Figures yesterday from the Eurozone showed that unemployment hit 11.1% in May as a slowdown in the manufacturing sector continued. Over 17 and a half million people in Europe are now officially unemployed which is the highest level since records began back in 1995 which only went to heap more pressure on Euro exchange rates which weakened again against Sterling. Meanwhile, figures also came out showing the manufacturing sector was still contracting and didn’t look like it would improve anytime soon. The economic data for the EU continues to be poor and therefore maintains the pressure on Euro exchange rates which do not look like they will improve any time soon. Having said that there are still many issues in the UK.

What could the impact of Quantitative Easing (QE) be on Sterling exchange rates?

With this Thursday’s interest rate decision for the UK drawing ever closer the prospect of further QE seems to be increasing but the question on most of our clients lips is what will be the impact to Sterling exchange rates? Well, in the past we have seen just the mention of QE weaken Sterling because effectively this is, put simply, the Bank of England (BoE) pumping more money into the economy which as a result increases the supply of money in the economy therefore reducing its value as supply outstrips demand. So, in basic terms if we see QE on Thursday we could see Sterling weaken, however as with most things in the currency market things are never that straightforward. As there is a level of expectation that the UK will introduce further QE it could already be priced into the market meaning we have effectively already seen the result of QE on the exchange rates which could explain why Sterling Euro exchange rates are still at the current high levels. So, it may be that when the decision is announced on Thursday assuming QE is announced there may not be a huge reaction or even Sterling weakness as the market has over priced the effect of QE.

With so much uncertainty surrounding this important decision it is important to speak with one of our experienced and knowledgeable currency brokers who will happily discuss your currency requirements and all the options available to you. So, if you need to transfer money abroad and are looking for exceptional exchange rates make sure you speak to us today, call straight through to our dealing floor for free on 0800 328 5884 or email