This Euro report will address the factors that are likely to affect exchange rates today if you are buying abroad or making a currency transfer, the below table shows the difference in Euros you would have achieved when buying £200,000.000 during the high and low points of the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
Over the last 12 months the Euro has made considerable gains against the US Dollar due to a strengthening Euro but also a devaluing US Dollar.
EURUSD has increased from the lows of 1.06 and broke through 1.24 this week. To put this into monetary value a $200,000 purchase is now €27,000 cheaper compared to 6 months ago.
As EURUSD is the most traded currency pairing the devaluing Dollar strengthens the Euro, which the Europeans are unhappy with as an overvalued Euro is having a negative impact on European inflation.
This week, European Central Bank President Mario Draghi expressed his concern at the US as he is concerned about certain individuals in the US, using certain language that devalues the US Dollar. He did not give any names; however, this statement comes shortly after the US treasury secretary Steven Mnuchin announced the US government are welcoming a weak US Dollar which caused another sharp drop in the US Dollar's value.
Last month the European Central bank left monetary policy unchanged and I expect this trend will continue in the months to come. At present the ECB buy €30bn of government bonds which is also known as quantitative easing. The program is set to run to September, but in recent weeks Mario Draghi has announced the program could be extended if needed.
The problem the President has is that European growth is at a 10-year high, Unemployment at a 9-year low but inflation remains stagnant. If inflation remains below the ECB's 2% target I wouldn’t be surprised to see the Q.E program extended in September which will more than likely devalue the Euro.
The Pound has made inroads against the Euro in recent weeks and mid-market exchange rates have reached 1.15 even though the Euro is performing extremely well. UK and EU economic data releases will continue to impact the value of GBPEUR however I expect news coming from the transitional Brexit talks will dictate whether GBPEUR breaks through 1.15 and remains above or if GBPEUR falls back towards the lower teens and levels we became accustomed to late last year. Trying to predict the transitional talks is close to impossible, nevertheless I am optimistic, therefore I believe there is a good chance GBPEUR will break through and remain above 1.15 over the next 2 months.
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