Are we in a Currency War?

‘Currency War’ has been a phrase increasingly bandied about by the news and press over the past week with severe fluctuations in foreign exchange rates making headlines. In truth, the nations tied up in accusations of artificially weakening their currencies (to ensure the competitiveness of their exports and therefore their respective recoveries) tend to be those nations with currencies mainly used as currency investments such as Japan and Brazil. An interesting fact if you didn’t already know it is that ninety-seven percent of foreign exchange in the world every single day is made by currency speculators …Currency Solutions deal with private clients and companies from the other three percent that actually need the currency to purchase or sell a property or import goods. Namely, those that are affected in the costs of their purchases by all the movements in the rates that the speculators are causing. So – even though the ‘currency war’ is occurring in some highly speculated currencies, this ongoing situation does affect any clients who might be requiring currency to purchase a property or a business needing a transfer as the overall movements in the currency markets cannot be avoided. The state of play for some time now has been a weak Pound, an even weaker US Dollar and an almighty strong Euro. The situation still remains the same although we have seen some slowing down in terms of the Euro’s advance on the Pound. Generally speaking, the Pound is still at around the 1.140 level against the Euro and the 1.590 level against the US Dollar (at the time of writing on Monday this week). This is still around a four month low for the Pound against the Euro so not a good rate for those UK based clients needing to buy Euros – it is very important therefore to speak to a broker and make sure you are protecting yourself from the current volatility as well as you can do. If you happen to be bringing Euros back into Pounds then this is a very good time in terms of exchange rates. What may move the markets this week? There are certainly important upcoming events– particularly in the UK arena. The Bank of England minutes from the last monetary policy meeting are due on Wednesday this week. As this is expected to show a split over the vote on interest rates and quantitative easing that took place at the meeting two weeks ago, the minutes have the potential to weaken Sterling or at the very least make it more vulnerable. (Last month’s minutes incited instant market movement at the time the minutes were released). The date of the minutes happens to coincide with the date that George Osborne is due to speak about the full details of budget cuts. Whether or not cuts will in fact hamper the economic recovery has become an increasing point of debate, but what is certain is that the UK economy will be very much in the spotlight for the second half of this week. Bearing this in mind, whatever your transfer, find out how to minimise your losses or maximise your profit by speaking to a broker and obtaining a much more preferential rate to the bank as well as protecting yourself from volatility.