally on email@example.com
Even though euro news has been out of the media recently due to the August holiday break and the Olympics, everyone with a currency requirement should be aware of it pending return. Moody’s the rating agency warned this week that it will take many more years to complete the fiscal adjustment program and structural reforms. They went on to warn that the task of sorting out the Eurozone crises is at best only halfway through. Read more here.
The first installment of news started yesterday as the Greek prime minister Antonis Samaras pleaded for more time to pay back debt. He said that the Greeks economy is “bleeding” and needs a little “air to breath,” this was at the start of several days of key meetings. Any extension will need to be signed off by Germany who has been against any form of extension, (a 2 year extension is expected to cost a further €20 billion to finance.)
This story will be key for anyone with a GBPEUR trade over the next 7 days; I would not be surprised to see GBPEUR swing upwards of 2% making a difference of €2,400 for every £100,000 exchanged. If you need to complete a trade within this time please contact the trading desk for times and days on when to potentially complete your exchange.
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The Euro took a slight decline yesterday as comments from Germany’s Bundesbank stepped up criticism of a potential proposal that the European central bank will start to re buy government bonds to quell the regions debt crisis. The comments from the Bundesbank came after the German magazine Spiegel reported that the ECB is considering setting a yield cap/limit on Euro bonds and was supposedly considering buying debt issued by vulnerable countries if their interest rates rose too high.
After the report from the magazine the ECB denied the speculation about potential market intervention to contain the euro zone debt crisis, dashing recent investor enthusiasm for risk which tuned Euro negative. An ECB spokesman said it was misleading to report on decisions that still had not been taken.
Looking forward it is very difficult to decide what to make of the comments from the ECB after the magazine’s report. There is never any smoke without fire and if I was looking at buying Euros I think I would buy what I need as soon as possible. The mere mention of how the ECB will solve the debt crisis seems to be Euro positive. At some point in September the ECB are going to inform the world what their plans are. If the magazine’s report is correct then it could bring some Euro strength as it will certainly boost investor sentiment in the short term.
When should I buy my Euros?
This afternoon we have witnessed the Euro reverse yesterday’s losses with the rate gaining over 0.5% against the pound, and is up 1% against the USD. Regardless whether you are buying or selling the pound, this Friday you may wish to consider securing your currency before the National Statistics release their second revised GDP figures for Q2 of this year for the UK. Recently it has been reported that the UK economy has contracted by as much as -0.7%. The general consensus is that the markets are expecting a contraction of -0.5% slightly better than -0.7% that was recently published.
The Bank of England recently stated that they felt growth in the UK will be flat for the remainder of the year and into 2013 so I am not expecting to see a shock announcement of growth. Where you must be cautious though is if the data comes out worse than the -0.5% that is predicted. If this happens sterling could just well fall back towards the 1.25 level against the Euro as their will more than likely be a big sell off of the pound by investors.
If before the decision this Friday, you do not want to take the risk with your currency exchange you are free to secure your funds on either a spot or forward contract. This will give you the peace of mind in knowing exactly how far your funds will go while taking away the stress and hassle of future data releases. If you choose to secure your funds sooner you will be pleased to know that you are trading at close to a four year high against the Euro. If you wish to open an account or would like to speak with us about your requirement you can do this by emailing me at email@example.com. I will then contact you to go over all the options that are available to you.
To give you a quick background I have been assisting both private and corporate clients make significant savings over the banks and other brokers for years. We created this site to give you the reader a brief insight into what is happening with a specific currency pair. Hopefully you will find this site informative and if you would like to speak with me regarding your currency requirement then please feel free to email me firstname.lastname@example.org with your contact details and we can discuss the different options that are available to you. I can help you limit your loss to volatile currency markets through the different contracts that we offer which may just give you the peace of mind you are looking for on your all-important currency conversion.
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This week will see Greece come under the media spotlight once again, as Greek Prime Minister Antonis Samaras is set to meet with EU leader in what is expected to be a final plea for more time to meet their deficit cutting targets. The rumours have been circulating for some weeks now that Greece is once again struggling to keep up with the tough austerity measures that have been implemented and fears will now resurface that their future in the eurozone in under threat. The truth of the matter is that Greece have no more lives and despite Angela Merkel’s bullish stance it would take a serious amount of backtracking by the major EU powerhouses, if they were offer Greece a further extension. That said if Greece can demonstrate that they are indeed working towards these targets and can prove that their levels of debt are being significantly reduced, then I feel there is more chance of an extension being granted. We know that Germany want Greece to remain in the EU and I feel it widely expected that any Greek exit would have a serious knock on effect peripheral countries like Portugal and Ireland and whilst the full implecations of this are not yet known, it is a scenario the majority (including most of the Greek population) want to avoid.
As well as the Greek situation making the headlines, September could well prove to be a defining month for the future of the EU and the short-term direction of the single currency. Amongst the other issues at hand for EU leaders to ponder are the possibility that Spain will finally request the bailout experts have discussed is necessary for so long but despite this, many analysts are predicting that the powers that will be will remain bullish during this period. If this does indeed turn out to be the case, the continuing problems our own economy is facing could see the EUR in line for a fight-back against Sterling over the coming months.
