Exchange Rate Forecast

Exchange rate forecasts and foreign currency news

Pound supported by increased chance of May interest rate hike

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Earlier today the Bank of England confirmed that they would be keeping interest rates on hold, but the voting pattern of the 9 members showed that 2 of the 9 members actually voted for an interest rate hike.

With Average Earnings figures surpassing UK inflation levels for the first time in a long time this has provided further support for the Bank of England to look at raising interest rates in the near future. At the moment the likelihood is that we’ll see an interest rate hike in May 2018 and this is why we have seen the Pound make some gains versus all the major currencies during today’s trading session.

With the Bank of England having raised interest rates towards the end of last year in order to combat rising inflation I think there is clearly a rising appetite for another interest rate hike to come and this has provided the Pound with some much needed support.

As we go into tomorrow’s trading session the EU summit is likely to cause a lot of movement for Sterling exchange rates as, depending on how the talks go this could have a big impact on exchange rates, so if you’re making a transfer with Pounds it will be very important to keep a close eye out on what could happen tomorrow.

We end the week with the latest Bank of England Quarterly Bulletin and this will also in my opinion provide details of reasons why an interest rate hike may be coming, so I expect the Pound to end the week on a high against the Euro in particular as long as the EU summit also does not cause too many problems.

We have had one of the most positive weeks for Sterling in many months so it may be worth taking advantage of current rates you you are looking to sell Pounds.

Will the Pound keep heading north?

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The Pound has had a positive week rising on improved expectations of a less disruptive Brexit and a Bank of England ready to raise interest rates. The market is looking much better for the Pound with much of the news triggering improvements and expectations high for even better news in the weeks ahead.

If we contrast the sentiments on Brexit today to those last year where we were looking at a hard Brexit, the mood today is much more optimistic. The transitional deal has to be finalised this week but is looking very likely to be agreed.

The economic news is now much more positive too with the UK economy holding up and economic growth likely to continue. The Pound is also stronger since the current economic conditions have led to the Bank of England looking to raise interest rates. The news this week on Inflation and Unemployment has all helped shape the conditions which means that soon the time could be right for the Bank of England to hike their base rate.

Tomorrow is the Bank of England’s latest interest rate decision and this is the most important news of the week, whilst we can make an educated guess about where the rates will go, there is no telling exactly what we will see. Hopefully the overall expectations will remain positive and the Pound should rally further, there is a danger now that with so much positive news, Sterling becomes immune to the good news and sensitive to the bad.

Whilst the progress on the Pound is welcome and may have further to run in the short-term, we still have some major obstacles to overcome from Brexit before investors and the market can really look to the future with absolute confidence. The current goodwill being extended to the Pound may not last long and clients looking to buy or sell should be making plans around the potential for further changes in sentiment.

Sterling spikes as transitional Brexit agreement is reached

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The Pound spiked upward against all major currency pairs yesterday, after news broke that there has been a breakthrough regarding the UK and EU’s Brexit transitional negotiations.

The legal text has now been agreed and although there are still some unresolved issues such as the Northern Irish border issue along with issues surrounding UK fishing waters which has already been commented on by a number of MP’s.

The breakthrough is a positive for the Pound and its resulted in the currency trading at some of the best levels in over 18 -months against the likes of the Aussie Dollar and the Canadian Dollar.

The Pound to Euro rate has been a bit more stubborn but I think that with wage growth picking up along with the Bank of England now likely to hike interest rates this year I do think that there’s a chance the Pound could trade at a higher level vs the Euro later in the year.

Those of our readers hoping for a stronger Pound should follow wage growth closely as so far, it’s lagged inflation levels reducing the spending power of the average UK household. Should this pick up I do expect to see the Pound climb and yesterday’s news of wages growing at the fastest rate since 2009 could be a turning point.

What data releases could result in further movement for GBP exchange rates?

Tomorrow morning there will be the release of UK unemployment data which is another area the BoE will be watching closely before making any further monetary policy decisions. This is another potential market mover and I also think that those watching the GBP to EUR rate should be aware of the Italian politics issues and how a potential coalition between the parties could also move the markets.

