# So where next for the pound versus the euro?



## keiths (Jul 27, 2009)

After a prolonged spell of the GBP-EUR moving in a very tight range between 1.15-1.18 we could be forgiven for presuming the rate would remain above 1.15. However towards the end of August the pound once again fell off a cliff and crashed through the key levels of 1.15 and then 1.1363.

In the last month the pound has fallen over 3% against the euro. The main reason for the recent demise is effectively related to sentiment on the policy decisions of the Bank Of England against the European Central Bank. The differences are stark; on the one hand the BoE have recently extended the programme of Quantitative Easing and the door is still open for further expansion. Contrastingly the ECB are not looking to inject further stimulus measures and are looking at exit strategies for existing QE measures introduced. For the UK the market has not warmed to the QE measures introduced and there is a strong argument that the trickle down effect to the consumer is not being realized. This is strongly apparent when looking at private and business lending data which is still abysmal; in addition mortgage approvals are still depressingly low. Another reason for the fall in the pound can be attributed to GDP or growth; recently France and Germany have posted positive GDP of +0.3% and the Eurozone as a whole posted a reading of -0.1%. This reading affirms that the Eurozone as a whole is close to coming out of recession and the two major economies France and Germany are already out of recession. In the UK we saw that GDP came in at -0.7% which was slightly better than expected, however still painfully weak. 

Another worry for the UK economy is the rising public debt issue- this is lending to a negative view of the pound especially as GDP is not showing more improvements. However we should not get too depressed on the health of the pound and the UK economy. The cautious approach by the Bank Of England could yet help the pound going forward; remember that problems are still in the background for the Eastern European banking sector and following this months German elections we could actually see a colder dose of reality from Europe's largest economy. Another reason we should see the pound recover is that the markets do not like surprises and disappointments; the recent improvements in Eurozone GDP have been strongly linked to the stimulus pumped into the economies. The concern is that once this river of stimulus runs dry then the underlying reality will be exposed and this will lead to unpredictable GDP levels and uncertainty and negativity for the euro.

If the European Central bank experiences a bumpy road ahead and look to add more stimulus in reaction to a downturn then this will be very euro negative and could lead to a sharp sell off against the major currencies including sterling. It has been one year since the economic downturn and it would be optimistic to expect recovery to ensue as a “V” shape. Any uncertainty I feel will eventually lead to euro weakness as the pragmatic attitude and dogged determination for the European central Bank not too act too aggressively will come under heavy scrutiny.


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## jojo (Sep 20, 2007)

crystal ball gazing Keith!!!! Whats that expression??? "If my auntie had balls, she'd be my uncle"!!

Jo xxx


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## keiths (Jul 27, 2009)

jojo said:


> crystal ball gazing Keith!!!! Whats that expression??? "If my auntie had balls, she'd be my uncle"!!
> 
> Jo xxx


LOL. Or...."Do you have crystal balls?" ....... "No, its just the change jingling in my pocket!"


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## jojo (Sep 20, 2007)

keiths said:


> LOL. Or...."Do you have crystal balls?" ....... "No, its just the change jingling in my pocket!"


From what I've heard Keith, yours are golden!!!! 

I have a theory that actually, Merv and the UK government want to keep the pound low cos eventually it will cause inflation, artificial inflation, but that would "look" good wouldnt it!!


Jo xx


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## JBODEN (Jul 10, 2009)

Did the British public feel the effect of the lowering of the VAT rate (from 17.5 to 15 %) or did the retailers pocket the 'bonus'?


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## jojo (Sep 20, 2007)

JBODEN said:


> Did the British public feel the effect of the lowering of the VAT rate (from 17.5 to 15 %) or did the retailers pocket the 'bonus'?


I dont think the public noticed and the retailers didnt benefit cos of the costs of implimenting it!!! In fact it cost my husband significantly and its gonna go back up again in the not too distant future I believe???? A waste of time and effort IMO


Jo xxx


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## owdoggy (Jul 23, 2008)

I have to transfer a lumper with a deadline of Oct 1st.

Sooner or later you reckon?

Or do I just keep on watching the rate go up & down more times than a whore's shreddies whilst occasionally banging my head on the desk:frusty:




Doggy


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## jojo (Sep 20, 2007)

owdoggy said:


> I have to transfer a lumper with a deadline of Oct 1st.
> 
> Sooner or later you reckon?
> 
> ...


A friend of mine has just tranferred a fairly hefty sum from Euros to sterling (Proceeds of a house sale) and he kept playing one off against the other (currency direct and HIFX) until he got the deal he wanted! One of those two companies actually advised him to hurry and do it cos the pound was due to go up any minute... good job he didnt listen cos the pound has fallen eversince she told him that (sales talk I guess) !!!!

