Euro (€) Currency Thread

JasonLVC

STERLING/EURO:
Sterling rose to a six-week high against the euro yesterday, hitting €1.17 for the first time since September 28 th as speculation of near-term quantitative easing from the BoE receded.

• In its Quarterly Inflation Report, the Bank commented on the upside risks to inflation stating that the rate is likely to remain above the 2% target through 2011 and could still be above target by the end of 2012.
• The forecast marked a noticeable revision to August’s inflation report and suggests that the prospects for further QE are fast diminishing as with VAT due to rise by 2.50%, the Bank will not want to risk stoking inflation by pumping more money into the economy.
• The Inflation Report also had a slightly more optimistic outlook on growth, and while the Bank reiterated the uncertainties facing the economy, it also does not envisage a sharp slowdown in growth, despite the government’s spending cuts.
• Alongside the developing financial crisis in Ireland, the Report helped push sterling through 1.17 and the price is continuing to fair well this morning after data revealed that the Spanish economy stagnated in the third quarter.
• Sterling does seem to be gaining favour by the day as investors grow more comfortable with the UK’s economic landscape, but the pound’s sharp move higher (six consecutive sessions on the rise) suggests that a bout of profit taking may not be far off.

Currently at 1.176

Source: CaxtonFX

JasonLVC

STERLING/EURO:
The pound recovered from early losses to close flat on the day against the euro but the single currency has the edge this morning as officials close in on a deal over Ireland.

• Data yesterday revealed British retail sales rose 0.5% in October, recovering from a 0.2% fall the previous month, but given seasonal factors these figures were largely priced in, limiting the impact on sterling.
• The main focus at present remains on Ireland where top Irish government officials acknowledged for the first time yesterday that the country is grudgingly edging toward a massive international bailout.
• Patrick Honohan, the head of Ireland's central bank, said he expects the country will receive "tens of billions" in international loans. Finance Minister Brian Lenihan added: "It's clear we will need some form of external assistance.
• Healthy bids for Spanish bonds at a sale on Thursday also helped to settle nerves, triggering a rally in European and US stocks, which buoyed the euro.
• Although short-term euro selling over concerns about Ireland have stalled for now, the impact of Dublin's problems on other struggling eurozone countries is likely to limit any significant euro gains.
• Sterling has weathered a busy week for news and data, but has not managed to find any real momentum to head higher. This looks unlikely to change today with the calendar quiet and as investors wait clarification over Ireland.

Source: CaxtonFX

Currently trading at 1.173

JasonLVC

UPDATE :_

Sterling's rally stalls as Ireland closes in on a deal

Given that the debt crisis in Ireland has dominated the headlines over the past couple of weeks it may come as a surprise that the pound has failed to fully capitalise. Certainly the exchange rate has made significant gains from the lows around 1.11 back in October, but the pound appears to have hit a ceiling just short of 1.18. In the near term we could see the price stall at this level before heading higher into year-end.

The main problem for the UK currency is the exposure of UK banks to those in Ireland. According to recent figures, that exposure is in the order of £140bn. Should the Irish banking sector run out of funding, the UK, more so than many other European countries, would find its own banking sector com ing under huge pressure. In recognizing this fact, George Osborne has stated that Britain will provide additional loans to Ireland should they be called upon.

With recent events now pointing to a near term resolution over Ireland, market confidence has risen, which is supporting the euro. Although an agreement is not yet set in stone, movements in Ireland’s bond market suggest that a funding arrangement is not far away. An announcement of such a deal (which could come early next week) would probably result in a knee-jerk euro positive reaction from the market.

We do not see sterling sliding by any means, but it could certainly struggle to break sustainably higher as investors focus on the positive effects of an Irish bailout fund. A one-week outlook looks closer to €1.16 than €1.19.

However, the threat of the debt crisis spreading to other eurozone countries (namely Portugal) certainly remains and we do still see sterling gaining further ground as we head to ward the end of the year. Also working in favour of the pound is the receding threat of another round of quantitative easing.

Following noticeable improvements in UK economic data and the high level of inflation, the Bank of England is looking increasingly unlikely to shift policy, which should provide sterling with some upward momentum in the short term.

Source: CaxtonFX

JasonLVC

STERLING/EURO:
The pound erased early losses yesterday to climb back through 1.17 as the announcement of an Irish bailout failed to uplift market sentiment.

• The initial reaction to an agreement over Irish funding was quite positive with the euro rallying across the board but gains proved short-lived with the single currency steadily back peddling through the day.
• Market fears were driven by the bailout’s political fallout, which is threatening to spiral out of control. Independent MP’s said they may withdraw support for Ireland’s austerity budget – a necessary precondition of the European bailout.
• Both the Irish government's coalition partner and the main opposition party have called for a vote in the near future. The political instability has offset any improved sentiment toward Ireland following the news of the EU/IMF funding, and the euro remains under pressure this morning.
• The single currency has also not been helped after rating agency Moody's said a "multi-notch downgrade" on Ireland was now likely.
• An array of eurozone data is due this morning from the manufacturing and services sector but given the market’s hang up over Ireland, any reaction will likely be brief.

