Pound at mid 18’s against the Euro

February 22, 2017 by Rob Lloyd

Brexit woes fade

The Pound made significant gains against the Euro during yesterday’s trading session, peaking at 1.1854 minutes before the markets opened this morning. Negative Euro sentiment appears to be a significant factor, as markets remain apprehensive towards the French elections that begin shortly.

The Brexit bill continues its debate in the House of Lords, and it looks as though the bill will pass with little ammendments. Economic data continues to outperform market expectations in the wake of the Brexit vote, and markets are beginning to calm their nerves as we enter Article 50 negotiations.

UK GDP figures up

Pound to Euro exchange rates begun clawing back gains made this morning, but remain steady around 1.1850 following stronger than expected GDP figures for Q4. The data came in .1% better than predicted which confirms that the UK economy remains in strong territory as we approach the final hurdle of the Brexit debate.

The UK are expected to begin an EU-exit as early as next week, and the Pound’s recent highs could begin to unravel as market uncertainty sweeps in.

There is little economic data released for the UK for the remainder of the week, however German GDP figures released tomorrow may boost the Euros position against the Pound.

Parliament overwhelmingly vote in favour of Brexit bill

February 2, 2017 by Rob Lloyd

Last night Parliament backed the Brexit bill outlined by Theresa May’s Government, with a huge majority of 498 votes to 114. The bill allows Parliament to debate the issue, with expectations for May to invoke Article 50 in the weeks ahead, beginning the process of EU withdrawal.

A Brexit White Paper will be released shortly detailing the Government’s Brexit strategy. It is anticipated further conflicts will arise between both the Conservative and Labour parties, with Shadow Chancellor John McDonnell promising to fight Theresa May’s ‘reckless Brexit’.

Government are working towards a March 9th deadline, on the basis ratification of the White Paper goes smoothly and MP’s can agree on Brexit terms. With this in mind the Pound may begin to withdraw from its recent highs as investors seek safer currencies.

The Pound has already fallen a cent since the beginning of the trading session.

Bank of England raise growth forecasts sharply

“Domestic demand has been stronger than expected in the past few months” Carney stated, leading the Bank of England to upgrade its growth forecasts for 2017 to 2%, up from November’s forecast of 1.4%.

Despite concerns that inflation may rise to 2.7% next year, the Bank of voted in favour of keeping rates on hold at 0.25%.

Will the Bank of England raise interest rates?

If inflation and wage growth continue to propel in the right direction, the Bank may have to raise interest rates more sharply than expected, a move that is quite likely to result in Pound Sterling strength.

The financial markets predict a 50% chance of rate hike this year adding further strength to the Pound. Markets are likely to begin pricing in a hike which could cushion the impact on GBP once the Government invoke Article 50.

Sterling Regains Memo Losses

November 16, 2016 by Ben Fletcher

The memo released yesterday morning that suggested the UK government had no Brexit plan turns out to not be truthful. The document was supposedly written by someone in Deloitte’s who has had no access to 10 Downing Street and was essentially speculating.

Essentially all the release proved was quite how volatile the markets are at the moment with anything Brexit related having an overpowering effect.

Merkel could accept free movement

Angela Merkel in a speech yesterday may have hinted that the EU-27 could have to compromise with the UK having access to the single market and full border control. However it was considered afterwards the in fact she didn’t really suggest that and it may have been confusion more than anything else.

It was reported yesterday that Angela Merkel could be looking to run for a fourth term however this was denied by her team. However in my experience this is likely to be an honest leak and I would not be surprised to see this released in the next few weeks. There is a huge amount of anti-EU sentiment with much of the blame lying at Angela Merkel’s feet with the decision to let in 1 million migrants. With the election just over 6 months away the decision to run is likely to be announced sooner rather than later.

Data for UK and EU

Tomorrow the UK is expected to release very positive Retail Sales figures that are expected to show month on month and year on year jumps, which could certainly help the GBP/EUR rate move towards 1.17. The Eurozone will also release Consumer Price Index data which is a key indicator of Inflation. There is in my opinion an air of scepticism forming around Euro’s strength especially with the Italian Referendum very close. If you’re a Euro seller I would consider moving sooner rather than later as 1.10 seems to be moving further away than getting closer.

US Dollar rallies with Trump’s pro-business stance

November 16, 2016 by Rob Lloyd

The US Dollar continues to extend its gains against the Euro as markets rally over Trump’s pro-business stance. Whilst the Republican Presidential elect has made concerning comments throughout his campaign, markets are beginning to see the positive aspects of his victory.