The EU summit in Brussels will start this Thursday and we expect the Brexit to be in focus once again, so expect any comments from key personnel to result in further movement for GBP exchange rates.

Towards the end of next week UK GDP will be released which will give us an idea as to the health of the UK economy. With so much data set for release and the Brexit transitional agreement just agreed I’m expecting the next week to be very busy for the Pound.

The Pound is making positive moves

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The Pound made a positive move yesterday, gaining value against most of the major currencies. GBP/EUR exchange rates have touched 1.1281, whilst GBP/USD rates hit 1.3995.

Whilst it has yet to make any further inroads this morning, it seems that investor confidence in the UK economy was boosted following Chancellor Philip Hammond’s Spring Statement, which he delivered yesterday. This was seemingly well received by the markets, with the Pound benefitting as a result.

The key points from the Statement were centred around stronger UK economic growth than was initially predicted. This improvement was despite the on-going market concerns around Brexit, with UK Gross Domestic Product (GDP) forecasts upgraded from 1.4% to 1.5%. Whilst this was only a modest improvement, the Government also expect borrowing to decrease throughout the year and inflation to fall back to their 2% target by 2019.

Sterling made impressive gains against the commodity based currencies, in particular the Canadian Dollar. The GBP/CAD rate was back above 1.81 and despite the Loonie finding some support around this level, Sterling has in fact gained over 7% against is CAD counterpart since the turn of the year.

The Pound was also putting pressure back on 1.13 against the EUR, but with the European Central Bank (ECB) remaining as bullish as ever in their recent address, I am not anticipating an aggressive move above this threshold over the coming days.

GBP/USD rates also spiked, with the USD coming under pressure since a weak US wage growth report, which cast doubt over whether the US Fed would raise interest rates at their next policy meeting on March 21st.

Up until this report the US economy had seemingly been on a constant upward curve, which meant investors started to factor in multiple interest rate hikes this year, which helped support the Dollar’s rise. However a run of mixed economic data and President Donald Trump’s current ‘trade wars’, have put pressure back on the greenback and this has helped inadvertently boost Sterling / US Dollar rates as a result.

With investors moving their funds away from the USD over the past couple of days, Sterling has benefitted and it now seems as though the Pound could once again move through 1.40, which has become a key threshold for the GBP/USD pair.

However, a word of caution as this trend may not last should the FED decide to hike interest rates later this month. This possibility, alongside the underlying concerns surrounding Brexit negotiations and which direction the UK economy will take over the coming months could easily put pressure back on the Pound.

In fact if we look at recent trends on the pair this is exactly what has happened and therefore it may be prudent to take advantage of the current spike and remove any risk from any upcoming Sterling currency exchange.

With so much uncertainty around Brexit continuing to restrict any aggressive sustainable gains for GBP, short-term opportunities like this should not be discarded.

Foreign Currency Direct produce a monthly currency forecast which is free to download and could be a useful resource for anyone looking to make a currency transfer. You can download the monthly currency forecast here.

Spring Statement is focus for GBP exchange rates

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Focus on Sterling exchange rates today will centre on the Spring statement given by UK Chancellor of the Exchequer Philip Hammond at 12:30. This is effectively a budget update from the Autumn budget and is not expected to throw up too many surprises, although any upward revisions for economic growth or productivity offered in the statement could help see the Pound rally across all of the major currencies.

Stronger data last week saw the UK’s budget deficit reduced considerably and the Chancellor is likely to play on this and highlight a brighter outlook which would be seen as positive for the British economy and hence the Pound, which could lead to some Sterling strength. My view is that today’s statement will be upbeat and has the potential to see the Pound strengthen. The GBP/EUR exchange rate is sitting at 1.1260 and a move higher above 1.13 seems realistic.

