Pound/Euro rises to €1.20 on ECB rate cut hint

Wednesday 20th November 2013 
So the Bank of England news this morning was a bit of a damp squib, with all 9 members voting to hold QE and interest rates, so didn’t have much effect on exchange rates. 

However, the Pound/Euro rate has shot back up to €1.20 this afternoon, after a surprise indication that the European Central Bank may cut the deposit rate to negative. So in today’s post I’m going to explain why this has caused the rate to go up, and analyse whether it will keep rising or drop back away. 

Pound/Euro rates shoot up to €1.20 

A report from Bloomberg this afternoon hinted that the European Central Bank may reduce the deposit rate to negative. 

This effectively means that commercial lenders that deposit funds with the ECB getting less return, or even potentially have to pay to lodge funds with them. These rumours caused investors to sell the Euro, and this has caused it to weaken and become cheaper to buy. 

As you can see from the chart above, there was an immediate reaction to the news, and Pound/Euro rates climbed to €1.20, a cent higher than we started the day. What is interesting is that this is not a scheduled release, which is usually what causes exchange rates to move, as I outlined in my last post.

This shows that while it's usually scheduled data releases that move the rate, surprises like this can also have an immediate effect.

For those that need to buy Euros, this is great news as the rate is now back to the highest it has been since January. Of course the key question is whether the rate will continue to climb, or drop back away. 

Will rates keep rising or drop back away?

This is impossible to forecast of course, but in my view these gains will not be sustained. We have seen the rate hit €1.20 several times in recent weeks, however each and every time this happens, the gains are short lived, the Euro fights back and the exchange rate drops again. 

This is partly due to the fact this is a key technical level, at which many automatic orders to buy Euros are triggered. As the market is then buying Euros again, it gives it strength and the rate drops away. 

Another reason I think rates could drop back is that the Bank of England don’t want a high exchange rate – it makes exports more expensive and so should rates hold firm above this level, we may see the BoE move to weaken the Pound to bring rates back in check. 

Indeed since we hit €1.20 at about 4pm this afternoon, rates have remained there and have failed to rise further. 

Click here to send me a free enquiry on exchange rates

If you are buying Euros 

Consider taking advantage of the best rates all year. Even if you don’t need your funds for some time, you can fix today’s rates for up to 2 years, and only lodge 10% of the total you want to convert. 

This protects you against rates falling, and allows you to budget effectively. Especially useful if you need Euros to buy property abroad or to pay for goods from the Eurozone.

Get a GBP/EUR quote.

If you have Euros to move back to Pounds 

For those selling Euros, the rate has moved against you. As we may see rates drop back away, I would place a ‘Stop Loss’ order that protects you should the market keep rising, but allow you to take advantage if the rate moves back down.

This gives you a worst case scenario and again allows effective budgeting without leaving things to chance.

Get a EUR/GBP quote.

If you need great exchange rates make a free enquiry today. 

Regardless which currency you need to convert, I can help you achieve excellent exchange rates that can be significantly better than your bank or existing broker may offer. Make a free enquiry with me by following the link below, and find out more about the service and rates I can offer. 

Click here to send me a free enquiry 

Alastair Archbold

How to get the best exchange rate buying or selling Euros

Wednesday 25th September 2013
Good afternoon. The currency markets have been fairly calm recently, and exchange rates seem to have stabilised. We haven't seen a huge amount of movement since my last post. GBP/EUR rates remain around the €1.19 level, and GBP/USD rates just above $1.60.

In today's post I will look at economic statistics that will be released in the next week, and how they may affect exchange rates. I will also explain how I can help you achieve exchange rates that can be much better than those offered by banks and other financial institutions.

So if you need to buy Euros at the best rate, have a foreign currency you need to convert back to Sterling, are looking for the best exchange rates, or are trying to find out if the Pound will go up or down against the Euro, read on...