Trump wants to bring American businesses back to US soil, imposing 35% trade tariffs on cars made in Mexico which has been heavily critisised by Ford boss Mark Fields. Furthermore, Trump’s win is likely to have no impact on the FED’s decision to raise interest rates, in fact, markets are now convinced that the FED will hike rates in its December meeting.

The impact of a Trump victory has not only had an impact on the US Dollar, the Pound which has struggled since the Brexit vote has had a significant boost as UK-US trade deals become more likely. The commodity currencies such as the New Zealand and Australian Dollar have weakened significantly as investors gear up for the FED to hike rates in the weeks ahead.

But will the trend continue? Much of this depends on whether Trump can downplay many of his campaign promises.

Is now a good time to buy US Dollars with Sterling?

With Brexit the main driver behind Pound Sterling exchange rates, and with Article 50 set for March 2017 its a real possibility that further weakness could emerge for the Pound. GBP/USD is now trading 3 cents higher since Trump became the Presidential elect which provides fresh opportunities for US Dollar buyers.

Whilst there is every possibility further GBP/USD could emerge once Trump assumes office in January, the risk surrounding Brexit negotiations will likely dominate investor decisions.

Pound continues its rally as Brexit fears fade

November 16, 2016 by Rob Lloyd

Following the leaked Brexit memo yesterday, which detailed the lacking plan from the new Government, Pound Sterling fell a cent against the Euro and US Dollar. But as the news unfolds the leaked memo was in fact a fake according to Government officials.

As a result, the Pound has recouped all of its losses at the start of this morning’s trading session, trading against the Euro at a 2-month high. There has been further developments this morning that could bode well for Pound Sterling exchange rates.

Angela Merkel to compromise over free movement

The German Chancellor has signalled that some maneuvering over free movement could be discussed with the UK, despite previously outlining that Brexit negotiations could not infringe on the 4 EU principals. The move has been viewed as positive for the Pound as it could show early signs of the EU backtracking, however her comments come at a time when the European elections are due which could be a tactical move from the German Chancellor.

With the likes of Brexit and Donald Trump, EU officials are becoming increasingly concerned about the new wave of right-wing parties sweeping across the globe. A curb on immigration could prevent further right-wing parties from entering political power and disrupting future plans for the bloc.

Nigel Farage to return to politics?

The former UKIP leader has hinted at rejoining the conservative party to shadow any Brexit discussions, as sources have suggested he will meet with Theresa May following discussions with the new President elect.

Whilst May has previously rejected his relationship with Trump as irrelevant, its becoming increasingly clear that Trump views Farage as a close ally.

There is a strong argument that Farage could be an ideal go-to MP for UK-US relationships, at an important time in British history following the Brexit vote. If Farage is able to secure new trade deals with the US, the UK could find itself in a better negotiating position with the rest of the World.

At this stage the Pound could find further support as some of these stories unfold, but as it stands buying Euro’s is now significantly cheaper than prior to the US election result. With so much uncertainty ahead it may be prudent to buy whilst the UK has the upper hand.

The Brexit-Trump domino affect on the Eurozone

November 15, 2016 by Rob Lloyd

Waking up to the UK’s decision of opting out of the EU was a tremendous shock amongst many as polls, markets and bookmakers placed guaranteed odds on the UK remaining a member of the single market. The former Prime Minister David Cameron spent months preparing for what many assumed was an easy win for the Remain campaign.

So you can imagine the shock last week when the US woke up to a billionaire tycoon beating longstanding-politically educated Hillary Clinton who for the most part, had a clear campaign message and sensible policy offerings. Perhaps I was the only one who saw it coming, but if Brexit taught us anything, polls are never really indicative of results.

But putting the polls to one side, if there’s one thing we can definitely learn from Brexit and Trump, even if both bring about economic destruction and are both unable to fulfil the promises made during their campaigns, these two strikingly similar entities spell further concerns for the Eurozone.

The Brexit effect

Right-wing populism is coming back into fashion, whilst not popular amongst the millennial generation, the rise of Marine Le Pen in France could shake up the political landscape across Europe. Equally, the Italian Referendum in December could be the end for Matteo Renzi, who has promised to resign if his reforms are rejected.

This of course, has got the 5-star movement – Italy’s right wing movement sharpening their knives, waiting for an opportunity to seize an already anti-establishment nation.

The Netherlands also have Geert Wilders to think about, and Germany’s Chancellor Angela Merkel is under fire following her refugee quota.

Something could well be brewing as we approach the European elections next year, and whilst the UK appears to be baring the brunt of its decision in June, it could well be the beginning of something more prevalent in the months ahead.