Although most of the specifics regarding Irish funding are yet to be revealed, downside risks for sterling look to be receding.

Euro currently trading at 1.172

Orville

Just some general advice pls. i am going to eurodisney early next year and was going to start to change my money to Euros, do you think it might be worth waiting to see if i can get a better deal.

JasonLVC

STERLING/EURO:
The markets seemed pretty unconvinced by Ireland’s €85bn bailout yesterday with the lack of confidence reflected in the euro’s drop across the board.

• The pound climbed to a fresh two month high just shy of 1.19 as investors looked beyond a debt rescue plan for Ireland and dumped the single currency on concerns that other eurozone nations may also require help.
• Investors are becoming increasingly concerned that European policymakers are putting out brush-fires rather than solving the issue at hand, with the cost of insuring Spanish and Portuguese debt again on the rise yesterday.
• Sentiment remained fragile with a sale of Italian bonds meeting only lukewarm demand and highlighting investor’s unease about eurozone debt.
• In the UK, the Office for Budget Responsibility raised its growth forecast to 1.8% from its 1.2% forecast in June, but it cut its 2011 forecast to 2.1% from 2.3%. The revisions were broadly in line with what the market had expected and had little impact on market movement.
• In trading this morning the euro has pulled back some ground but the price remains comfortably above 1.18 and the risks remain to the upside.

Trichet is due to talk later today but he’s too well practiced to cause any real stir, which should leave the European bond markets to continue dictating direction

JasonLVC

Orville wrote: »

Just some general advice pls. i am going to eurodisney early next year and was going to start to change my money to Euros, do you think it might be worth waiting to see if i can get a better deal.

I doubt anyone knows the answer to that Orville, you just need to buy your Euros at a rate that you find acceptable.

The Pound has been around the 1.15 to 1.17 mark for a good few months now and the markets appear to have priced in all the major catastophes so far, I think personally the Pound will gain a little further on the Euro to about 1.20 to 1.21 over the next 2-3 months if the EU doesn't do more to fix the inherent problems it has, if it does fix things, the Euro will go back to about 1.16 to 1.17 again.

I don't think we'll see massive gaps between the currencies like we did some years back when you could get $2, to the £, the markets seem to cash in as soon as a currency gains a little ground on another, so lots of short-term profit making rather than longer term investment.

If you're only exchanging a few hundred pounds for a weekend trip to Disneyland, the savings on exchange rates will only be a few quid, but if you are thinking of spending £1k or more then you might want to consider talking to an proper currency exchange and buy a forward contract, but they're just as abig a gamble as you could get a better rate on a forward contract and then find come the time the spot rate is higher anyway.

dzug1

Orville wrote: »

Just some general advice pls. i am going to eurodisney early next year and was going to start to change my money to Euros, do you think it might be worth waiting to see if i can get a better deal.

It might be - difficult to tell. The euro is expected to weaken, but expectations are often confounded by an unexpected piece of news that noone has factored in.

JasonLVC

• The pound advanced to its strongest level in 10 weeks against the euro amid growing concerns that the eurozone’s debt crisis will worsen.
• Sterling’s gains of over a cent yesterday led the currency to post its biggest monthly gain since January 2009 and at present there a few signs of a turnaround in the trend.
• Portuguese Prime Minister Jose Socrates is adamant that his country can pull through without a bailout but the market appears wholly unconvinced with the yields on Portuguese debt rocketing to record highs.
• Indeed, the premiums investors demand to hold Spanish and Italian sovereign bonds over German debt also jumped to lifetime highs while yields on Irish and Belgian bonds also widened.
• From the UK there was limited reaction to a British consumer confidence survey that showed a larger than expected drop in sentiment in November, however sterling is off its highs this morning after a Nationwide survey showed UK house prices fell to a nine- month low last month.
• In trading this morning sterling is currently back down in the low 1.19s with focus on the UK’s monthly manufacturing index due at 09:30. The data is not expected to offer too many surprises and is unlikely to offset the negative sentiment emanating from the eurozone.

Trading at 1.193 at this time.

JasonLVC

Currently 1.182

STERLING/EURO:
The pound made a half cent gain against the euro yesterday as disagreements between EU finance ministers fuelled fears that the debt crisis will remain unresolved in the short term.

• Investors were focused on a meeting between European finance ministers, which are facing pressure to increase the size of a €750bn safety net for crisis-hit members in order to halt a debt crisis in the eurozone.
• Belgian Finance Minister Didier Reynders said a eurozone bailout fund might be expanded, breaking ranks with German Chancellor Angela Merkel and French President Nicolas Sarkozy.
• Merkel was adamant that she will not explore the possibility of injecting more cash, “I see no need at this time to increase the fund. Only a very small percentage of it has been used.”
• Disagreement between the ministers put pressure on the euro, enabling the pound to edge back above 1.18 where it is continuing to hold this morning.
• The data calendar is a little busier today with UK manufacturing and industrial production figures due at 09:30. Slightly improved monthly readings are expected, but with the market still focused on developments in the eurozone, we’re unlikely to see a significant reaction.

Source: CaxtonFX