Sterling US Dollar Quarterly Forecast. In this forecast: July September 2015

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1 OF CURRENCY CONSULTANCY FOR BUS I NESS GROWTH Sterling US Dollar Quarterly Forecast July September In this forecast: Review of UK and US economies Looking ahead to the rest of Currency forecast for Sterling US Dollar

2 Introduction The key economic stories affecting the global market in the second quarter of were, of course, the ongoing debt crisis in Greece and the UK General Election. This report summarises the key points of these, and looks ahead to the key economic factors that could affect sterling and the dollar over the next quarter. We also assess the impact that the changing currency rates could have on transfers in the coming months, and demonstrate the range of forecasts available. In brief: April June GBP/USD Rates Month Average High Low April May June Year

3 UK Questions turn from General Elections to interest rates UK markets tensed in anticipation of the country s General Election in May. Poll results were close, and potential outcomes were plentiful, with a Conservative-led coalition, Labour-led coalition, or a minority government seeming likely of prospects. Markets greeted the eventual outcome of a Conservative majority with surprise but were able to take advantage of this businessas-usual result. Since then, the eternal question remains: when will be the right time for the Bank of England (BoE) to raise interest rates? Should the UK achieve stable growth levels, it will still be influenced by events abroad which could hold off on a rate hike, such as the debt crisis in Greece, oil prices and China s shaky expansion path. 3

4 US Shadow on the horizon It s been a positive quarter on the whole for the US economy, thanks to encouraging employment and job openings data. Events elsewhere in the world most notably in Greece drove up demand for the relative safe-haven US dollar. The International Monetary Fund (IMF) has cautioned that a strengthening dollar could add pressure to US growth, by affecting the country s trade balance. This, coupled with US Federal Reserve Janet Yellen s promise of slow, gradual rises in interest rates, could mean that a significant rate hike is further away than previously anticipated. 4

5 Looking ahead to the rest of Key economic factors that could affect the UK economy for the remainder of Interest rates The question remains in : will interest rates rise? Deflationary pressures remain an intrinsic problem. Coupled with lacklustre productivity, it seems that a potential UK interest rate hike is far beyond the horizon. Debt levels The UK s debt levels are still rising, due, in part, to Government spending. It remains to be seen if the Government will be successful in implementing a robust solution. Bank stress tests Global risks will weigh heavily on banks ability to pass Bank of England stress tests, the results of which will be published later this year. EU Referendum The possibility of an EU Referendum for the UK is still up in the air, but remains a factor for consideration. Key economic factors that could affect the US economy for the remainder of Unemployment US unemployment has fallen, but it remains to be seen if it will reach the levels deemed sufficient to encourage an interest rate hike. Although the US Federal Reserve does not use one economic indicator to guide a potential increase in the interest rate, the unemployment level has been historically an important one, and should be watched with interest. Interest rates Although the US economy is outperforming those of its major peers, a number of factors as outlined above still rein the central bank in from attempting to increase interest rates too soon. Some commentators wonder if the US will be able to raise interest rates in. 5

6 Currency forecast Major Bank Forecasts GBP/USD Institute 1 Month 3 Months 6 Months 12 Months Barclays HSBC JP Morgan Lloyds Nordea Santander Scotiabank Median Minimum Maximum Reuters SmartEstimate * *Reuters Smart Estimate by StarMine, a division of Thomson Reuters Source: Reuters Forecast accurate from 9 th July. Data taken from Reuters poll. 6

7 Forecast chart Predicting currency movements is not an exact science. Forecasts from major financial institutions for the GBP/USD rate vary dramatically, with a predicted median of 1/$ in twelve months time. There is also a marked difference between the minimum rate of 1/$ and maximum rate of 1/$ listed by the banks. This means that for every $100,000 changed to sterling, you could have lost or gained more than 18,000! GBP/USD 12 month forecast GBP/USD Interbank rate Month Months Months Months June Aug Oct Dec Feb 01 Apr 01 June 01 Aug 01 Oct 01 Dec 01 Feb Apr June 2016 Forecast accurate from 9 th July. Data taken from Reuters poll. 7

8 About us Smart Currency Exchange is an FCA-authorised international money transfer specialist with over ten years experience in the overseas property market. Smart Currency Exchange has built on founding values of customercentricity and harnessing overseas property expertise to help over 30,000 clients in the UK to better understand the risks of exchange rate volatility to save money on currency costs, transferring over 1 billion for clients to destinations all over the world. Crucial to this is an in-depth understanding of the overseas property buying process, supporting clients from start to finish. Smart Currency Exchange also partners with legal experts, agents and financial advisors to help make their overseas property purchase as smooth and straightforward as possible. Get in touch info@smartcurrencyexchange.com smartcurrencyexchange.com Smart Currency Exchange Ltd is authorised by the Financial Conduct Authority under the Payment Services Regulations 2009 (FRN ) for the provision of payment services. Smart Currency Exchange Ltd is authorised and regulated by HM Revenue and Customs under the MLR no The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy or sell. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.