Sterling Exchange Rate Forecast Remains Volatile

If you are sending money overseas or need currency for a foreign property purchase then the table below shows how volatile exchange rates for the pound can be with the movement in just one day.

Will The Dollar Weaken Due To Hurricane Sandy?

With the tragic events that have unfolded across the US and the clean up costs only beginning to be estimated does this mean the Dollar will weaken substantially with the amount the US economy has lost?  Natural disasters are just one point of the Ellis Currency Compass, however they do not always have the same impact. 

With the Japanese tsunami the Yen strengthened with the amount of insurance money flowing back into the country, however when the earthquake hit Christchurch the Kiwi Dollar weakened massively due to the damage caused.  The Dollar has weakened in the last few days but I suspect the US is big enough to ride out the damage and will ultimately bounce back – if you do need to buy Dollars soon then why not look at a forward contract?  Call 0800 328 5884 to find out more.

More likely the bigger impact of the Hurricane will be the effect it has on the race for the White House.  The big debate stateside is how to tackle the “fiscal cliff” and the Dollar has been partly paralyzed by the fact that markets don’t know whether the Democrats or Republicans will be able to implement their plans – if Obama can be seen to be a good leader in a time of crisis it may help swing the election in his favour.  In any event I feel the US election and the issue of how to deal with their national debt is likely to have a bigger impact on the Dollar than the hurricane, and I also think that the Dollar will strengthen irrespective of which candidate wins the Presidency just because of the certainty the outcome will provide in allowing investors and businesses to plan ahead.  A move back below 1.60 is therefore foreseeable before the end of November.

EU Budget Causes UK Problems

The Government was defeated last night in a UK Parliamentary debate over the EU budget which saw Labour side with Tory rebels to defeat proposals to allow the EU budget to increase in line with inflation, and instead demand  a real terms cut in European spending.  The move is a blow to David Cameron ahead of talks next month and was reminiscent of how John Major was brought down as PM by backbench revolts over Europe.  Whilst in itself the vote is not binding it does put further strain on the Coalition.  The recent positive GDP data in the UK has deflected some attention from the economic battle they face, but there are still strong headwinds facing the UK economy and a weak government is unlikely to bolster the pound.  With a Bank of England meeting due next week, and nobody certain whether the GDP data is a sign of modest recovery or simply a one off due to the Olympics, sterling remains vulnerable and anyone selling the pound should be prepared to move quickly to protect their budget levels.

When Should I Buy Canadian Dollars?

Canadian GDP figures released yesterday came in below expectations and the Loonie weakened as a result.  The pound has struggled this year against the Canadian Dollar largely due to high commodity prices with Canada being a large producer of natural resources.  With this in mind I feel these are the types of spike that CAD buyers may wish to take advantage of, and avoid the risk of the pound dropping back to the mid 1.50’s we have seen for large parts of 2012.

Sterling Euro Exchange Rates Still Range Bound In Mid 1.20’s

GBP EUR rates have sea-sawed over the last couple of weeks with the pivotal point seeming to be around the 1.25 or 0.80 pence mark.  The movement has been caused by the ebb and flow of confidence surrounding the Eurozone debt crisis and various economic data releases that have been better or worse than expected for both the UK and our European counterparts. 

The general consensus amongst most analysts during this period has been if you are buying Euro then it is worth doing whenever the mid rate has been above 1.25, and if you are selling Euro then do so when the mid rate is below the 1.25 mark.  This trend is likely to continue until the markets see one of two things.  Either the UK posts consistently better data and the pound strengthens (a move that I think is unlikely), or the Eurozone crisis flares up again.  The latter is more likely in my view, however there is a serious risk that any move higher for GBP EUR rates could be weighed down by UK economic weakness.

If you are considering buying or selling a property overseas then why not get in touch with one of our experienced currency brokers to find out more about what Foreign Currency Direct can save you compared to your bank?  Likewise if you are a business with exposure to currency through import or export requirements and want expert guidance on your currency strategy then it would be worth getting one of our corporate team to do a trade analysis – it is free and could save your company many thousands of pounds.  Either way ring 0800 328 5884 or email cmg@currencies.co.uk