Pound/Euro exchange rate forecast December

Monday 3rd December 2012
Good morning everybody. It's a new month, and today I'll take my usual retrospective look at what happened last week, why the Pound/Euro rate fell, and what the month of December may hold in store for Exchange Rate forecasts for the best Pound/Euro exchange rates.

In this week’s Report: 

• Pound/Euro rates fall on Bailout news 


• New Governor for the Bank of England 


• Round up of the week’s other data that may affect rates 

Sterling vs. Euro; 

Pound/Euro rates dropped to a 5 week low on Friday last week, as the Euro gained further strength due to the fact progress has been made with bailouts for troubled EU countries such as Greece and Spain. The main cause for the strength was the approval of Greece’s next bailout payment, which was uncertain in the early part of last week. As you can see from the chart below, rates have been in decline for some time, which will cause concern for anybody needing to purchase Euros. 

 
Why has the Euro strengthened? 

The strength came as the German parliament has approved a Eurozone bailout payment of 44bn euros (£32bn; bn) for Greece by a large majority despite unease about the cost. Before Friday's vote, Finance Minister Wolfgang Schaeuble warned German MPs that the fate of the Eurozone was at stake in Greece, which has had two huge international bailouts in recent years. "A Greek bankruptcy could lead to the break-up of the single currency area," he said. 

Despite the fact that Greece's government had carried out reforms and passed a harsh austerity budget, the release of the next round of money was delayed for weeks by a disagreement between its lenders - the International Monetary Fund (IMF) and European Central Bank (ECB). The European Commission has set out a timetable for integration, including plans for a separate budget and joint issuance of debt. 

In the short term the commission's chief, Jose Manuel Barroso, envisages a new fund inside the EU budget to speed up structural reforms. The instrument - essentially a fund for struggling economies in the 17-nation currency bloc - would require governments to sign "contracts" similar to the strict conditions demanded for bailouts. Mr Barroso said: "We need a deep and genuine Economic and Monetary Union in order to overcome the crisis of confidence that is hurting our economies and our citizens' livelihoods." 

The news was welcomed by the markets, and the Euro gained strength as a result, causing it to become more expensive and pushing GBP/EUR rates lower. 

New BoE Governor announced, what could this mean for Sterling? 

In other news last week, the appointment of Mark Carney as the new Bank of England governor has been generally welcomed. However, with an expanded brief which includes overseeing the health of the country's banks, it will be a tough job. 

The first foreigner to be appointed Governor of the Bank of England in its 318-year history said he was “going to where the challenges are greatest”. He is currently the governor of the Bank of Canada, and will replace Sir Mervyn King next summer after the Chancellor decided against another British candidate for the role. 

Mr. Carney, 47, who had previously ruled himself out of the running for the governorship, is credited with helping to protect Canada from the global economic crisis. It is one of the few countries to have recovered fully from the financial meltdown. His appointment came as a surprise to City experts who had predicted that Paul Tucker, the deputy governor, would be promoted. 

What this means for the Pound is uncertain. Some say he is more of a ‘hawk’ than outgoing governor Mervyn King, who for some time has been talking the Pound down. However the challenges that Canada faced are very different to ours, mainly as the fact they avoided recession was due to the fact they are a commodities based currency. We will have to wait and see what his approach means, but in general the news has been welcomed by the markets. 

Summary for Pound/Euro rates 

We have seen rates fall for several weeks now, due to renewed strength in the Euro. Despite UK growth forecasts being revised up, Sterling is failing to make any gains against the Euro. Given there have been warnings the UK may head back to recession, there is every chance rates could continue to drop away, however if we get better growth figures this week, the Pound could make a recovery. 

Regardless whether you need to buy or sell Euros, contact us today to discuss the different options you have available to you. It’s free to have a consultation, and in this way you can find out how to protect against the rate moving against you, and make sure you are making the most of your currency. 

Click here to send me a free enquiry. 

Weekly Economic Data that may affect exchange rates 

Monday – It’s the start of a new month, and the first data release of note is UK House prices from the Halifax. We will also see some UK inflation data this morning. In the Eurozone we have various inflation numbers which could dictate future interest rate movements. Elsewhere we have US Construction Spending, Vehicle Sales, Inflation data and a speech from the FED. 

