Why has Pound/Euro dropped to €1.39?

Wednesday 8th July 2015 
In today’s report I’ll look at the latest developments in Greece, the effect of today’s Budget statement on Sterling, and also why the Pound/Euro rate has dropped to €1.39. 

Pound/Euro drops to €1.39 

Since the start of the week, we’ve seen GBP/EUR exchange rates drop from €1.42 to €1.39 today. There are several factors affecting the Sterling/Euro cross at the moment, and after a quick look at the chart I’ll address each one in turn. 

What has caused Pound/Euro rates to fall? 

Sterling had been performing very well recently, rising on the back of some better economic numbers in recent months and the returning of a majority Conservative administration in May's general elections. The Pound had strengthened as a result, however now seems to be on the back foot. Here is my take on why Sterling has weakened off today. 

Greek deal - The Greek situation seems to be coming to a head, with Greece set to submit fresh proposals on Thursday, EU ministers meeting on Saturday to discuss, and a decision on Sunday before a looming deadline for Greece to make a €3bn payment to the IMF. This could well be the last chance for Greece, and many sources are optimistic a deal will finally be done. The uncertainty of the last few months had largely already been priced into the Euro, and so the single currency is starting to regain some strength on the possibility of a resolution. 

UK Budget – today George Osborne delivered his first conservative majority budget. The Pound had weakened this morning, and while there were some very positive things announced, in general it was a budget of austerity, and the fact that they are looking to go harder on austerity and start reducing overall debt soon bodes ill for the immediate outlook for the Pound.UK growth figures have been revised down, House prices are rocketing due to low supply, and this means that while the UK economy is performing very well, it’s not as good as some had hoped several months ago. This has taken the steam out of the Pound. 

Flight to safety – there are real problems in China right now, with the stock markets there in free fall. Investors are wary of any uncertainty, and this combined with Greece and very low commodity prices means investors are placing their funds in ‘safe haven’ currencies like the US Dollar, Japanese Yen and Swiss Franc. The Pound has lost out as people move their funds to safer places riding out the global economic uncertainty. 

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Exchange rates can move very quickly, and having an expert currency broker on your side can make a huge difference. From exchange rates up to 5% better than the banks, free consultations to discuss your currency requirement and strategy, to various contract types to help protect against adverse exchange rate movements, there are many positives to getting in touch to see how I can help you. 

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Will Pound go up or down against Euro this week?

Tuesday 18th  March 2014
The Pound has fallen again today, dropping as low as €1.19 before settling at that level. There hasn't been any data of note from the UK today, so this is simply the market positioning itself ahead of tomorrows key day for the currency markets. 

What will affect exchange rates in the next few days?

The next 24 hours will be key for exchange rates, so the following information is important if you need to buy or sell currency at the best exchange rates. Firstly I will look at the key events, and what effect they may have on the market. I will then give my view on what effect this could have on rates, specifically the Sterling/Euro exchange rate. 

Later this afternoon at 17:45pm we have a speech by Bank of England governor Mark Carney. This could affect exchange rates depending on his comments. If he were to be very upbeat about the UK economy including growth forecasts, then we could see Sterling bounce back. What we're looking for is any hints that interest rates may have to rise, as this would strengthen the Pound. If however he does the opposite and indicates that a rate hike is some way off, then Sterling could fall.

Tomorrow morning at 09:30am we have 2 key releases. Firstly the Unemployment figures are released. If the number is 7.2% or higher, then expect the Pound to fall. If it's lower than this, then the Pound will likely rise in value. 

At the same time, the BoE releases it's minutes which show how they voted, and what was discussed, in their recent meeting to hold interest rates. Much like Carney's speech, we're looking for hints as to their policy on interest rates and growth. Positive comments will cause Sterling to rise.  We then have the Budget at 12.30pm. While this will generate the most headlines in the news, I think it will have little impact on exchange rates as I don't expect any surprises in terms of the UK economy.

So does this mean the Pound/Euro rate will go higher or lower?

Unfortunately it's impossible to predict which way the market will go. What I can do however is give my views on what's happening to help you make an informed decision on when to fix a rate. 

My personal view is that we will see the rate recover tomorrow. It's dipped for several days in a row now, falling from recent highs of €1.22 down to €1.19. The UK economy is still fundamentally strong, so I think the figures tomorrow will support this view, and I expect rates to be sat back at €1.20 by the end of this week. We'll have to wait and see whether I'm right or not! I don't expect it to break through €1.20 for some time though, as it's a key resistance level.

