Euro Sterling – pound nearly hits 12 month low

Euro18th April 2011 – Euro versus Sterling, the pound nearly hits a 12 month low.

The pound continued its downward trend against the Euro last week, with lower inflation figures from the UK weakening Sterling. At one point rates were near a 12 month low, before staging a small recovery at the end of the week:

The Consumer Price Index (CPI) figures released last week showed a fall in inflation for the first time in 8 months. The fall in food and soft drink prices was the main cause. The figure was lower than most analysts had expected, and lower inflation means that initial expectations of a rate hike in the UK have now been pushed back to November.

Latest Euro Pound Exchange Rate Graph – 18th April 2011

Euro Sterling Graph March April 2011

Earlier in the year the consensus was for a rate hike in the UK as soon as May, to combat rising prices. The latest numbers however have pushed this expectation back to the end of the year.  The news weakened Sterling and pushed GBP/EUR rates close to the lowest in 12 months.

Adding to Sterling’s woes was a survey last week showing the biggest drop in retail sales in nearly 6 years, highlighting the problems facing the UK as the government’s tough austerity measures hit consumer spending, and jobs data on Wednesday will also be closely watched.

“The economic data that we’ve had out of the UK gave a lot of ammunition to sterling bears,” said Audrey Childe-Freeman, EMEA head of currency strategy at JP Morgan Private Bank.  “Lower-than-expected inflation, weaker growth, that’s taking off pressure from the BoE to raise interest rates and Sterling is a loser in that environment.

We’ll know a bit more about the Bank of England’s take on interest rates this Wednesday when the minutes to the recent decision to hold rates are released. These minutes released at 09:30am on Wednesday will show how the 9 member committee voted including differences of view.

As the chart above illustrates, there was some respite to the downward trend, with a slight recovery in rates towards the end of the week as the EU’s debt problems resurfaced. Following Portugal’s request for support, there was speculation Greece would again have to re-structure its debts, weakening the Euro slightly.

In summary, rates are low and despite slight Euro weakness, interest rate expectations have and will continue to drive rates. With markets closed on Friday and next Monday for Easter and limited UK data being released this week

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.

Tenerife Night Sky showing the Milky Way

Tenerife Night Sky showing Milky WayTenerife Night Sky showing the Milky Way – Amateur astronomer Juan Carlos Casado stitched together this extraordinary shot from nine photos of the night sky. Article already published in the Daily Mail.

Viewed as one digitally-fused image, as they are here, and the result is a 360-degree panorama. The faint band of light that stretches across the sky is the disc of our spiral galaxy. It appears to encircle Earth – this is because we are inside the disc.

Also visible is Tenerife’s Teide Volcano near the centre of the image, behind a volcanic landscape that includes many huge boulders.

But far behind these Earthly structures are many sky wonders that are invisible to the unaided eye, such as the bright waxing moon inside the arch. Also visible are the Pleiades open star cluster and Barnard’s Loop, which can be seen as the half red ring below the Milky Way band. The stars that the human eye can distinguish in the night sky are relatively near and are all part of the Milky Way.

Our galaxy contains between 100billion and 400billion stars, as well as an estimated 50 billion planets.

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Euro versus Sterling – 10th April 2011 – Status Quo

Euro10th April 2011 – Euro versus Sterling, the current Status Quo.

In a move that had been widely anticipated since their March meeting, The European Central Bank (ECB) announced on Thursday that the Governing Council had voted to raise the key benchmark interest rate from 1 percent to 1.25 percent. As the ECB looks to drain liquidity from the market, following unprecedented stimulus measures over the past few years in order to prop up growth following the recession, the rate hike may indeed be considered a move back towards normality or is it simply a status quo situation? The hike had almost totally been factored-in to the markets before the announcement and so failed to strengthen the Euro as some might have previously suspected would have happened. The hike, aimed at curbing inflation, could spell trouble for weaker economies in the Eurozone which desperately need to encourage growth. All eyes will now turn to next month’s meeting. Looking into the future, Jean-Claude Trichet indicated at an ECB news conference that more euro zone rate rises were in store.

Latest Euro Pound Exchange Rate Graph – 10th April 2011

Latest Euro Pound Exchange Rate Graph

The Bank of England (BoE) contrastingly decided against raising its key interest rate, maintaining its current 0.5 percent rate. Whilst The BoE had been widely expected to hold rates for a consecutive 25th month, their decision was bolstered by the release of weak manufacturing figures earlier in the week. The majority of voting members emphasised the need for more evidence on the strength of the economic recovery before changing their stance. Most onlookers see a diminishing chance of a rate hike in May. The policy meeting minutes are likely show another 6-3 split within the Monetary Policy Committee (MPC) – however, it is worth considering that a growing shift within the committee could stimulate a bullish reaction in the British Pound as investors wait for the central bank to steadily normalize monetary policy in the short term. The details of the voting pattern and the debate among BoE policymakers will not be made public until the minutes are released in around two weeks’ time.

