Brexit has been the main driver for GBPEUR rates in recent months. Ministerial resignations, rumours of second referendums, Theresa May taking the reins of negotiations and uncertainty around a no-deal being the latest event to cause the Pound to lose value. The impact of the Turkish crisis on the single currency is covered below. The table below shows the range of GBPEUR exchange rates throughout the past 4 days showing the difference in return you could have achieved when selling £200,000.00 during that period.
|Currency Pair||% Change||Difference on £200,000|
It is only recently that GBPEUR has moved from the 1.1194-1.1380 range – where it was for 9 months - to its current range of 1.11-1.13. The lowest point came last Friday at 1.10834 right before the Turkish crisis broke out – at the time of writing this report, rates are sat just under 1.12.
Last Friday, Donald Trump doubled import tariffs on steel and aluminium as part of their diplomatic row relating to US Pastor John Brunson. The Lira’s devaluation – 40% against the USD so far this year – is a concern for European banks, mainly Spanish and French, because of the exposure of major European lenders to Turkish debt.
Because of the high participation of foreign banks and portfolio investors in Turkey, there are clear risks of contagion for the single currency. This risk applies particularly to the Euro and is symbolised by Spain's IBEX 35 being down 1% percent and France's CAC 40 losing 0.5 percent in the aftermath of developments on Friday.
The Turkish crisis has caused huge uncertainty for clients with a Euro requirement and it looks as though it could offset Brexit-caused Sterling losses in the coming days. Just to give clients an idea of how much the markets can move, they need only keep in mind on one hand Sterling losing a cent because of no-Brexit deal rumours and on the other hand, the Euro losing 1.5 cents because of recent developments.
I believe we may have seen the biggest 1-day Euro collapse linked to the crisis on Friday, however the path seems clear for Turkey and potentially the Euro’s troubles, to continue.
This morning will provide opportunities for clients with Euro requirements. Germany, the engine room of the single market, will release GDP figures for Q2 and inflation figures for July are released at 07:00.
At 09:30, we will see UK average earnings but most importantly Eurozone GDP figures at 1000. The consensus for year on year GDP for Q2 is expected at 2.1%. When Gross Domestic Product falls below market expectations, currency values tend to fall. If your Euro requirement is upcoming, I think it worth being in touch with your Account Manager this morning to maximise your transfer.
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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I find the process to be efficient, uncomplicated, and very good value – the exchange rates used are unbeatable, and the fixed service charge is insignificant when sending a large-ish sum.