Tuesday – Today’s UK data comprises Retail Sales numbers and Construction figures. The EU wide inflation figures at 10am could affect GBP/EUR prices. From Canada we have an interest rate decision. 

Wednesday – We kick off with Australian GDP figures. Later in the morning we have another host of inflation numbers from the Eurozone, in addition to Retail Sales. The UK also releases some inflation figures. Over in the USA we have Mortgage applications, Employment numbers, Factory Orders and Inflation Data. 

Thursday – An important day for the UK today. At 09:30am we have Trade balance figures. Later in the morning we have the latest decision on Interest Rates and Quantitative Easing. Both of these have been key to Sterling’s weakness recently. EU data today comprises of French Unemployment numbers, EU wide GDP figures and the latest interest rate decision from the European Central Bank. There are some Jobless numbers from the USA at 13:30pm and in the evening New Zealand announces its interest rate decision. 

Friday – We end the week with UK House Prices, Industrial & Manufacturing Production and the latest inflation numbers. There is also a GDP estimate in the afternoon that could affect the value of the Pound. In the EU we will see French Trade Balance data and German Industrial Production. Stateside we have Earnings data, Unemployment, Non-Farm Payrolls and a Consumer Sentiment Survey.

 

Getting the best exchange rates 

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you. 

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.
 

Click here to send me a free enquiry

Source | Foreign Exchange Rate Forecasts | http://foremostcurrencygroup.blogspot.com/2012/12/poundeuro-exchange-rate-forecast.html

Pound/Euro rates falling. December forecast

Wednesday 21st November 2012 

Good morning. In today’s post I’m going to look at the developments so far this week that have affected exchange rates, including the Bank of England minutes, UK public sector borrowing, The latest on the Greek bailout, and the downgrading of Frances Credit rating. Of course I will also take a view on how this could affect exchange rates in the coming weeks and months. Let’s start in the UK. 

Bank of England minutes 

This morning the Bank of England released the minutes from the latest decision to hold off any more Quantitative Easing (QE) and leave interest rates on hold.

There were no real surprises; only one member voted for QE, so the vote was split 8-1. 

This indicates there is less chance of further stimulus in December, however many think it’s only a matter of time before more funds are needed, so I think depending on economic figures, we could see further QE in January. If so, then expect the Pound to weaken if it starts to look more likely stimulus will be needed. The decision to leave interest rates at 0.5% was unanimous. 

Public Sector borrowing increases 

The Pound hasn’t fared very well this morning though, falling half a point so far from the open this morning. One reason is the news that the government borrowed much more than expected in October, reducing the chances that the UK will hit its deficit reduction target in 2012-13. 

UK public sector net borrowing hit £8.6bn in October, which is a blow to the government as they were hoping that the deficit would fall by around 5%. At the moment this is moving in the wrong direction, and this is causing the Pound to lose out to other currencies, pulling exchange rates down. 

No Greek deal – what does this mean for Euro? 

Over in the Eurozone, the main concern continues to be Greece. They have failed to reach a deal to give Greece its latest bailout payment, and this threatens the whole bloc, leaders have said. Following nearly 12 hours of talks in Brussels, the Eurogroup said it needed more time for technical work. Greece needs the next tranche of its second bailout worth 130bn euros (6bn; £104bn) to avoid insolvency. 

The Eurozone "would be threatened if we did not reach" a deal, French Finance Minister Pierre Moscovici said, before adding that "we are very close to a deal." The news initially caused some weakness in the Euro, pushing exchange rates up slightly. 

These gains were short lived however, and rates have already dropped below the level we have been sat at for most of the week. The reason that a weak Euro is not really pushing up GBP/EUR rates is the fact that problems in the EU have a knock on effect on the UK, so even if more problems arise, don’t expect Pound/Euro rates to shoot up. 

French credit rating downgraded 

In a further blow to the EU, Moody's downgraded France's debt from Aaa to Aa1, and kept its negative outlook, meaning it could be cut again. Moody's blamed stalled economic growth, the risk of a Greek euro exit and the risk that France has to contribute to bailing out other Eurozone countries. This leaves only Germany and the UK with AAA credit ratings from all agencies, reflecting the health of the 2 large economies. 

So what does all this mean for exchange rates? 

