ü Pound Euro – Spanish news
ü USD – rates to climb
ü New Zealand Dollar Forecast
The table below shows the percentage movement of exchange rates over the year along with the extra currency bought if buying with £200,000.
|Currency Pair||% Change||Difference on £200,000|
GBPEUR sterling forecasts
GBPEUR rates have held up well over the last week and I think the main reason for this is the intensifying tension in Europe creating euro weakness. In summary, the ECB has created a potentially unlimited “bond buying program” which allows them to increase demand for short term bond in troubled states. This added demand would reduce the yields needed to be offered and as a result alleviate short term costs for troubled Spain and Italy. Before this was announced yields were well over the 7% threshold widely seen as unaffordable. Just the creation of this caused rates to fall however Spain is yet to ask for it. The reason why? In return for the funds austerity cuts would need to be introduced which Spain is against as they would lose control of their own finances.
Today Spain is scheduled to announce further austerity measures in the 2013 budget; it will be keenly watched, it is this announcement that any Euro buyer or Euro seller should be keenly watching in the short-term. This has already created a number of strikes.
Other interesting news released yesterday was showing that even the “strong” members of Europe are struggling. France unemployment is now over 3 million.
Longer term, anyone with a euro need should watch out for news from Greece as they have almost completed their request for a 2 year extension to their austerity targets. This extension is expected to cost €12-€15 billion and could weaken the Euro, I would expect this to move markets by 0.5% maybe.
UK GDP figures – recession continues?
In the UK today we have Gross Domestic Figures released at 9:30. Which is expected to confirm the UK is still in a double dip recession. If released as expected I doubt FX rates would move much but any deviation from this even by 0.1% could easily take away or add a cent to GBPEUR trades making a difference of €1,000 on each £100,000 exchanged. Recently it was estimated that the UK economy is 10% smaller now compared to before the recession.
The trend for Cable (GBPUSD) has been positive recently but I expect this to change later today if US GDP figures are released and confirm the expected contraction in growth at 13:30. The reason why is as the US contracts, the risk appetite of traders will probably also fall, which traditionally results in riskier currencies being sold and safe havens like the US dollar being bought. This additional demand for the dollar will probably drive GBPUSD priced down from near YEAR HIGHS. Personally I would expect a fall of around 1% cent from the start today costing buyers $1,615 for every £100,000 transferred. If you need to buy dollars you may want to buy ASAP.
New Zealand Dollar Forecast
GBPNZD rates have remained volatile over the last 3 months due to its growth being closely linked to global growth and the exports of raw materials. Buyers have had opportunities recently as uncertainty in Europe has shrunk growth forecasts along with commodity prices. I expect rates to fall back long term as growth forecasts in New Zealand are still close to 3%, considerably better when compared to the near zero expected here in the UK. Buyers as a result may want to buy at these current levels.
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