ANY QUESTIONS?: CURRENCY
LATEST NEWS: THE EURO AND THE US DOLLAR
POUND/EURO RALLIES TO NEAR 20-MONTH HIGH
The Pound/Euro exchange rate surged to levels above €1.21 in April, reaching just below the highest we have seen it in nearly 20 months. There are two reasons for the gains: fi rstly improving UK data such as better than expected construction fi gures, unemployment slowing, and the services sector showing positive growth. We also saw further support as the National Institute of Economic and Social Research (NIESR) released its estimate for UK GDP for the last 3 months, predicting Q1 growth of 0.1%. While such a small reading would normally be bad news, any growth at all is welcomed by the markets as previous forecasts had suggested a contraction which would mean the UK is in recession. The better than expected economic fi gures for the UK have given Sterling support and helped it gain against the single currency, however compounding the rise in exchange rates is the weak Euro. Worries about the Eurozone debt crisis took centre-stage yet again recently, as Spanish 10-year bond
yields pushed higher, prompting investors to switch to the Pound which is still considered relatively safe in comparison to the Euro.
OUTLOOK
Given all the uncertainty surrounding both the fragile UK recovery, and of course the on-going problems in Europe, the outlook for this currency pair is very hard to predict. Rates have stabilised slightly in recent weeks, and do not seem to be pushing higher. It should also be noted that over the last few years we have seen rates reach these levels several times, only to stabilise and drop very soon afterwards, sometimes signifi cantly. While past performance is no guarantee of future results, with rates close to their best in a long time, and continued uncertainty surrounding the UK and EU economies, anyone that needs to convert Pounds to Euros this year should consider either a ‘Stop Loss’ order or ‘Forward Contract’, in order to retain control over your total costs.
POUND/DOLLAR DROPS
Against the US Dollar, Sterling has also made recent gains due to the more positive UK economic data. Rates to buy US Dollars now sit just below their best since November 2011. Despite this, many investors could be hesitant about pushing the Pound too high considering there is still a possibility of further quantitative easing in the UK, that cannot be ignored.
With the US currency it’s also important to consider its ‘safe haven’ status when considering market movements. Unlike the Euro, investors see the Dollar as a safe bet in times of global economic uncertainty. When there are issues in Europe or elsewhere that make investors jittery and ‘risk averse’, they fl ock to the safe havens and the increased demand it creates strengthens the Dollar and makes it more expensive to purchase. For this reason we have seen exchange rates remain relatively unstable, fl uctuating by almost 5% during 2012 alone.
OUTLOOK Due to this safe haven status, we GBP/Euro over 3 months
1.2000 1.8000 1.1600 1.1400
NOV 1/2012 JAN 1/2012 MAR1/2012
1.6200 1.6000 1.5800 1.5400 1.5200
NOV 1/2012 JAN 1/2012 MAR1/2012 To fi nd out more about the exchange rates available from the Foremost Currency Group, call 01442 892066 and quote Ref APITSAJA 86
aplaceinthesun.com BELOW $1.60, REMAINS UNSTABLE
think Sterling will struggle to sustain a move over $1.60. Indeed with the situation in Europe remaining very unpredictable to say the least, it is likely we will see renewed US Dollar strength. Furthermore recent minutes from the Federal Reserve’s March meeting provided an insight into how the policy-setting committee members voted, showing it’s unlikely that the US will pursue more quantitative easing in the short term, supporting the view that the US Dollar will remain strong. With rates still close to the highest we have seen since November, if you need to buy or sell Dollars throughout 2012, it’s wise to have a strategy in place in order to take some control over your purchase. As with those needing to buy or sell Euros, the best course of action is a free consultation with a specialist currency brokerage so you are fully aware of all the options available to you. The alternative is simply hoping things will move in your favour and as I have said before, hope is not a reliable economic tool!
GBP/Dollar over 3 months
This month currency expert Alastair Archbold of Foremost Currency Group looks at a resurgent Pound and how brokers beat the bank rates
CURRENCY
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