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By Alex Ellis

Sterling exchange rates have lost some ground recently owing to the Bank of England’s apparent reluctance to raise interest rates despite the growing inflation levels in the UK. Currently the UK’s inflation is around 4% which is double the BoE’s target of 2% and the market has been eagerly awaiting interest rates to rise, this seems to be taking much longer than first forseen and this has caused the market to react aggressively.

This looks set to continue until the BoE do raise rates and I am under the opinion that rates will rise around May time. The reason for this is that the revised GDP figure for the pound showed the economy contracted -0.6% in the fourth quarter, this was worse than previously thought and presents the BoE with a very serious problem – do they allow inflation to spiral or do they raise interest rates and risk the economy to enter into a double dipped recession.

When rates do rise the European MPC will have to raise their rates soon after or sterling will gain ground very quickly and we could even see rates as high as the mid 1.20′s. These rates have not been seen since the recession first hit so will come as welcoming news for those looking to trade GBP/EUR although owing to the uncertainty this could be some time away.

By Alex Ellis

Tomorrow’s Bank of England minutes could help to shape both the short and long term future for sterling exchange rates as we may find that another MPC member has voted for an interest rate hike. Currently only two members have voted for an interest rate increase and each time a member has voted we have seen sterling strength as a result. I therefore think that if another member were to vote for an interest rate hike then we would see sterling strengthen as a result. At present rates are pushing closer to 1.20 and therefore if another member is seen to join Sentance and Weale then we may see them push through this psychological barrier.

Also due out this week is some UK GDP data on Friday at 09:30, GDP is seen as one of the leading indicators of the health of an economy and therefore this can cause rapid movements on the market if released worse or better than expected.  Recent UK retail sales showed a massive increase on what was expected so we may see GDP released in similar brackets. If this were to happen then again I would expect the pound to strengthen as a result.

In any event all of the above can impact the value of your conversion regardless of whether you are buying or selling sterling, therefore by employing the services of an experienced currency broker you can protect your position and ensure that you maximise your savings. Use our contact form to be put in contact with one of our representatives.

By Alex Ellis

Sterling has had a very unpredictable week this week as the market showed just how volatile it can be, UK CPI figures on Tuesday (an inflationary measure) showed that inflation had in fact risen to 4%. This was slightly off the predicted figure of 4.1%, but still shows that inflation is double the BoE’s target of 2%.

High inflation is seen as a positive thing because the only way to combat this is to raise interest rates which of course make investing in an economy more attractive, so you would expect this to cause sterling strength. The market in fact reacted oppositely and the pound weakened over a cent against the Euro on a conversion of £100,000 this makes a difference of £776.

Tomorrow we have retail sales figures for the UK and these could help to mould the short term opportunities for sterling. Following December’s figure that was affected by the adverse weather all eyes will be closely watching this release to gain a much more truthful idea of how well the economy is performing.

The prediction was that once the coalition budget cuts came into play we would see an economic slowdown for the UK so typically you would expect this release to be worse than last years. However last January was a very sluggish month so the figure was released at 0%, because of this I don’t think it will be hard for this to be eclipsed by tomorrows figure.

Currently the UK is experiencing what is known as stagflation, this is where inflation is high but unemployment is also. Obviously raising interest rates makes the cost of living much more expensive and this is the dilemma facing the Bank of England, because if they raise the interest rates they risk damaging the UK’s already sluggish growth.

Retail sales are due at 09:30 (GMT) tomorrow morning so use our contact us form to be assigned an individual currency broker who can help to guide you through the process.

By Alex Ellis

The Bank of England may need to take a more aggressive stance towards curbing the UK’s inflation figure following today’s Consumer Price Index figure today which showed inflation has risen to 4%. This has been attributed to the rising cost of food, the VAT increase to 20%, as well as oil prices which are now at their highest ever at £1.27 per litre according to the Office of National Statistics.

The majority of analysts are predicting that we will see an interest rate rise in the third quarter this should cause sterling exchange rates to improve vastly as high interest rates see investors get greater returns and therefore increases the likelihood of money being pumped into an economy.

Today’s figure has caused the pound to weaken slightly because although it showed that inflation had grown it was actually slightly lower than many investors were hoping. As discussed I still think that inflation will cause interest rates to rise but feel this will more likely be towards the summer months.

Tomorrow at 10:30 the Bank of England will announce their quarterly inflation report and this could cause some further movement in exchange rates as this will outline how the BoE view the long term future for inflationary figures. It would be wise to contact your currency broker around this time so as ensure that you are not caught out by any adverse movement.

Other data to watch out for:

• On Thursday at 07:00 we have Producer Price Index figures for Germany – these have been known to cause movement as Germany is seen as one of the economic super powers in Europe.
• Also on Thursday at 09:30 we have UK Retail Sales figures which again can cause large movements on the market, keep in close contact with your account manager around this time to ensure that you are well informed prior.

By Alex Ellis

Sterling has stumbled early morning even following better than expected UK retail sales figures for January; these figures were 2.3% better than they were the previous year. Although you would normally expect this to cause strength for the currency we have actually seen GBP exchange rates suffer since the market opened. This shows just how fragile the pound remains at present and how data which you would normally expect to show strength has now become unpredictable.

Sterling has gained over 3% in the last 2 weeks and this is still a good time to change sterling into euros. To put it into perspective on a £200,000 transfer this movement makes a difference of €7,560 and this continues to highlight the importance of following exchange rates. The easiest way to do this is to employ the services of a currency broker who can help to guide you through the process and outline any upcoming data which may impact the value of your exchange.

Later on today at 11:00 we have German Industrial Production figures due and these are expected to show an increase to 0.2% from last month’s contraction of 0.7%. This economic release is seen as a key indicator of strength in the manufacturing sector and therefore considered quite important to show the overall health of an economy.

On Thursday at 05:00 we have the GDP estimate for the UK and this is definitely one of the releases to watch out for as recent GDP figures were so weak they caused sterling to lose around 4% against the Euro; this equates to a difference of around £8000 if you were selling €200,000. At 11:00 we have the ECB monthly report and at 12:30 we have the Bank of England’s interest rate decision – all of these have the potential to cause large swings on the market so it is worth contacting your currency broker beforehand.