In response to Portugal’s request for financial assistance, European Union Monetary Affairs Commissioner Olli Rehn said that the bailout package is likely to reach EUR 80 Billion. It is felt that the Portuguese face an uphill battle to meet its debt obligations due up in June as the government faces rising financing costs. Mounting fears that Spain will be the next country to file for a euro bailout has had implications on keeping the euro weak. On a more positive note for the Euro, the single currency rallied to an unprecedented yearly high on Friday on the back of an improved outlook for future growth. The Euro currency may continue to strengthen over the near-term as the European Central Bank shows an increased readiness to tighten monetary policy further this year. So in summary, Sterling-Euro rates remain low and may well do so for some time, the current status quo.

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.

Sterling vs. Euro 4th April 2011 – Sterling hits 5 month low

Euro4th April 2011 – Sterling vs. Euro – Sterling hits 5 Month Low

Sterling fell to a 5 month low vs. the Euro last week, on expectations that interest rates in Europe will rise faster than in the UK and talk of month-end demand from central banks. Sterling’s falls were exacerbated by sterling selling against the Australian dollar, related to insurance payments for flood damage in Queensland.

“There is a sense that the UK economy is going through a ropey phase and selling in sterling has been very steady since last week,” said Michael Derks, currency strategist at FXPro. “Further gains look likely while the market embraces the more positive aspects of the euro area periphery story, ECB tightening and softening UK data,” he said.

Following Thursday’s movement, the euro was broadly firmer as above-forecast euro zone inflation cemented the case for higher interest rates from the European Central Bank (ECB). Markets see the tightening cycle starting in April.

Current Euro Sterling Graph – 4th April 2011

Euro Sterling Exchange Rate Graph 4th April 2011

Manufacturing growth slowed more than expected in March but companies still ramped up prices at a record rate to cover rising costs, a survey showed on Friday. The Markit/CIPS manufacturing PMI headline index fell to a five-month low of 57.1 in March from a downwardly revised 60.9 in February. Analysts had expected only a slight dip to 60.6.

On a brighter note for sterling, Housing prices increased and the manufacturing survey also showed that companies’ raw materials costs had continued to rise in March, albeit at a slightly slower rate than in February. And companies continued to take on new staff, though not at February’s record pace.

Rising job creation, a surprise rise in house prices and further growth in the manufacturing sector are encouraging signs. However, the economic outlook is still uncertain and the slowdown in the pace of expansion in the sector will not ease the dilemma facing Bank of England policymakers over how to tackle persistently above-target inflation, without harming economic recovery.

The pound fell off the back of the figures, but analysts noted that the manufacturing sector was still on course to make a strong positive contribution to first-quarter GDP growth, which may work to ease concerns of the UK slipping back into recession.

Money markets have pushed back expectations for the first rise in interest rates from a record low 0.5 percent to August from May, largely as a result of weak news on consumer activity. “The Monetary Policy Committee’s balancing act between growth and inflation has perhaps become even more precarious,” said Markit economist Rob Dobson. Markit said the slowdown in demand was most pronounced in the consumer goods sector, which was virtually stagnant, and indicated a fall in domestic orders for such goods.

Rising inflation, muted wage growth and the prospect of government spending cuts have hit consumer morale and dented retail sales, spelling bad news for an economy which has historically been heavily reliant on household spending.

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.

Sterling vs. Euro 28th March 2011 The weekly report

Euro28th March 2011 – Sterling vs. Euro – The weekly report.

In the build up to last week all eyes were focussed on George Osborne’s budget on Wednesday, however, in what was a busy week it was UK retail sales that most affected Sterling’s performance against the Euro.

Monday started well for the UK with Rightmove house prices showing a slight increase although movement in the market is mainly limited to the top end. The market’s reaction was limited as traders were waiting for Consumer Price Inflation (CPI) out on Tuesday.

Consumer Price inflation is a key measure of the economy that looks at the change in prices of consumer goods and services purchased by households. February’s CPI figures were expected to show a growth from 4% to 4.2% but in fact came out better at 4.4%. As expected the Pound began to gain against the Euro as the figures were interpreted that an Interest rate rise in the UK is more probable.  However there were some in the market, including currency analysts at HSBC, who believed the Pound was overpriced, saying rising inflation at a time of fiscal austerity was a reason to sell the Pound, rather than buy. As expected this curbed Sterling’s performance somewhat.