Pound/Euro forecast 2013

In the last few months the Pound/Euro rate has climbed nicely, peaking a few weeks ago in the mid €1.19's. This is due to much better economic data that indicate the economy is recovering nicely. The only fly in the ointment was last week's poor retail sales that took the wind out of the Pound's sails a little.

Since then rates have stabilised around the €1.19 level. This is because the markets have now accepted the economy is recovering, and so good economic numbers are no longer a surprise.

So will rates go higher? Stay where they are? Drop back away?

I think that for the next few days it will be the UK GDP figures that will have an impact on rates. These are released at 09:30am tomorrow morning. I expect this to be revised up to 0.7%, and the markets have already priced this in to where the exchange rate stands. If the number is higher than this, the Pound/Euro rate may rise. If the number is worse, expect a drop in rates.

On Friday the European Central Bank (ECB) president Mario Draghi gives a speech. I think that his comments could well affect GBP/EUR rates. Put simply, if his words are positive for the Eurozone, Pound/Euro could drop, and vice versa.

For the medium to longer term, I personally don't think that rates will climb to €1.20 and above. Why? Well it wouldn't be in Britain's interest to have higher exchange rates, as it would affect imports to the Eurozone due to UK goods being more expensive. 50% of our exports go to Europe, so if the rate climbed too high I would expect the Bank of England to move to weaken Sterling.

If I needed to buy Euros in the next 6 months, I would look to fix a rate on a Forward contract. This allows you to fix today's rates which are around the best they've been all year. You only lodge 10% of the total to be converted, and the remainder when you instruct me to transfer your Euros. This protects you against the rate dropping away and allows you to budget.

If you need to buy Euros and want the best rates, send me a free enquiry now by clicking here.

Converting Euros back to Pounds

Rates have been moving against you due to the strong pound. If we look at the bigger picture though, last summer rates were nearly €1.30, so it's not too bad. You don't have to look back too far to remember when rates were €1.50+.

So if I had to convert Euros to Pounds, I would take the view that if the EU economy recovers, rates could improve. I wouldn't want to leave things to chance though, so I would place a 'Stop Loss' order to convert funds if rates breached a particular level; €1.20 for example. In this way I can hold out for an improvement in the rate, but have a 'worst case scenario' or safety net should the rate continue to get worse.

Converting Euros back to Pounds? Click here to find out more about the rates I can offer.

Other data releases in the next week that could affect exchange rates

Thursday 26th Sept - UK GDP figures, as I mentioned above, are released at 09:30. We also have US Unemployment and Home Sales numbers in the afternoon.

Friday 27th Sept - Nothing of note from the UK, however there are some important EU releases such as the ECB president's speech and some inflation numbers. In the United States we also have Central Bank members giving talks, so expect some volatility in GBP/USD rates. 

Monday 30th Sept - UK mortgage approvals, but I don't think it will have much of an impact. Of more importance will be EU Inflation numbers and Retail Sales.

Tuesday 1st Oct - The new month starts with a raft of Manufacturing numbers from the EU, Britain and the United States. Could be a volatile day as we also have EU unemployment numbers.

Keen to know how data releases like this could affect the exchange rate you're interested in? Send me a free no obligation enquiry now.

Getting the best exchange rates

 
That's the easy part - the rates I can source are commercial levels up to 5% better than the banks. Send me an enquiry now to find out more. The tricky part is timing your trade so you buy at a good level. There's no way to predict the way exchange rates may move, but what I can do is explain what is causing the movement, and my thoughts on how things may move in the future.

It is of course up to you to decide when to fix your rate, but by taking advantage of my expertise gained from over 10 years in the financial services industry, you can make an informed choice of what to do.

Why not take the advantage of a free consultation by clicking here and sending me an enquiry. I will personally contact you within 24 hours to discuss your requirements, run over your options, and give you an idea of the rates I can offer.

Click here to send me an enquiry or call me today. You may be very surprised how much you can save. I look forward to hearing from you.

Alastair Archbold