This Euro currency update discusses the impact of the Deutsche Bank situation on GBP/EUR rates. To keep track of current exchange rates please visit our live exchange rates page.

What has happened to Deutsche and how does this affect GBP/EUR exchange rates?

Over the past few days those buying Euros may have found a new buzzword to cling to for some improvements in GBP/EUR rates – Deutsche.

If you are not aware, Deutsche Bank, the largest such institution in Germany, is on the verge of being squeezed for reparations by the US government following investigations of their fraudulent mortgage practices in the run up to the financial crisis. This is to the tune of $14bn.

The shock to markets which has caused this depreciation on the Euro is that despite the bank’s enormous portfolio, they are not very capitally liquid. In fact, they had only planned to pay up somewhere in the region of $3bn. The shortfall was obvious, and talk of a bailout by the German government filled the chatter globally on the currency markets over the past 48 hours.

Similar to the effects caused by Volkswagen when their massive fine was imposed, the anticipation of such a large fine and the painful impact on the company spelt gloom for the Euro. Alongside the concerning picture of the largest financial institution in the Eurozone’s powerhouse economy requiring any kind of emergency help whatsoever, it was enough to see the Euro depreciate against the Pound by over 1 percent since the beginning of the week. In real terms for example, in a short period if you have a €200,000 to make in a relatively short period the slide on GBP/EUR has halted, and you have clawed back close to £2000 on this cost.

Short-term opportunities for Euro buyers

At the moment, it seems that the Euro has an armour whose chinks only show for a short period. News about a massive bailout necessary for Italian banks, and now news of German banks in a position to feel suddenly squeezed is creating short-term opportunities, but nothing in the realm of the prolonged slide on the Euro seen last year when Greece was on its knees.

We’ve already heard noises that that German government have said they will bailout the Bank if it comes to it, only 36 hours after Merkel stated that the Government would unequivocally not step in and help. The narrative on the Eurozone is still about maintaining calm.

The European Central Bank and individual European governments are so trigger happy to lay funds on the table if need be, the concern about their economic future is heavily muted. Opportunities, such as this sudden look into Deutsche, as they did with the Italian Banks in July, come and go relatively quickly.

As such I strongly recommend that anyone with an upcoming Euro purchasing requirement over the next month should detail this to their account manager. We may be subjected to very sudden movements in the run-up to October with a new data set cycle set to change the narrative on the Euro, and may erode this sudden gift coming out from Deutsche, which, looking at historical trends, could fade away relatively quickly – swept under the rug for a very distant future to re-emerge noisily.

Thank you for reading my Euro currency report, if you have any questions about Euro exchange rates I would be more than happy to discuss them – you can contact me with any queries at jjp@currencies.co.uk.

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