Having a good knowledge of the market can save you thousands it you need to buy or sell currency at the best rate. If I had to convert Euros to Pounds I would want to move quickly to take advantage of the current rate - it's the best it's been all year. 

If I was buying Euros, I would probably hold off to see what effect tomorrows data will have. I wouldn't want to risk losing out though, so I would do one of two things. I would either hedge my bets and secure half of my currency now, allowing me to take a risk on the other half. This reduces exposure to the market by 50%, but still allows you to take advantage of any rise. 

Alternatively, I would place a Stop Loss order, which lets you place a limit below which your exchange rate is fixed - €1.18 for example. In this way you can still take advantage of any gains in the rate, but have a safety net should the market keep dropping.

Find out more about the rates and service I offer 

I can help with market knowledge, various contract types, and can source exchange rates that are significantly better than the banks usually offer, sometimes by as much as 4% or 5%. If you need to convert currency, then it will do you no harm to contact me for a quote to compare.  

If you have a currency transaction to perform and would like to find out how I can help you, get in touch in the following ways: 

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Ask for Alastair Archbold, and quote ref ‘FERF’

Sterling strengthens after Budget Statement

Wednesday 30th November 2011
Good morning. The Budget statement yesterday reinforced Sterling as a safe haven currency within Europe, pushing exchange rates higher against other currencies, and to a near 9 month high against the Euro as the EU debt crisis deepens. So why has the Pound risen against the Euro? Today we'll take a look at what strengthened the Pound and the forecast for GBP/EUR rates. At 08:30am this morning rates are as follows:

• GBP/EUR 1.1710
• GBP/USD 1.5535
• GBP/AUD 1.5598
• GBP/NZD 2.0492
• GBP/CHF 1.4355
• GBP/CAD 1.6076
• GBP/ZAR 13.073
• GBP/JPY 121.04
• GBP/DKK 8.7067
• GBP/NOK 9.1185
• EUR/USD 1.3265

UK Budget Statement strengthens Sterling

Chancellor George Osborne yesterday updated MPs on the state of the economy and the government's future plans in his Autumn Statement as the Office for Budget Responsibility (OBR) publishes its latest growth and borrowing forecasts. You can read a detailed report on what happened here on the BBC site, as here we will only focus on the effect on exchanger rates.

Despite most news outlets pitching the statement as doom and gloom amid revised growth forecasts for the UK, the markets have taken it positively as reflected in the Pound rising yesterday. He said slower than expected growth meant it would take longer to reduce the budget deficit, meaning tough austerity measures will extend beyond the next election in 2015.

That is likely to underpin the UKs AAA credit rating and encourage more flows into safe-haven UK gilts. That in turn has supported Sterling despite the prospect of more QE by the BoE and the risk of recession. Analysts say the fact the UK is following an austerity plan and the BOE is proactive in easing monetary policy is a positive for sterling in the coming months.

In contrast, the euro zone debt crisis keeps getting worse with little policy action to stop the contagion. The debt crisis continues to deepen in the EU, and this has weakened the Euro further yesterday, pushing GBP/EUR rates back above €1.17.

There remains no fundamental reason to buy the pound, however amid the problems in Europe it has become a safe haven currency for savers worries about keeping Euros, and this has supported Sterling and is the reason exchange rates have risen.

So if you need to buy Euros in the next 6 months, what are the options?

• Buy Forward now – this way you know where you are, but of course can’t take advantage if the rate does get higher.

• Wait and see – it could go a little higher, but not by a huge amount. The risk here of course is rates falling away.

• Use Stop Loss/Limit Orders – with these, you can place a ‘Limit order’ to buy at a level that’s not currently available, 1.18 for example. At the same time you can place a ‘Stop Loss’ order to buy should rates fall below a pre-agreed level, for example 1.15. This way you have a ‘worst case scenario’ should rates fall, but if they don’t you can still take advantage of any gains

• Hedge your bets – Forward buy half what you need now, and take a gamble on the other half. This way you have some level of protection regardless what happens with rates.

To discuss any of the above options further, or to find out more about how much you can save by using us to secure your currency at commercial exchange rates:

Click here to send us an enquiry and have a free consultation on your options.

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