Brexit negotiations for transitional agreement due to be completed this month

The Brexit negotiations continue with the second round of talks on the transitional arrangement expected to be concluded by the end of the month. An agreement here is likely to see some positive movement for the Pound although much of this may be priced into the market a week or two prior as we saw when the first round of negotiations was concluded.

Any gains are likely to be limited as the British Government will still need to negotiate the trickier issue of the future trade relationship and ultimately whether or not financial services can be included in such a deal. For the moment the EU has stated there is to be no cherry picking whilst Theresa May has said choosing which parts of the EU Britain wants to continue to be a part of is not cherry picking but rather all part of the negotiating of the best agreement that works for both the UK and the EU.

Politics are very much the order of the day and the Russian poisoning story is still grabbing all the headlines. In Italy though there still has not been a decision on which parties will form a coalition to govern. Coalition talks are expected to begin 23rd march and are likely to have an impact on GBP EUR rates of exchange.

Sterling rallies following talk of transition deal agreement

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The Pound shot up this afternoon following reported rumours breaking that the UK and EU negotiating teams are close to agreeing a transition deal after the Brexit deadline. Robin Walker who is a junior minister said that Britain is very close to reaching a deal with the EU.

After the last few months there is hopefully going to be some news in the next few weeks, with the EU Summit set to take place at the end of March. The Summit has always been hallmarked as the point in which a deal was going to be hopefully agreed and the jump today certainly shows the market is waiting for any news of Brexit progress.

In the next few weeks Sterling could break out of the current lull after last week was the Pound’s least volatile week for 2 years. There is currently total focus on the Brexit talks which were proven last week after there was poor UK data released for Sterling but the exchange rate still rose. This suggests that whatever decision or deal that gets made in the next few weeks could completely dictate market movements.

If the rate was to rise up to the 1.15 level then there could be optimism of a movement more towards the 1.18 at the end of the year. Barclays previously suggested they thought the rate might get very close to 1.20 however without positive Brexit talks and a clear agreement for the UK’s transition out the EU this currently seems unlikely.

In the next few weeks before the end of March I will be surprised to see any major movements with the market poised in anticipation. In my opinion if you’re looking to buy Sterling then the lows of the last few months may not be on the cards for too much longer. Completing any transfers in the next week or say may be important to avoid missing out on the low teens.

Brexit uncertainty holds back the Pound

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The Pound is looking even more range bound as we remain uncertain about the future outcome of Brexit. The future strength or weakness of Sterling is very much linked to the future outcome from Brexit, overall expectations on the final deal from Brexit are taking time to finalise but thankfully we do seem to be getting ever closer to understanding at least the ultimate direction.

It appears that we will be looking at more of a softer Brexit which will see the Pound rise if and when it happens since it means less disruption to the UK economy. Last year the prospect of a harder Brexit saw the Pound lose lots of value, the market is now pricing in the higher chance of a softer Brexit which has helped Sterling to rise and removes the possibility, I feel, of the Pound dramatically plunging. The withdrawal agreement in December has allowed this to progress so far, the EU Summit later this month will be very interesting to determine where we are headed next for Sterling.

Thankfully we should get lots more news on what Brexit means in the next week as the EU Summit scheduled for the 22-23rd March becomes a more important event.

If you need to look at the Pound next week the UK Budget Report due on Tuesday from Philip Hammond could be important, but there is not a huge amount of economic data out unfortunately. Therefore, the Pound will likely be swayed by Brexit news and rumours or speculation about what to expect from the EU Summit the following week.

Sterling exchange rates seem likely to remain range bound and next week might not be the week where we see it break out. However, sooner or later the Pound will break free of these ranges so planning a transfer around such outcomes seems the sensible move.

May and Hammond discuss the future of business following Brexit

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Theresa May and Philip Hammond have called in senior officials from Europe’s largest corporate employers in the UK for talks regarding a post-Brexit relationship with the EU.

The meeting will cover the Government’s plan for the implementation period when Britain leaves the EU. There will be representatives from BMW, Bosch, Kingfisher and the Bank of Ireland present.

