February could mark a return to normal for forex market

2 February, 2015

Robin Haynes

January was one of the most eventful months for many years for foreign currency rates. With the Swiss National Bank’s abandonment of the EUR-CHF cap, the announcement of the European Central Bank’s massive QE program, and the Greek elections, we saw unprecedented volatility.

On Friday, Eurozone inflation figures showed that the single currency bloc saw consumer prices fall in the 12 months to January, by 0.6%. This quite negative news of ‘deflation’ did not affect the value of the Euro as much as we might have expected, perhaps signalling an end to the single currency’s dramatic recent fall in value. We still have excellent rates available for sending Euros, and they may not be around for ever.

Looking forward to February, we might expect a more ‘normal’ month ahead. This week starts off with UK and US manufacturing figures today, and later in the week we have the Australian and UK interest rate decisions, New Zealand unemployment, Eurozone retail sales, Canadian unemployment and US non-farm payrolls. So whichever currency you are buying or selling there is likely to be some data which could move your rate.

Further ahead of course it is only just over 3 months until the UK election, and it is likely that there will be huge uncertainty in the run-up to polling day. Political uncertainty usually results in a weaker currency, so we might expect exchange rates to drop if there is unlikely to be a clear winner or strong coalition.

Finally after the events of January, which were dominated by headlines in the Eurozone, it is easy to have missed some other major rate movements; those of you sending money to Canada for example have actually seen the biggest improvement in what your Pound buys over the course of the month. Below is a table showing the difference in rates from January 1st to 31st, across a basket of currencies.

Pound vs Jan 1st   Jan 31st   Change (%)  
Euro 1.2772 1.3335 +4.4%
US Dollar 1.5327 1.5087 -1.6%
Canadian Dollar 1.8062 1.9178 +6.2%
Swiss Franc 1.5353 1.3871 -9.7%
Australian Dollar 1.8938 1.9386 +2.4%
New Zealand Dollar   1.9898 2.0775 +4.4%
South African Rand 17.94 17.55 -2.2%







Interbank (mid-market) rates for comparative purposes only; E&OE