Jo xxx


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## mrypg9 (Apr 26, 2008)

It seems that recovery in the eurozone is gaining momentum: new orders for industrial goods rose by 3.1% in July. I would guess that this recovery will be confined to the stronger economies. The PIIGS are still coping with their own severe but differentiated economic and social problems.
A breakdown of Germany's GDP figures shows that consumer spending rose by 0.7% in the three months to the end of June, strongest rise since Q4 of 2006.
Sales of new homes in the U.S. rose by 9.6% in July, of existing homes by 7.2%.
So where this leaves the£/euro I know not.
And since I can do nothing about the situation, why worry? Back to the pool and cava.


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## jojo (Sep 20, 2007)

The exchange rate looks a little "poorly" this morning doesnt it!! I wonder what will happen later on????

Jo xxx


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## Joppa (Sep 7, 2009)

The market was jittery about what the BOE might do following the monthly meeting of Monetary Policy Committee. While no change was expected in the interest rate, they were wrong-footed last month when the bank surprisingly extended the quatitative easing programme (pumping money into the economy) by £50billion. And when the minutes of the August meeting showed that the governor, Mervyn King, wanted even greater amount (£75billion) but was outvoted, the forex market was alarmed. Hence the weakness of the sterling in the last few days, and this morning.
As it happened, there was no surprise in the noon announcement by the BOE so sterling recovered its poise, for now. But nervousness hasn't gone away and more bad news on UK economy will likely to lead to further sterling weakness, and even good news may only give it a temporary boost, until there is a clear evidence that QE is working, with coresponding increase in lending to small-to-medium sized firms and individuals, and Britain is pulling out of recession.


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## keiths (Jul 27, 2009)

Joppa said:


> The market was jittery about what the BOE might do following the monthly meeting of Monetary Policy Committee. While no change was expected in the interest rate, they were wrong-footed last month when the bank surprisingly extended the quatitative easing programme (pumping money into the economy) by £50billion. And when the minutes of the August meeting showed that the governor, Mervyn King, wanted even greater amount (£75billion) but was outvoted, the forex market was alarmed. Hence the weakness of the sterling in the last few days, and this morning.
> As it happened, there was no surprise in the noon announcement by the BOE so sterling recovered its poise, for now. But nervousness hasn't gone away and more bad news on UK economy will likely to lead to further sterling weakness, and even good news may only give it a temporary boost, until there is a clear evidence that QE is working, with coresponding increase in lending to small-to-medium sized firms and individuals, and Britain is pulling out of recession.


As expected the Bank Of England left interest rates unchanged yesterday and also did not expand the QE measures any further from the £175bn current level. This gave sterling a swift boost as it pushed higher across the markets- gaining on the USD and the EUR. Further good news today from the UK with stronger than expected economic data; GBP/USD has today touched over 1.67 and GBP/EUR has gradually climbed to 1.1450.


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## jojo (Sep 20, 2007)

keiths said:


> As expected the Bank Of England left interest rates unchanged yesterday and also did not expand the QE measures any further from the £175bn current level. This gave sterling a swift boost as it pushed higher across the markets- gaining on the USD and the EUR. Further good news today from the UK with stronger than expected economic data; GBP/USD has today touched over 1.67 and GBP/EUR has gradually climbed to 1.1450.


its not exactly a rip roaring gain tho is it LOL!!! Fingers crossed for a substantial increase before my next pay day!!!!!


Jo xxx


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## Hombre (Sep 10, 2009)

Sabadell Bank has just introduced a scheme whereby the exchange rate can be fixed for you for 12 months. Apparently, when the rate is at a level that is acceptable to you, you can go into your local branch and negotiate with your manager to fix it for a year. Either they lose, or you do. The service is free. I have gleaned this from my local branch manager , and it has been confirmed by phone calls from head office.
However, I have no intention of following it up just yet as the rate is pretty poor. It is, however, worth considering should the rate reach an "acceptable "level.


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## jojo (Sep 20, 2007)

Hombre said:


> Sabadell Bank has just introduced a scheme whereby the exchange rate can be fixed for you for 12 months. Apparently, when the rate is at a level that is acceptable to you, you can go into your local branch and negotiate with your manager to fix it for a year. Either they lose, or you do. The service is free. I have gleaned this from my local branch manager , and it has been confirmed by phone calls from head office.
> However, I have no intention of following it up just yet as the rate is pretty poor. It is, however, worth considering should the rate reach an "acceptable "level.



Whats acceptable tho!??!! When we moved out here it was 1.30, before us there were folk getting as much as 1.70+ and at christmas it was parity!

It all a gamble isnt it! You've just gotta go with it 

Jo xxx


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## Hombre (Sep 10, 2009)

jojo said:


> Whats acceptable tho!??!! When we moved out here it was 1.30, before us there were folk getting as much as 1.70+ and at christmas it was parity!
> 
> It all a gamble isnt it! You've just gotta go with it
> 
> Jo xxx


Well I suppose what is "acceptable" is a level of income that you are comfortable with. When we arrived here it was 1.60 something but I doubt that those days will ever return, or anything like. It is all so unpredictable and the more you research, the more confusing it becomes.
Ah well !...back to the accordion on the corner.


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