Sterling losing ground against the US Dollar

November 14, 2016 by Ben Fletcher

The Greenback despite all the on goings and drama has managed to gain over a cent on Sterling today. Despite what many thought, would be a worst-case scenario in the general election there has been little to suggest panic buttons had been hit.

Trump in his first few days as President-elect has started back tracking on some issues whilst pressing forwards with others. The wall with Mexico is now just going to be a wire fence and Obama care will continue in some form.

Trump has held firm that he will be looking to remove around 3 million migrant criminals. The turnaround on the wall doesn’t really come as a surprise as many commentators were of the opinion that Trumps stance would change on the more extreme matters. Due to the back tracking the markets have not panicked as it appears the next President may not be completely mad.

The current market movements with Sterling strengthening against the Euro and not the US Dollar leads me to believe the Dollar is strong. Furthermore, the USD has gained against the Euro emphasising there is little market concerns at the moment.

The USD/EUR rate gaining several cents in the last few days suggests to me that the Euro is also starting to struggle and the Referendum in Italy could be heavily taking its toll. In the next few weeks if you do have any currency transactions I would consider moving if you’re happy with the rate. There is so much volatility currently that anything could change in a second.

UK economic growth halved according to NIESR

August 9, 2016 by Rob Lloyd

NIESR cut growth estimates to 0.3%
Sterling falls 0.73% since beginning of trading day
Next week’s CPI data could reflect today’s estimates

The UK’s growth cut in half in the month of July, according to the NIESR’s GDP estimate report. The data predicts growth for the last 3 months up to July, estimates have been cut from 0.6% to 0.3%.

At this stage it’s not clear if Brexit is the cause of economic slowdown, or whether other factors are at play. Although its likely Brexit had some part in the recent growth cut predictions. Sterling has lost 0.73% since the beginning of trading, with GBPEUR rates trending around the 1.168 mark.

Consumer price data next week could cause further losses for Sterling

The report today is considered highly accurate and I therefore expect next week’s CPI release to follow a similar trend, retail sales for the month of July were up despite Brexit, which could cushion some of the fall next week. However, lower growth will likely be linked to Brexit which could have implications for Sterling next week.

Will Sterling continue to weaken?

If Brexit is causing economic shock and growth continues to decline, the Bank of England may have to implement further measures to tackle low inflation, further rate cuts and stimulus could be on the table, which will likely put Sterling in a weaker position. With Brexit yet to begin, it could be that the recent run of bad economic data is a reaction to the vote, with the UK’s withdrawal from the EU not likely to happen until 2019, business confidence at least short term could improve.

On the other hand, whilst the UK remains in a period of uncertainty, investors will likely hedge their bets in safe haven currencies. Until a clearer picture of what deal the UK want post-Brexit, Sterling could remain on the lower end of the deal.

Next Tuesday’s releases could weaken Sterling to the mid teens, I’d therefore consider buying foreign currency sooner rather than later.

When is the best time to buy Euros this week?

August 2, 2016 by Rob Lloyd

The release of this mornings PMI construction data provides further confusion over the results of the Referendum. Although business and consumer appears down, this mornings release came in only marginally lower than June’s release and much better than predicted. We are still yet to see the impact of Brexit through the economic releases, how will this impact the Bank of England’s decision on Thursday?

Do the economic conditions justify a rate cut?

If the Bank of England were to cut rates on Thursday, Pound to Euro conversion rates could fall below 1.15, but will they likely cut rates? Although it is predicted by many they will, I personally cannot see why at this stage a rate cut is necessary, given the lack of quantifiable data.

If anything, the current economic releases do not support a cut and Mark Carney may adopt a ‘wait and see’ approach again. If he does, we may see a slight perk in GBPEUR exchange rates, positive news for the UK economy does however have limited impact in the wake of Brexit.

Regardless of the outcome of tomorrow, it is also predicted that Carney will downgrade his forecasts for growth which could lead to further Sterling weakness.

Should I wait until next week to buy Euros?

Next Tuesday’s NIESR GDP estimates report on the growth for the last 3 month’s, which will include data after the referendum vote.

This report will be a true indicator of how Brexit is impacting growth and could cause high volatility, investors will likely be awaiting the results before deciding on whether the UK is a safe place for investment.

It may also be a trigger for the Bank of England to act to stabilise growth in the form of further interest rate cuts or further stimulus.

If you are looking to buy Euros in the near future, doing so ahead of the interest rate decision on Thursday could prevent further losses to your Euro needs.