Exchange Rate Forecast

Exchange rate forecasts and foreign currency news

GBP/EUR exchange rate hits 11 month high

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There have been several catalysts for Sterling’s recent rapid rise. We saw retail sales data come in well above expectations. Previous figures arrived at -0.2% and the general consensus was that the next set of data would arrive at 0.4%… they landed at impressive 0.8%. Average wage growth also came in above expectations at 2.8%, which is very close to parity with inflation which is a strong indicator of a strong economy. Unemployment figures in the UK have also been very impressive, and they currently sit at a 43 year low.

Another major factor is that a deal for the Brexit transitional period has been agreed, with the UK being granted access during to the EU’s single market during the transitional period.

A further catalyst was added yesterday when it emerged the European Central Bank (ECB) may be holding off on cutting the Eurozone’s current Quantitative Easing (QE) program. QE is when money is pumped into an economy in order to stimulate growth. Current monthly increments are €30bn a month. If this were to be cut to nothing it would no doubt mean a substantial improvement in the Euro value and therefore a drop in the GBP/EUR exchange rate. With inflation now a concern in the Eurozone it has pushed a cut in QE further back, which was the cause for the GBP/EUR rate to strike 1.1589 today.

Will the GBP/EUR exchange rate improve

The question still remains, could we see further improvements or will we see the GBP/EUR rate retract below 1.15, as it has done on numerous occasions during the past 11 months. A stop/loss order may be a viable option if you are currently looking to exchange currency. This would to offer a safety net should there be a quick fall on the exchange.

Keep an eye on the next set of average wage growth data on Tuesday as this could well be of importance.

Sterling rallies against the major currencies

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It’s been a prosperous afternoon for Sterling, which has made gains across the board.

GBP/EUR exchange rates touched a high of 1.1569, whilst GBP/USD rates reached 1.4246. This positive spike is a continuation of recent trends, with the Pound gaining value in line with an upturn in fortunes for the UK economy.

A strong run of positive economic data set the tone for Sterling improvement of late, along with the agreement made between the UK and the EU regarding the terms of a transitional period ahead of the UK’s final separation from the European Union. This seems to have alleviated some major concerns amongst investors who have piled funds back into Sterling following the announcement. It will give the UK Government an extended period of time to negotiate the terms of its Brexit, including what type of trading relationship we will have with our European neighbours following our final separation.

GBP/EUR rate has broken through 1.15

Looking at GBP/EUR exchange rates and the Pound has finally broken through the key resistance level of 1.15, which had provided so much protection for the single currency during the first quarter of 2018. Whether or not the Pound can sustain these levels, or indeed kick on again is debatable but there is no doubt that an air of confidence seems to have returned to the currency markets when the Pound is concerned.

Looking at Cable rates and the Pound now seems to have found firm foothold above 1.40, with the current trend for GBP/USD offering optimism that we might see the Pound make a run towards 1.45.

With the Bank of England (BoE) alluding to a prospective interest rate hike over the coming months, market conditions could change again, but for the time being I would be keen to take advantage of the current spike and remove any unnecessary risk from what is an increasingly unpredictable market.

Sterling maintains recent strength despite weaker economic data

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Sterling has been supported over the last week despite a series of weaker economic data releases. Last week’s Purchasing Managers Index (PMI) data from the construction and services sectors in particular highlighted that the “Beast from the East” certainly saw performance in these sectors fall as a result of the cold weather blast. The weaker data, though which did fall by someway, has failed to give major concern for the markets, which have largely shrugged them off.

The Brexit negotiations which saw the second round of discussions covering the transitional arrangements concluded have also helped lend support to the Pound. For the time being the mood on Brexit is looking more optimistic with the hope of a future trade deal between Britain and the EU. However there is still a long way to go in this negotiation and the third round of talks which will cover such topics as a future trade agreement are likely to be the most difficult to achieve a suitable solution.

There are two main issues that Britain faces and unless resolved could end up with the “no deal” scenario which all sides are trying to avoid. The Irish border is perhaps the most talked about but still remains a major obstacle to any free trade agreement. The other issue is whether financial services can be included in any future deal. The services sector comprises almost 80% of the British economy and it is crucial that it is included. If it is not then there won’t be a trade deal and this is the risk that remains, which is likely to keep the pressure on the price of Sterling.

Now that politicians have returned from the Easter recess it will only be a matter of time before Brexit is making the headlines and causing more volatility for Sterling exchange rates

Bank of England Governor Mark Carney will be making a speech tomorrow and his choice of words can always have a direct impact on the price of Sterling. The markets are already gearing up for an interest rate increase as soon as May and this is helping support the Pound. Any strong comments should see further volatility ahead of the next interest rate decision to be held next month.

The GBP/EUR exchange rate breaches 1.15

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For only the second time this year the GBP/EUR rate has breached 1.15 today, providing a fantastic opportunity for the Brits that are buying properties in Europe at present.

