Exchange rates – forecasts and predictions

There's no shortage of economic bodies in the UK and worldwide, who produce reports that predict changes in economic growth and exchange rates. It may seem like forecasting exchange rates is fairly straightforward, relying on a few basic economic principles, but it can actually be far more complex than that and whilst experts may be able to forecast general movement, it's very difficult to be completely accurate. It's a key area, however, as the foreign currency market is the biggest in the world.

Factors affecting exchange rate predictions

There are many things that need to be taken into consideration when predicting changes in exchange rates, including both quantifiable and unquantifiable evidence such as:

• Economic predictors – reports that look ahead at the state of a country's economy can be useful in predicting exchange rates. Although the economy is not the only influencing factor, it does play a key part and the perceived strength of the currency is often linked to the perceived strength of the country.

• Economic reports – these reports look back at a recent period – perhaps the last quarter's employment figures or the last month's housing market trends. By analysing these trends, predictions can be made that can have an effect on exchange rates.

• Interest rates – the level of interest rates is a good indication both of the economy in general and of the government's or central bank's approach to managing the economy. Rises or falls in interest rates are an important indicator when it comes to predicting exchange rates.

• Market confidence – the confidence in the currency is very important. Even if all the economic indicators are positive, a lack of confidence in the currency may result in investors selling it off which, in turn, devalues it. Only some investors are risk-averse and will hang onto a currency in the face of a large sell-off, and exchange rates are certain to be affected by a lack of confidence in the currency.

It's important then, that you look at exchange rate forecasts from brokers and analysts carefully to make sure that they have considered all the variables when making their predictions. You can buy your currencies in advance and put a stop mark on their value in order to make sure you get the best deal in the light of the forecasts you receive.

Foreign Currency Exchange Ltd is a commercial currency brokerage based in the UK. We help thousands of clients move hundreds of million pounds across the globe every day. From large businesses to private individuals who wish to send regular payments abroad, you can save money by getting a better currency exchange rate than your bank. Foreign Currency Exchange buys currency at wholesale rates and can help you save money with our fast secure service. For more information contact us now, telephone +44 (0) 20 7989 0000 or email info@fcexchange.co.uk.