Exchange Rate Outlook – November 2011

Currency Index’s summary of the exchange rate outlook for November:

Currency news and exchange rate volatility at the moment have been dominated by the Greek debt crisis, which has had knock on effects for many major currencies as well as the Euro. For those of you buying property abroad, who will need to make international payments in different currencies, the prospects for November are even less clear than usual.

For the Euro, we have seen the single currency react strongly to developments in the Eurozone regarding the package to bailout the troubled Greek economy and in particular its inability to repay its debt to commercial banks around the world. While the UK and therefore sterling is exposed to European sovereign debt, the Euro itself has strengthened whenever the outlook has been positive (when last week’s deal was announced) and weakened, giving better exchange rates for sending Euros, whenever the outlook has been negative (as when George Papandreou made the shock referendum announcement).

Much may depend in the coming weeks on whether Greece implodes with political plate-smashing (cheaper Euros) or comes up with a plan to ratify the deal – and quickly (more expensive Euros).

There is also speculation that the European Central Bank may cut interest rates at its monthly meeting tomorrow (Nov 3rd) which would be likely to weaken the Euro further.

Against the US Dollar, we have seen rates for sending money to America generally do the opposite to the Euro. Sterling is stuck somewhat in the middle of a currency see-saw, with a stronger Euro often meaning cheaper US Dollars, and vice versa.

Generally the economic outlook for sterling is still negative. Although this week’s GDP figure was better than expected, 0.5% growth is still not a great sign of economic recovery, and there may well be more Quantitative Easing announced by the Bank of England next week, which is likely to be bad news for the Pound. Manufacturing is still struggling, and unemployment is still too high. The UK economy will also be affected by any further problems in the Eurozone.