As it stands GBP/EUR levels are still hovering around the 1.27 mark, as the markets wait for the upcoming economic events in Europe and the UK to unfold. Personally I still worry about the possibility of Greek exit from the eurozone and the potential contagion it could cause to other smaller EU members but I still feel EU leaders will try to reduce market fears and with the problems our own economy continues to face, a move back towards 1.25 is more likely than a move up through 1.30.
Back on our own shores and Chancellor George Osborne has been told he must change the course of the UK economy or cause “immeasurable damage”. Fears are growing that the UK is struggling to pull itself out of recession and as the Olympic blues start to set in recent poor data, including the widest trade deficit since records began, is weighing heavily on an already fragile economy. Following multiple announcements by the BoE (Bank of England) that growth forecasts will be minimal for the remainder of 2012, it is easy to see why concern is growing and personally I feel any positive momentum gained by Europe and the single currency over the next month could see the focus shift firmly on the UK and our economic uncertainty.
Key data this week – We have UK GDP figures out on Friday and further contraction is expected (-0.5%) which could cause Sterling weakness.
If you have an upcoming currency requirement or would like to be kept up to date with latest market movements, then please feel free to contact me directly at email@example.com or on 01494 787 478.
Euro exchange rates shave clawed back some of the ground lost during yesterdays trading as Angela Merkel (the German Chancellor) voiced support for the ECB and Mario Draghi – backing up the head of the ECB’s stance that they will do ‘whatever it takes’ to keep the Euro alive. This may have created a window of opportunity for any euro sellers as I still firmly believe the ongoing euro crisis will inevitably rear its ugly head in the future and cause a detrimental affect to the value of the euro. To me, particularly those looking at the pairing of GBP/EUR, should take stock of their position and may well wish to utilise the 1 cent swing seen in the past 24 hours. Yesterday the UK released much better than expected retail sales figures and with the Olympic affect to come - will we begin to creep out of recession? Certainly I hope so and should data from the UK continue to be positve, and certainly better than forecast, you are likely to see sterling strengthen as a result.
At the moment the direction for euro is firmly in the hands of the ECB. We are constantly hearing that the powers that be will support the euro at all costs, however very little policy, other than the continuation of the ECB (European Central Bank) bond buying programme appears to be coming out of the ECB headquarters. I personally think the market needs to see something a little stronger and many analysts are eagerly awaiting the next ECB meeting in September (first Thursday of the month at 12:45). What will they do to reduce the borrowing costs for Spain and Italy? Will we see an interest rate cut? Should nothing come out of Frankfurt in early September I would expect a large sell off for Euros and a devaluation across most majors, however any strong policies and expect euro strength, particularly against the US dollar – as risk appetite increases and the dollar weakens as a result of its continued ‘safe haven’ tag.
Should you currently have to buy or sell euros (whether it be for a property completion/sale, emigration, or a corporate transaction) and be in a bit of quandary as when best to exchange, then please do feel free to contact me to discuss your transfer in more detail. I work for currencies.co.uk a specialist foreign exchange broker assisting thousands of clients with all manner of currency transfers. As part of the service we keep an active look at exchange rates for our clients passing on market knowledge to help you make the best decision for your conversion. To benefit from the service or to run through the multiple contracts we can offer tailored to your requirement then please email Mike at firstname.lastname@example.org or call 01494 787478
The Euro was once again under pressure today due to a combination of uncertainty over what and when the ECB will announce to damp down current concerns over Eurozone debt, as well as a strong set of Minutes from the Bank of England which helped support sterling.
It looks as though something will have to happen soon (September) if Draghi’s recent comments about doing enough to save the Euro are to retain their credibility and prevent the Euro plunging further. He has bought some breathing space with his staunch defence of what the ECB, other policy makers and politicians are doing behind the scenes, and it is pretty much expected that nothing would be unveiled in Europe during the August holiday season. However the delays and uncertainty over what will happen are continuing to leave a dark cloud over the price of the Euro.
Personally I expect some measures to be done come September, or Draghi will risk losing face and credibility, and as such the Euro may strengthen back a touch following this. Sterling has had a good boost in the short term by Bank of England Governor Mervyn King confirming an interest rate cut in the UK would be counterproductive at the moment (with all 9 members of the MPC confirming this in the Minutes). However I am not convinced the Olympics will provide the huge boost in GDP that some commentators are reporting, and whilst the unemployment rate in the UK dropped again today, I suspect much of this will be down to temporary jobs created around the Olympics. As the decision on whether to extend QE or not was a difficult one for many of the MPC members, I suspect that before November there will be further signs of increases in QE in the UK so sterling may slip back as we head into the Autumn.
If you need to transfer euro into pounds (or any other fx transaction for that matter) then by all means feel free to contact me by e-mailing Colm at email@example.com and quote ERF in the subject matter with a brief overview of what you need to do.