Despite the fact that Theresa May insisting that negotiations are going well, investors don’t seem to be entirely convinced and this can be seen in the value of Sterling. If we look at the GBP/EUR exchange rate it currently sits in the 1.11s, the lowest levels for five months.

France’s not so secret agenda poses threat to London’s financial Sector

The French seem to be trying to make the situation as complicated as possible in a thinly veiled ploy to make Paris the centre of European financial Services.

French economic minister, Bruno Le Maire has said there is little chance of Britain securing a free trade deal for the financial sector that would give the UK the level of access they wish for Britain’s largest area of income.

The UK would like a mutual recognition system so financial services will still have access to the EU on the premise that regulatory standards are at the same as current international rules.

Le Maire has stated that UK financial services would be subject to a legal mechanism referred to as ‘equivalence’. Equivalence gives countries based outside the EU limited access to the single market. It is not consistent and can be revoked at short notice which is hardly a situation the UK could deal with.

This does not bode well for Brexit negotiations and the Pound could be set for further falls, the market has already reacted on the rumour as we can see from falls in Sterling value.

It would be wise to keep an eye on developments should you wish to maximise the return on any trade involving the Pound.

GBP/EUR rate forecast for the week ahead

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The Pound has had a poor start to the week versus the Euro breaking below 1.12 on the Interbank level earlier today. Bank of England Chief Economist Andy Haldane is due to speak later today and with many analysts expecting a rate hike coming in May this could cause some movement for Sterling / Euro exchange rates later on tonight. I think he will remain cautious and try not to give too much away.

The next important dates for GBP/EUR rates are March 22nd and 23rd which is the EU summit. I think rates could remain relatively flat until we get some more clarity surrounding Brexit.

Indeed, the Pound has been heavily influenced in recent times with what is happening with the Brexit talks and with phase 2 due to be coming soon, could this be the catalyst to send Sterling vs Euro exchange rates in an upwards direction?

Euro economic data that could impact GBP/EUR

In the morning the Eurozone will announce their latest set of GDP data for the fourth quarter. The expectation is for 0.6% growth so any change could cause some movement for GBP/EUR rates so make sure you’re well prepared if you’re in the process of exchanging Euros or Sterling.

On Thursday the European Central Bank will be announcing their latest interest rate decision and clearly there will be no change to interest rates but any hints of QE coming to an end in the next few months could potentially cause some volatility for the Pound vs the Euro.

We end the week with a lot of UK economic data with both Industrial and Manufacturing data as well as Trade Balance figures for the UK. With the Bank of England thinking about an interest rate hike in the next two months Friday’s data could influence the central bank in the weeks ahead.

GBP exchange rates after a heavy week of Politics

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The Pound has made some small inroads to start the week after a very heavy week in British politics and of course after the speech from UK Prime Minster Theresa May last Friday.

The Pound saw a very muted reaction to that speech and actually took losses against most of the major currencies. The speech itself, which is still being talked about, made reference to an “ambitious economic partnership” between Britain and the EU and is supposed to signal to the EU exactly what Britain is looking for in terms of a future trade arrangement. The EU are expected to respond this week setting out their terms of future trade and a strong response that is less accommodating to Theresa May’s objectives could see the Pound come under pressure. Expect considerable more volatility for GBP EUR as the Brexit negotiations continue and the rates remain equally driven by political developments.

UK Purchasing Managers Index data for the services sector was released this morning which arrived stronger than expected and showed an improvement in February over the month prior and helped lend support to the Pound.

UK house price data is released on Wednesday and should help create some direction for the Pound. Construction and housing are two sectors that the markets are keeping a close eye on and any weakness in these sectors in particular could put pressure on Sterling exchange rates. Friday however sees UK manufacturing and production numbers which could give a good snapshot as the heath of these sectors. A positive number could see the Pound rally.

EU Gross Domestic Product is released on Wednesday and should help direct the future path of the European Central Bank. The Euro is already performing well and so any improvement in the growth numbers are likely to see additional gains for the Euro.

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