Drop against the Euro

Last week we witnessed another tough week for Sterling exchange rates versus a basket of currencies including around a 3.5% drop against the Euro at its lowest point. The decline came after speculation mounted that the UK could see a hung parliament when the election takes place in May. Political uncertainty is one of the biggest market movers and with such uncertainty it’s no surprise Sterling is seemingly on free fall. Many people are in the process of buying a property abroad and this drop could have increased a transaction by over £6000 based on a €200,000 transfer.

Even with this downward trend and outlook for that matter there is one word of caution from this trader. The currency markets are extremely volatile and often unpredictable so those with a transfer of Euros to Pounds may not see their requirement continually increasing. It is well documented of the problems currently being seen in Greece and this issue could turn rates around should increased negativity come to light. One of the tools available to private clients and businesses alike, would be a forward contract. This is a contract set up to protect clients from adverse market movements by locking in a rate of exchange today for anything up to two years in the future. All that is required is a 10% deposit to take the contract and protect yourself from future losses whichever way your currency needs to be moved.

Other news last week saw both the Bank of England and European Central Bank keep interest rates on hold for another month at 0.5% and 1% respectively. As expected the market did not react to this in any particular fashion however there is still further uncertainty as to whether the UK will increase its Quantitative Easing program in the months ahead. Many will be looking to the Bank of England minutes released in just over a week to see if the program was discussed in last weeks interest rate meeting, and what affect this could have on future exchange rate movements.

This week sees a limited number of data releases for the UK. Figures to be released will show Februarys GDP estimate and manufacturing production figures.