Monday, 20 April 2015

Monday, 20 April 2015

Guest blog: "A good week for the pound"

Adam Bobroff, Director of our currency exchange partner Foremost Currency Group, writes ...

It has been a very busy time on the currency markets recently with all of the talk surrounding the General Election in the UK and the on-going talks over in Greece regarding their bailout conditions.This market volatility does not seem like it is set to end anytime soon with uncertainty still rife on both the Sterling and Euro side.

Sterling had a good week last week, reaching a one month high of 1.3946 against the Euro and briefly breaking the 1.50 mark against the US Dollar. It seems at present the pound isn’t feeling the full effects of the political uncertainty surrounding the upcoming General Election. This is the closest election we have seen in a generation and generally you would expect this uncertainty to have a negative effect on a currency. This time round however there is so much going on elsewhere, in Greece and over in the US, markets aren’t reacting quite as expected.

The markets did react at the end of last week when it was announced that the UK unemployment rate fell to it’s lowest since 2008. The amount of jobless people in the UK dropped by 76,000 to 1.84 million, meaning that unemployment now sits at 5.6%, in line with forecasts. This is great news for the UK, if you cast your mind back just a few months, Mark Carneys form of ‘Forward Guidance’ was targeting an unemployment level below 7% before an interest rate hike would be possible.

Unemployment was a real issue affecting the economy and this new figure shows that the UK is continuing to move in the right direction.

Over in the Eurozone last week German finance minister Wolfgang Schaeuble took a small swipe at Greece stating that they are welcome to find investment from Moscow or Beijing but they would have great difficulties. This comes off the back of fears that Greece will default on their pending debt repayment. Schaeuble added “The Europeans have said, ok, we are ready to lend money until 2020. If you find someone else, whether it’s in Beijing, in Moscow, in Washington DC, or in New York who will lend you money, ok, fine, we would be happy. But it’s difficult to find someone who is lending you in this situation amounts of €200bn”. Last week also saw Greece have their credit rating downgraded and their borrowing costs jump up 3.5%.

Currency markets are very to judge at the best of times and in this phase of heightened volatility it may prove prudent to stay in touch with our currency brokers, the Foremost Currency Group. They have a number of different contract options that can help safeguard your funds against adverse market movements. One of these being a Forward Contract whereby you can lock in an exchange rate for a future settlement date up to two years in advance by simply placing a small margin against the trade.
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