Sterling falls to fresh lows

Sterling continued to lose ground against the greenback today as rates once again dropped below $1.60.
A lack of data releases from the UK meant that the pound was at the mercy of events around the globe and in today's post we will take a closer look at sterling's movements and the events that triggered this latest decline.

Over the course of the morning sterling climbed gradually against the dollar as markets reacted to the U.S beige book report from the previous evening and at its highest point mid-market levels reached $1.6040, well short of the $1.6150 we witnessed earlier in the week.

 

Yesterdays FED beige book (which consists of the 12 Federal Reserve districts) reported that the U.S economy is witnessing some growth, economic activity has picked up speed since November, thanks mainly to an increase in retail sales leading up to Christmas.

However, it was not all good news, the report also detailed that the manufacturing sector was still under performing and the fiscal cliff was still having a knock on affect on investor confidence. Unemployment still remains high on the FEDs agenda, they have indicated that reducing the long-term unemployment rate was a priority.

The gains that sterling made during the morning soon evaporated, US initial jobless claims came in much better than forecast and will have been seen as a major positive by the Federal Reserve. The consensus has been for the numbers to fall against the previous month but figures released actually showed the number of first time claimants had dropped by nearly 30,000 more than forecast.

As the data was released cable dropped by nearly 0.5% to hit a low of $1.5960 for the day. to reach it lowest levels for a number of weeks. With the pound seeming to come under enormous pressure, the potential for rates to carry on declining seems to be growing. Sterling has fallen across the board since last weeks GDP estimates and with the official figures due for release on the 25th we could see cable slip even further from the $1.60 mark.

To put the sudden drop into perspective a $200,000 dollar purchase would have cost you nearly £700 more after the decline and the  it once again outlines just how volatile the markets can be and how important timing can be. If you need to buy or sell dollars in the coming months click here to complete the contact form for a free, no-obligation consultation.

GBP/USD exchange rates lose over a cent

Good afternoon, today saw the pound lose the gains that where made last week against the dollar as poor euro-zone data increased safe haven flows into the states and increasing the value of the greenback.

Rates dropped from a high of $1.6154 to $1.6035 as euro-zone factory output fell again for the month of November, the decline is the third consecutive month and comes despite predictions of a rise.











Tuesday could see further movements as the UK data releases come thick and fast. Tomorrow we will see Retail and Producer Price index (RPI and PPI)  along with Consumer Price Index (CPI) for December. This will give another indication to whether the UK economy contracted in Q4 of 2012 and could fuel speculation that further stimulus is needed from the Bank of England (BoE).Most forecasts show they are expecting a rise in figures from November but following Fridays surprise negative GDP estimate the door is open for further declines.

Over in the states some analysts believe the U.S economy could be on the up, last week saw the U.S trade deficit widen as imports of consumer goods increased unexpectedly in November. Import of goods increased by $4.6 billion and could be a sign that the U.S retail sector is growing and that spending is increasing.

As mentioned in previous posts there seems to be a fair amount of focus on the UK at the moment and a run of poor data tomorrow and over the course of the week could well see GBP/USD rates drop back below $1.60.

With so much volatility in the currency markets it is vital to get the timing right on your currency transaction.With a number of currency contracts at my disposal we can work together to ensure your money goes as far a possible. If you would more information click here to complete the contact form for a free, no obligation consultation.

Sterling/dollar weekly forecast and overview

Last week saw some big movements for the GBP/USD cross. Early on we saw sterling fall to its lowest levels for a month to $1.5995 before a 1.1% gain towards the end of week saw cable push back towards $1.62. The gains came despite a relatively poor week in terms of data releases from the UK, so what caused the spike in rates? In this week’s report we will take a closer look at to what caused this unexpected rise.

The Bankof England (BoE) and their policymakers met last week to discuss UK interest rates and their stimulus package. They met on Thursday and as expected kept interest rates on hold and decided against adding to the existing Quantitative Easing Programme (QE) and as a result there was little movement between the currency pair.  

One thing that would have been on the agenda in regards to stimulus would have been the poor retail sales data that was released at the start of last week. Figures released from the British Retail Consortium showed that Christmas sales barely increased for retailers and will once again fuel speculation that the UK economy may have contracted for the final quarter of 2012.

All eyes were on the initial UK GDP estimate released on Friday afternoon, it had been predicted for the economy to grow by 0.1% but the actual figures showed a contraction forecast of -0.3%. As the data was released sterling fell just over half a point from $1.6160 to 1.6095. With Manufacturing and Industrial Production figures for November released on Friday morning also came in well below forecast, the UK is facing the possibility of a triple-dip recession. (Recession is two consecutive quarters of economic contraction) The focus will now turn to the 25^th Jan when the official GDP figures are released, if the report shows the UK economy has contracted again questions will be raised as to how the BoE will attempt to solve the crisis.