With limited data releases for the UK and the EU today, arguably the reasoning for the improvement in exchange rates, comes from recent developments surrounding Brexit and the commentary from the Bank of England (BoE) and the potential of an interest rate hike in May.

Brexit transition deal positive for Pound

A few weeks ago now, UK Prime Minister Theresa May agreed a transitional deal with the EU which will start on March 29th and run for 21 months. To finalise a deal many people within politics believe she gave away more than she wanted as she gave full rights to EU citizens that enter the UK within the transitional period.

Mark Carney’s due to speak on Thursday

The commentary coming from the Bank of England is that an interest rate hike could occur as early as May this year. This has led to investment re-entering the Pound which has caused the Pound to increase in value against most of the major currencies. All eyes now turn to Governor of the Bank of England Mark Carney’s speech on Thursday afternoon. Mar Carney has the ability to cause major fluctuations with GBP exchange rates.

With the Pound gaining in value, foreign currency buyers have something to smile about however I think this improvement could be coming to an end. Over the last 18 months, any time the UK start to negotiate an element of Brexit the Pound comes under pressure as the negotiations don’t go to plan and I expect this trend to continue. Arguably the most important aspect of the Brexit deal is the trade relationship between the UK and the EU, and as yet this is to be discussed, therefore this could cause the most amount of volatility for the GBP/EUR exchange rate.

For foreign currency buyers the recent surge in Sterling value is certainly an opportunity and one that should be considered.

Has the Pound reached a peak?

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The Pound seems to be struggling to improve on the recent strong performance as the market desires to learn of better news. Whilst the good news is not exactly forthcoming there is a very high expectation the data will continue to be positive for the UK and the Pound which will lead to the Bank of England considering an interest rate hike in May.

The problem with the news coming out this month is that it reflects the news from March which is when the snow caused widespread disruption across the UK, leading to lower economic figures. Whilst the Bank of England will take this with a pinch of salt, they cannot ignore the reflection of a slightly weaker economy and this might influence their decision making.

Other concerns for the Pound centre on the Brexit and what might be likely to happen in the future with the Irish border and also the final trade arrangements for the UK and the EU. This is unlikely to be finalised this month and therefore Sterling might drift down owing to any negative headlines surrounding this situation. What could be more likely in the future is any evidence of conflict between the UK and EU over the Irish border and trade talks leading to a breakdown in the current confidence and Sterling losing ground.

The week ahead is not too busy on the data front so it might be a good week to organise yourself ahead of any future transfers. We know from experience that it is usually when everything seems to be going swimmingly in one direction that we see some sudden uncertainty that suddenly changes the picture. Nothing can ever be wholly predicted on exchange rates but Sterling could well be trading at the top of the latest ranges, holding on for any major improvements could prove expensive.

Will the Pound rise higher in April?

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The Pound has reached fresh highs against all currencies on the back of renewed confidence in both the outlook for Brexit and also the prospect of the UK raising interest rates.

I have to say that if we go back to points in 2017 and 2016, it is quite difficult to imagine Sterling at the current levels which it has now found itself at. The overriding belief is now that there will be more of an overall ‘softer’ Brexit which should minimise the disruption to the UK economy. This has helped the Pound to regain some strength during 2018 so far.

There could be further Sterling improvements ahead, although it is difficult to see anything major happening in April, since we do not have any key news like a Bank of England interest rate decision or any EU Summits released. What will be very important is the potential for future interest rate hikes, but with UK economic data struggling because of the weather in March, I feel it is likely the Bank of England will have to remain cautious in their assessments of future interest rate hikes.

Sterling will only rise this month if we see some sudden progress on Brexit or if there is an unexpected improvement in the UK economic data. Whilst there is a possibility this will happen, I do not feel that it is too likely since there are no scheduled ‘big’ releases on Brexit talks and the poor weather in March has seen the UK data coming out rather poorly so far.

The Pound is benefitting from the improvement in sentiment that we learned of last month but this will not alone be enough to see the Pound just continue to rise. Current levels, which are across the board at the top of the recent ranges are therefore very worthy of consideration as it seems unlikely the Pound will just keep rising without any extra new good news.

Sterling holds on to its recent gains despite weak data releases

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Those watching GBP exchange rates will be aware that the Pound received a boost recently after it emerged that the UK and EU’s chief Brexit negotiators have come to an agreement regarding the Brexit transitional agreement.

The Pound to Euro rate hit a 9-month high in the wake of the news breaking, making the conversion of Pounds into Euros a more attractive proposition.

Interestingly there has been a batch of weak economic data for the UK this week and this usually would have resulted in a weaker Pound, and although it has softened slightly the Pound has managed to hold onto the recent gains more or less in full.

Manufacturing, Construction and Services PMI data have all disappointed for the UK this week, either dropping from the previous month’s figures or coming out below the expectations of the market.

The most import data release was this morning, when the Services PMI figure was released. The services sector covers over two thirds of the UK economy so the markets usually watch the figure closely, especially as PMI data is indicative of future performance.

