Following the news that Brexit negotiators will get another 18 months to confirm the deal the UK will have with the EU post Brexit, the GBPEUR rate has improved to 9 month highs. Today's Euro report looks into the ways this could affect Euro rates in the coming months. The below table shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
GBPEUR rates now sit towards the highest levels seen for over 9 months, up over 2.5% in the last 30 days. This gain has helped a well-timed client to save over £2,000 on a €100,000 purchase. This gain in value has continued following the Brexit negotiators getting a further 18 months to conclude on what UK trade with Europe will look like. From an economic basis however Europe has been performing well. The euro area unemployment rate fell to its lowest level since 2008 in February and last year the economy in Europe grew at the fastest pace in over a decade.
This improvement within the EU has re-ignited conversations that the European Central Bank (ECB) should consider tapering their QE program. This is the program that was introduced following the economic crises in 2008 and is a way with which the bank ‘pumps’ money into the economy to increase spending and grow the economy. This policy has been showing signs of improvements and most expect the ECB to taper or reduce the amount of ‘stimulus’ that they are importing. Currently this sits at €30b a month and any confirmation in a cut would be a good sign for the Eurozone economy, strengthen the euro and make it more expensive – something to watch out for if you are considering a GBPEUR position.
Any change in the ECB’s policy could well be released today at their next meeting. This Monetary Policy meeting is one of the largest economic releases from Europe for the next 6 weeks and has the potential to change the cost of anything from a boat to a property purchase in Europe. In real terms most fully expect the tapering to conclude and the program to finish by the end of the year however the potential timing of when this happens will change the euros value. The sooner this happens the more expensive the euro will become is what is expected. I personally expect today’s update to see no change due to the recent political challenges across Europe resulting in GBPEUR rates staying relatively unchanged. However, if Mario Draghi, the head of the ECB does taper or brings forward the expected time frame expect the EURO to get more expensive.
Generally speaking I personally expect the value of the GBPEUR pairing to stay within a tight range. Within the next 3 months I think rates could either climb by a little or drop by a larger amount, like so many times we have seen over the last 9 months. I would not be surprised to see GBPEUR rates back at 1.13 before it climbs to 1.16.
The driving factors for market movement include Brexit trade negotiations, UK interest rate forecasts, European QE tapering timelines and wider factors including US interest rate change. Each have the potential to make a significant difference to the market. For more information on any of the above please feel free to get in contact.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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