Some analysts are predicting we could see a further £50 billion of QE in the first half of 2013 and if the BoE opt to go down this road again it is likely we could see sterling lose ground against a number of currencies. (Under QE the bank creates money and uses it to purchase government bonds to try and stimulate the UK economy)

Despite the poor data and uncertainty surrounding the UK we did see a big spike for cable on Thursday. As mentioned in the Euro report, Mario Draghi did an excellent job in talking up the euro, increasing investor appetite for riskier currencies. This led to investors pulling out of the safe-haven dollar and heading back to the single currency, weakening the dollar which in turn pushed rates towards $1.6170.

So what next for the GBP/USD cross?

This recent surge may only be temporary. Over the last couple of weeks we have seen a steady decline for the pound against the dollar, the package put together by President Obama to avoid the U.S falling over Fiscal Cliff seems to have done its job and lent some much needed support to the greenback. With the UK coming under threat from losing it prized triple-A credit rating (which means investors could lose confidence in the pound) and safe haven flows into the UK easing as the euro-zone stabilises the potential for the pound to weaken against the dollar will continue to grow.

To put last week’s movements into perspective, if you were looking at purchasing $200,000.it would have cost you nearly £1400 more at the start of the week compared to Thursdays high. It also highlights just how important it is to get the timing right on your currency transfer and to stay in touch. If you haven’t done so already click here to complete the contact form for a free, no-obligation consultation.

Sterling rallies against the dollar as rates climb by 0.75%

After yesterdays decline sterling rallied against the dollar today as rates recovered and climbed almost 0.75%. At the start of the day the mid-market price was hovering just over the $1.60 mark before hitting $1.6133 in the afternoon. In today's post we will take a closer look into the events that caused this sudden spike.

There was little movement in the currency markets as the Bank of England announced (as expected) to keep interest rates on hold and to not extend their quantitative easing (QE) stimulus programme.

QE is when the bank will create money to pump in to the economy to try and stimulate growth, in the past when the BoE has injected cash it has flooded the market and weakens the value of pound. This tends to mean you will see sterling fall against a number of currencies.

Although the bank has opted not to go down the QE route this time round, it will be interesting to see how policy makers voted when the minutes of today's meeting are released later in the month. Many analysts still feel the bank could look to add to the £375 billion they have pumped into the economy so far, especially if figures released on the 25th of this month show a contraction in growth for the final quarter of 2012.

The main driver for the rise in today's rates came as the European Central Bank (ECB) President Mario Draghi spoke after the Central Banks monthly meeting, he said that policymakers voted unanimously to keep interest rates and hold, lending extra support to the single currency.

This led to a sudden drop for the GBP/EUR cross but at the same time caused a sudden spike for cable, Investors would have been buoyed by Draghi's comments with investor appietite returning to riskier assets. This caused the GBP/USD cross to jump from $1.6045 to $1.6133 in the space of a few hours.

To put this rise into perspective, if you were looking at purchasing $200,000.it would have cost you nearly £1000 less in the afternoon than first thing this morning. It also highlights just how important it is to get the timing right on your currency transfer. Click here to complete the contact form for a free, no obligation consultation.

Sterling falls to its lowest levels in a month

Wednesday saw sterling fall to its lowest levels in a month against the dollar to $1.5995 during the afternoon.The GBP/USD cross fell by nearly 0.5% over the course of the day as weak sales data released in the UK highlighted the issues still surrounding the UK economy and future growth.

The recent data release from the British Retail Consortium showed that Christmas sales hardly increased for retailers and will once again fuel speculation that the UK economy may have contracted for the final quarter of 2012.

Weak data from the UK could increase the chances of further quantitative easing from the Bank of England in coming months and could come under discussion when policymakers meet tomorrow at their monthly meeting. Today's data is unlikely to cause a knee jerk reaction though, as it is widely expected that the BoE will keep interest rates on hold and refrain from adding to the current QE programme to try and stimulate further growth.

So what next for cable?

Over the last couple of weeks we have seen a steady decline for the pound vs the dollar. The temporary package put together by President Obama and White house representatives to avoid the U.S falling over Fiscal Cliff seems to have done its job and lent some much needed support to the greenback. With the UK under threat from losing it prized triple-A credit rating (which could mean investors losing confidence in the pound) and with the euro zone crisis easing, safe haven flows into the UK are also slowing. If things continue as they are it is possible we could see rates continue to fall.

If you are thinking of buying or selling dollars in the coming months there are a number of tools at your disposal to make the most of your currency purchase. Click here to complete the contact form for a free, no obligation consultation.

