Pound/Euro exchange rates May/June 2015

Tuesday 19th May 2015
Sterling/Euro rates continue to remain pretty volatile, and in the last 24 hours we have seen the pair rise from €1.3730 to nearly €1.40, which was due to weakness in the Euro. The gains didn’t last long however, and UK inflation figures this morning have weakened the Pound and knocked the rate down a cent, to around €1.3850 as the chart below shows. 

In today’s report I’ll explain what has caused the movements for Pound/Euro rates, and look at where the GBP/EUR exchange rate may move in May & June 2015. 

Euro weakness causes GBP/EUR to rise to nearly €1.40 

Greece has another large debt repayment to make on the 5th of June. Whether they will make it or not is having a big impact on the value of the Euro. The IMF think they don’t have much chance of meeting the payment, and their acknowledgement of this yesterday caused the Euro to weaken, pushing GBP/EUR rates up from 1.3750 to 1.3850. 

The weakness in the Euro continued this morning when European Central Bank officials said the bank could take further action, and pump even more money into the economy than they are doing already, in order to quash euro zone bond yields and boost inflation. If they increase their QE program and the amount of Euros their pumping in, then it will weaken the Euro. More of anything means it’s worth less, and that was the reason for this morning’s GBP/EUR push up to almost €1.40. 

UK inflation figures pull rates back down 

The rates only got to this level for 20 minutes or so, and then the UK released its latest inflation numbers. This showed that inflation turned negative for the first time in over 50 years. So why did this cause the Pound to drop? It’s because of interest rates. With inflation negative, there is no chance of a rate hike anytime soon. Because rates are going to stay low for a long time to come, there is little incentive for investors to buy the Pound, so that’s why the rate dropped back away. 

Where next for Sterling/Euro rates 

You can see from the chart that there is a steady line of support and resistance at around the €1.3850 market where it keeps settling back down. I think that whether the GBP/EUR rate goes up or down depends on what Greece is expected to do. Quite simply, if they don’t make their next payment or it looks like they won’t, the Euro could weaken further and push rates back towards €1.40. This is a key technical level so unless anything else unexpected happens I don’t think it will break through this. 

Alternatively the Greeks could just be delaying in order to re-negotiate the deal they are getting. If payments are made or an agreement is put in place, then the Euro could gain strength, pulling rates back down again as the single currency becomes more expensive to buy. 

Getting the best exchange rates 

Rates are very volatile at the moment, moving very quickly. In order to get the best possible rates you need to have a good currency broker who can monitor the market for you, explain the options you can consider on when to fix a rate, and get you a much better rate than banks will offer. The worst thing you can do is just watch the rate and hope itwill move your way, or use the bank to convert your funds. 

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This will be an important week for Sterling...

Monday 16th December 2013
Good afternoon. It's been a quiet start to the week, and since my last post Pound/Euro rates remain in the mid €1.18's, and Pound/Dollar rates around $1.63. This week will be key to whether rates continue dropping as they have in the last week, or resume the trend of the last few months which has seen the Pound rise against other currencies.

Sterling has been one of the currency market's surprises since the summer, having risen consistently over the last 6 months. As I've been explaining over the last few weeks, really impressive economic data has strengthened the Pound, and it's also been helped by the view that interest rates may rise earlier than previously expected. 

This week in my view will be key to the direction Sterling takes over the next month, as we have some key economic data releases including inflation data on Tuesday, and minutes from the Bank of England's Monetary Policy Committee and jobless data on Wednesday, followed by Gross Domestic Product figures on Friday.

So in today's post I'm going to list all the things to look out for which may cause volatility in exchange rates this week. 

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This weeks economic data releases that may affect exchange rates

Monday 16th December

This morning we saw EU Manufacturing and inflation numbers, which were better than expected. This caused the Euro to strengthen and pulled GBP/EUR rates lower. 

This afternoon we have Speech by the European Central Bank president Mario Draghi, which may cause further volatility in Euro rates. 

Tuesday 17th December

Starting in Australian we have the RBA minutes and a speech which may cause changes in GBP/AUD rates. Closer to home, at 09:30am we have a raft of inflation data. This is linked to future interest rate movements so could change Sterling’s value. 

In the Eurozone we also have a raft of inflation numbers in addition to some surveys that look at Economic Sentiment. Over in the States we have more inflation numbers and house price data. 

Wednesday 18th December

This is the key day for the Pound. At 09:30am we have the minutes to the recent decision by the Bank of England to hold interest rates and Quantitative Easing. The minutes show what was discussed and often cause exchange rates to fluctuate. We also have the latest unemployment figures. This is key as future interest rate movements have been linked to a drop in Unemployment figures, so if the number is any lower than 7.6% expect the Pound to make gains, and vice versa. 

The rest of today’s data is from the USA – Building Permits, Mortgage Approvals, an Interest Rate decision, and economic projections from the FED. So all in all, a key day for both GBP/EUR and GBP/USD exchange rates. 

Thursday 19th December

UK data today is Retail Sales. This is seen as a good overall barometer of economic activity so it could be another choppy day for Sterling. There are no EU releases of any significance, but over in the USA in the afternoon we do have Jobless Numbers, and Home Sales figures. 

Friday 20th December

Another very important day for the Pound. We have a measure of consumer confidence, but I think the main event will be the latest Gross Domestic Product figures released at 09:30am. GDP is considered as a broad measure of the UK economic activity. This is key as it will indicate whether the UK recovery is sustained, so could push rates higher or lower depending if the number is higher or lower than the expected +0.8%. 

Elsewhere, GDP numbers from the states are released at 13:30pm, and a Consumer Confidence measure for the Eurozone at 3pm. 

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