The Services PMI figure actually feel to its lowest level since the Brexit vote, which may grab some headlines due to the significant drop. One argument for the markets remaining relatively unchanged can be put down to the heavy snow impacting economic output. At the same time I think sentiment has improved surrounding the UK now that both the Brexit transitional agreement, along with expected interest rate hikes from the Bank of England are common knowledge.

Next month the Bank of England is likely to raise the UK interest rates to 0.75% which would be the highest rate since the UK exited the recession.

There is no further economic data due out of the UK this week, so I expect to see GBP exchange rates continue to be driven by sentiment.

Will this Sterling strength continue?

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The Pound is ending March on a good note, finishing higher against most currencies than where is began at the beginning of the month. The expectation is for the Pound to remain strong, and the progress that has been made during Brexit negotiations so far should help Sterling avoid any cliff edges. However, the lack of clarity on a final deal for Brexit or any firm confirmation of future interest rate rises from the Bank of England is holding the Pound back and could see some of the recent strength undone.

Against both the US Dollar and the Euro the Pound has lost ground from the absolute highs of last week, this is perhaps partly explained by the initial enthusiasm wearing off from last week’s news.

With much of the good news now priced into current Sterling exchange rates, it does seem a more likely outcome is a gentle softening in the recent strength of the Pound. The progress that has been made should help Sterling to keep its head above water but I would not be expecting any major surprises in the near future, we will need to see much better data being released to really trigger a sharp move higher.

The next piece of key news for the Pound is tomorrow, with the latest GDP (Gross Domestic Product) data released at 09:30 UK time. There are no significant changes to the figures expected, this would probably see the Pound remain within the recent ranges. This is the last estimate from Q4 of 2017 so will give us the final figures for economic growth in 2017 for the UK.

Growth in the UK has been nowhere near as low as was believed it might have been following the Brexit vote, which is helping support the Pound and is also a key factor for the Bank of England to be considering in their estimates for the future.

The Pound is enjoying buoyancy at present but this could quickly change in the coming weeks as wider concerns over the final EU trade deal the UK gets come to surface and capture headlines.

Uncertain end to the month for Sterling exchange rates

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The most recent update from the Brexit talks was focused on the Irish border issue and as yet it appears to be unresolved. This is a key point to take things forward and this has caused the Pound to drop slightly from its recent best rate to buy Euros since May 2017. Brexit Secretary David Davis has been much more positive in recent times and has suggested that talks are looking much better between the European Union and the UK.

The Pound rose up to 1.15 against the Euro after the Bank of England voted 7-2 in favour of keeping interest rates on hold, but it appears as though there is clearly a growing appetite for an interest rate hike coming in the UK. Indeed, the chances are approximately 75% in favour of a rate hike when the Bank of England meet in May and as the UK economy has been performing very well, as proved by wage growth, which outpaced inflation this month I think the central bank are well within their rights for a small interest rate hike.

However, there appears to be a big problem on the high street and although Retail Sales have remained very strong the issue is that some high street stores have been closing recently such as New Look and Toys R Us. More recently Select fashion has come under a lot of pressure with potentially 2,000 jobs at risk.

We end the week with UK GDP figures for the final quarter of 2017 on Friday morning. The expectation is for 1.5% for the final quarter so any change could cause a lot of volatility for Sterling exchange rates at the end of this week. Also, Thursday is the final day of the month and the first quarter so we could see some end of month flows which can often have a big effect on the Pound’s value against a number of different currencies.

Positive week for Sterling finishes strong

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The Pound had one of the most positive weeks in a long time as it brushed into the 1.15’s against the Euro for the second time this year, reaching a multi month high. For those looking to purchase Euros this was a rare opportunity and within 1 hour of the jump on Thursday the GBP/EUR exchange rate fell back below 1.15.

Today we have seen the GBP/EUR rate remain in the mid 1.14’s, whilst against the US Dollar Sterling is back at the high of yesterday. The Brexit transitional deal with the European Union adds that little bit of confidence for businesses and citizens alike essentially meaning little will change now until 2021.

Bank of England interest rate hike

This week the Bank of England Monetary Policy committee voted 7-2 to keep the current interest rate the same. There was some analysts suggesting there might be a rate hike this month, evidently that was not to be the case. However, the fact there was a split vote does provide confidence for the next vote in May, which could see more members vote for a rate hike.

Inflation will also have a significant bearing on what the Bank of England chose to do. The BoE were going to be forced to act as inflation sky rocketed meaning the rate hike would have slowed things down. However, naturally inflation has begun to fall, but does still sit above the Bank of England’s 2% target. This means a rise in the interest rate wasn’t vital, but in the next few months I would be surprised if there wasn’t another hike on the cards.

Average wage growth has also moved closer to inflation meaning consumers are not seeing wages decrease whilst the costs of goods increase. Essentially, Sterling could be moving into a positive period as some of the economic worries following Brexit appear to be decreasing.

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