Sterling/dollar hits fresh high

The sterling/dollar cross hit its highest level since September 19th at around 1.6120 early last week. This was however short lived as the president of the ECB Mario Draghi outlined great concerns for the European economy as a whole on Thursday, which saw investors pull money out of the single currency and into the safe haven of the greenback. That was coupled with the eagerly awaited Non-Farm Payroll from the US on Friday, which came out above the forecast of 93,000 at 146,000. These both strengthened the Dollar and pushed the GBP/USD rate back down around a point to the 1.60 level.

Despite the UK coming out of recession recently showing a 1% growth between July and September, the UK economy is still walking a finally balanced tightrope. There were no surprises in store at this month’s MPC meeting as the BOE’s decision to keep interest rates on hold and resist pumping any further funds in to the QE program was widely expected and therefore did little to move the rates. UK interest rates have been kept at a record low of 0.5% since March 2009 and there is little sign of them changing any time soon.

One of the reasons for the BOE’s halt in its QE program was due to the recent consumer price data. This showed inflation jumping unexpectedly to 2.7% in October, compared with 2.2% in the previous month.  Ross Walker, A chief UK economist at RBS said “They (BOE) have a bit of a balancing act at the moment” He said this is because inflation is likely to stay just above its 2% target for several months to come.

From the US the Fiscal Cliff remains the focus of everyone’s attention. The “Fiscal Cliff” is a popularised term used to describe the conundrum that the US government will face at the end of this year, when the terms of the Budget Control Act of 2011 are scheduled to go into effect.

There are two main routes the US can take with regards to dealing with this. They can let the current policy that is scheduled for the start of 2013, go into effect. This involves a number of tax increases and spending cuts that are expected to weigh heavily on growth and possibly send the US economy back into recession. The advantage being that they could see the deficit cut in half. Alternatively, they can cancel some or indeed all of the tax increases and spending cuts. This may help growth but would add to the deficit and increase the chances of the US facing a similar crisis to Europe.

Whichever route the US decides to take, it is likely to face difficulties and we could see some large movements in the currency markets in the coming weeks and months.

The GBP/USD cross saw some fairly modest movements last week but even a small movement can make a substantial difference in the price of a property purchase. A typical purchase of $200,000 would have a difference of around £1000 between the highs and lows of last week. For this reason, it is always important to stay in close contact with me to ensure you are buying at the right time. If you have not already done so, click here to complete the contact form for a free, no obligations consultation.

Cable weekly overview

With the US presidential election out of the way, markets last week were centred around discussions over the impending ‘fiscal cliff’, due to be implemented in the new year. The fiscal cliff is a combination of massive spending cuts and tax increases and is expected to send the US back into recession. Movements in the GBP/USD were also largely driven by events in Europe as the rate tracked movements in EUR/USD, pushing Cable to near a two-month low with concerns over Greece encouraging safe-haven flows into the US currency.

Sterling recovered somewhat on Tuesday morning as better than expected inflation figures were released for October. The pound consequently jumped half a cent against the dollar, breaking back through the $1.59 mark. However, its recovery was only temporary with sterling’s gains evaporating as market players realised that UK policymakers would be more concerned with encouraging economic growth than controlling inflation, fuelling speculation that more quantitative easing would be announced in the near term. Sterling continued to slide, losing nearly half a percent against the U.S dollar midweek, despite official figures showing unemployment had fallen by nearly 49,000 for the months July-September. Cable fell from high of $1.5914 back to $1.5840 as Sir Mervyn King announced that the Bank of England had cut the UK growth forecast for 2013 back to 1%.

We also saw the release of another batch of poor UK data as retail sales for October came in much weaker than expected, falling 0.8% month on month. Analysts saw this release as significant as it had been expected that retail sales would begin to stabilise. This raised fresh concerns that the UK would soon lose its triple A credit rating if the country recedes into a triple-dip recession. As a result, GBP/USD continued to drop further, despite poor data across the pond, with jobless claims worse than expected. However, questions were raised as to whether this was partly due to Hurricane Sandy.

With so much uncertainty in both the US and Europe, markets are particularly volatile at present. It is not unusual to see movements of more than 2 percent over the course of a trading week. If you are buying a property overseas, or if you have foreign invoices to pay, the cost of your goods or property will fluctuate in line with movements in the foreign exchange markets.

As a specialist currency broker,  I can provide you with various tools to limit your exposure to wild swings in the currency markets. Forward contracts, Stop Loss and Limit orders are all useful if you are working to tight budgets or are simply looking to maximise the return on your currency. Click here to contact me today for a free, no obligation consultation and take the first step to making the most of your currency.