This report will examine the factors that could affect exchange rates in the coming months to help you stay informed if you need to make a currency transfer. The table below shows the difference you would have received in Euros when buying £200,000 at the high compared to the low for the past month.
|Currency Pair||% Change||Difference on £200,000|
The Eurozone economy continues to go from strength to strength, with the EUR for the most part, being the chief benefactor of this. Some analysts were predicting its demise last year but 12 months on and that prediction could not be less accurate.
It is a testament to the European Central Bank (ECB) and its President Mario Draghi, who have overseen a run that has culminated in the Eurozone economy producing its strongest growth in nearly seven years. However, this show of strength is now likely to put some pressure on the ECB to wind up their current monetary policy stimulus, possibly even later this year.
The aggressive measures Draghi and the ECB put in place have no doubt been of benefit to the Eurozone economy, which was in dire need of stabilization at the time.
However, monetary policy is intended to support an economy through times of economic downturn and hardship but with this period seemingly resigned to history, how will the ECB act and will there be an announcement at Thursday’s interest rate & policy meeting?
Personally, I do not anticipate a shift in interest rates or a change in stance in regards to the current Quantitative Easing (QE) programme. Draghi has been steadfast in his commitment to the current stimulus and the benefits the Eurozone economy have reaped from it.
Only recently he reaffirmed his belief that the current levels of QE could perhaps be diluted over the coming months but not completely dissolved, for fear of any negative repercussions for the Eurozone economy. In fact, he even suggested the current programme could be extended into 2019 if necessary, which indicates that he is hardly likely to change the current remit any time soon.
It is far more likely that he will once again point to its on-going benefits and the protection it is giving and as such I wouldn’t be holding out for a change in stance come Thursday’s decision.
Despite the current positivity surrounding the Eurozone economy, both in terms of its economic output and future growth forecast, the EUR has lost ground against its Sterling counterpart during the early part of the trading week.
However, the Pound itself has fallen so far in the past 6-12 months that the scope for improvement is greater than the scope for further demise and as such, I would not be too concerned if I had any upcoming EUR currency positions to execute.
It is still finding support in the mid-teens against Sterling and has continued to perform well against the greenback. It currently sits close to a three year high and some of the best levels we’ve seen since the EUR was first introduced as a currency. This is despite the US economy performing extremely over recent months, alongside that of the Eurozone’s.
Whilst rates remain at such attractive levels, it may be prudent to remove the risk of what may lie ahead. The markets are likely to be driven by developments with Brexit negotiations and fluctuations with interest rates & monetary policy, which will likely also have a direct impact on exchange rates.
For this reason I would be looking to take advantage of the current sell prices against both GBP and the USD.
For more information on how future data releases could affect your Euro requirement, call our trading floor on 01494 725 353 or email me here.
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