Euro Pound Graph – March 2011

Euro Pound  Graph March 2011

On Wednesday the Bank of England’s Monetary Policy Committee maintained its 6-3 split in favour of keeping rates on hold this month, seeing no major change in the medium-term outlook despite the CPI data on Tuesday. At lunchtime on Wednesday George Osborne’s budget unveiled cuts in the 2011 growth forecast to 1.7 percent from 2.1 percent as well as commenting that soaring oil prices mean inflation will remain between 4 and 5 percent this year. As Alejandro Zambrano, market strategist at FXCM commented, ‘Low growth and high inflation does not make good news for the currency’.

Despite the budget, Sterling remained relatively stable against the Euro and it wasn’t until disappointing UK retail sales were released on Thursday that we saw the Pound start to lose value. Sales in February fell 0.8% on the month against forecasts for a smaller decline of 0.6%, sharply slowing the annual rate of growth to 1.3% from a downwardly revised 5.1% in January. Added to this,  the ratings agency ‘Moody’s’, said that Britain’s triple-A credit rating could be at risk if slower growth makes it harder for the government to rein in its budget deficit.

These two pieces of information effectively threw the Pound into freefall against the Euro throughout Thursday and well into Friday with the Pound falling to its lowest level in 2011. The Pound’s fragility against the Euro was based on concerns over the state of the UK economy and uncertainty as to when rates in the UK will be raised which BOEWATCH suggests is more likely to be in August rather than July as previously thought. Whilst in the Eurozone, Trichet confirmed he planned to press on ahead with the raising of interest rates potentially as soon as April despite deep concern over some of their member states, such as Portugal, who are looking almost certain to require a bailout from the European Central Bank.

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.

Sterling vs. Euro – 14th March 2011

Euro14th March 2011 – Sterling vs. Euro – The weekly report.

Sterling had another poor week last week heading toward a 6 week low against the Euro. The main blow to Sterling was landed at Thursdays Bank of England meeting where the Monetary Policy Committee again voted for a hold on interest rates.

This hold coupled with the news that chief rate hawk Andrew Sentence is to step down from the MPC in May  triggered most analysts to reduce their expectation of a UK rate rise in 2011. The knock on effect to the currency market saw many UK banks & traders cut their pro GBP long positions on Sterling, deciding instead to sell the pound short with little confidence in the future performance of the pound.

Euro Pound Graph – 14th March 2011

Euro Pound Graph

These moves came in the backdrop of Jean Claude Trichet’s statement last week that the ECB could raise rated as soon as April, so acting as a second quick blow that appears to have left the Pound on the ropes.
Indeed, callous as it sounds the earthquakes and tsunamis that tragically struck Japan and the Pacific Rim on Friday only worsened the pounds plight, with a knock on effect felt from a dip in UK stocks to a 3 month low.

Obviously your currency requirement can be affected by events ranging from the commonplace such as central bank meetings and unemployment figures and by the unimaginable events like those last week. Keeping in contact with an experienced broker is your only way of trying to navigate the notoriously volatile currency markets.

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.

Sterling vs Euro Exchange Rate Report – 7th March 2011

Euro7th March 2011 – Sterling vs. Euro

Sterling vs. Euro exchange rates have not fared well over the last week. Through most of the week Sterling had actually recovered quite well against the Euro, supported by better than expected housing data and inflation figures early in the week. All that was overshadowed however when the European Central Bank (ECB) president said on Thursday that interest rates were going to rise in the EU as soon as next month. As the chart below shows, this caused rates to fall close to a 3 month low:

European Central Bank President Jean-Claude Trichet said on Thursday that euro zone rates could rise next month — stunning markets which were expecting a rise late this year. He also pledged “strong vigilance” on rising inflation, a phrase that in the past has signalled a forthcoming rate rise.

Euro Pound Graph – 7th March 2011

Euro Pound Graph 7th March 2011

“There are significant risks on the upside for euro/sterling and yields spreads have moved in favour of the euro after yesterday’s comments from the ECB,” said Adrian Schmidt, FX strategist on Friday.

For most of the year so far, most analysts thought the UK would raise interest rates by mid year, with the ECB following suit much later in the year. This is reflected in the upwards trend shown in the graph above. Now however it seems that the tables have turned, and the EU will be raising rates before the UK. This has reversed the trend, and the Euro is now gaining on Sterling.

Higher interest rates strengthen a currency because of the higher return on offer to investors. The recent comments have therefore strengthened the Euro significantly, making it more expensive to purchase.  So the gains the pound has made all year have now been largely eroded. Given the harsh austerity measures on the way in the UK there is not much to suggest rates will bounce back any time soon.

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.