Surprisingly it hasn’t really affected rates that much. Pound/Euro rates have been range-bound around the 1.24 to 1.2450 level for a while now, and the markets are not reacting too much to the latest news. The main driver continues to be investor confidence, and at the moment the UK is not performing too badly. 

What is a concern is the Bank of England’s determination to weaken the Pound to try to help our exports. Also, problems in the EU will affect the Pound, as I’ve already talked about in detail over the last week or two. 

If you need to buy Euros, consider a Forward contract 

I think it’s unlikely we will see any gains in the GBP/EUR rate any time soon, so if you need to buy Euros then consider a Forward contract. This is where you can fix today’s rates for up to 2 years, and only pay 10% of the Sterling now. The remainder would be due when you want to take delivery of your currency. 

In this way you can protect against adverse exchange rate movements and budget effectively for any purchase either soon or in the future.

Click here to send me a free enquiry now, and find out more about our commercial exchange rates.  

Getting the best exchange rates 

You want the best exchange rates, of course you do. That's why you're reading this blog to try and gauge your timing. Take the next step and send us a free enquiry and have a consultation on all the options available to you. 

It's free, it doesn't obligate you, and you may be surprised how much you can save by using us to get exchange rates that are up to 5% better than offered by banks. Click below to send your free enquiry now, and get a response the same day.  

Click here to send me a free enquiry

Source | Foreign Exchange Rate Forecasts | http://foremostcurrencygroup.blogspot.com/2012/11/poundeuro-rates-falling-december.html

Forex Strategy Outlook: US Dollar May Shed Gains on December Effect

The US Dollar stands to shed previous gains as financial markets gear up for a quieter end to the trading year.

DailyFX Individual Currency Pair Conditions and Trading Strategy Bias

DailyFX+ System Trading Signals –Breakout Opportunities had a disappointing week, as sharp intraday breakouts did not result in extended moves. In fact the system is on one of its worst drawdowns in recent memory, and we have accordingly moved away from breakout-style trades. A drop in forex options market volatility expectations favors strategies that do well in slow-moving markets.

Thus we will shift our strategy bias towards Congestion Opportunities and adapt a counter-trend style of trading. As we discussed in this week’s US Dollar trading forecast, there is considerable risk that a stock market rally in the month of December could force a noteworthy USD correction.

It obviously serves to note that the exact opposite has happened through Monday’s trading session, but the USD continues to trade below October highs against the Euro (EURUSD lows), and we expect that a substantial breakdown is fairly unlikely.

Market Conditions:

Volatility expectations have fallen off sharply into what is typically a slower month of price action, pointing to reduced currency swings across the board. The US Dollar itself has previously benefited from elevated volatility and uncertainty surrounding financial markets; thus we might expect that the reduced vols might likewise influence the USD itself. We will position ourselves for slower market moves and reasonably steady trends into the year end.

--- Written by David Rodriguez, Quantitative Strategist for DailyFX.com

To contact David, e-mail drodriguez@dailyfx.com

To be added to David’s e-mail distribution list for this and other reports, e-mail subject line “Distribution List” to drodriguez@dailyfx.com

Definitions

Volatility Percentile – The higher the number, the more likely we are to see strong movements in price. This number tells us where current implied volatility levels stand in relation to the past 90 days of trading. We have found that implied volatilities tend to remain very high or very low for extended periods of time. As such, it is helpful to know where the current implied volatility level stands in relation to its medium-term range.

Trend – This indicator measures trend intensity by telling us where price stands in relation to its 90 trading-day range. A very low number tells us that price is currently at or near monthly lows, while a higher number tells us that we are near the highs. A value at or near 50 percent tells us that we are at the middle of the currency pair’s monthly range.

Range High – 90-day closing high.

Range Low – 90-day closing low.

Last – Current market price.

Bias – Based on the above criteria, we assign the more likely profitable strategy for any given currency pair. A highly volatile currency pair (Volatility Percentile very high) suggests that we should look to use Breakout strategies. More moderate volatility levels and strong Trend values make Momentum trades more attractive, while the lowest Vol Percentile and Trend indicator figures make Range Trading the more attractive strategy.

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Source | Gold and Forex News | http://gold-forex-news.blogspot.com/2011/12/forex-strategy-outlook-us-dollar-may.html