The Eurozone economy has all of a sudden become a cause of concern for investors, with talk of a bloc-wide recession surfacing over recent days. This may come as a surprise to our regular readers, with the Eurozone exceeding almost every analyst’s expectation for the past 18 months. This Euro rate forecast looks at the reasons for the Euro's recent weakness.
In the table below you’ll see high to low GBP/EUR exchange rate movement when exchanging £200,000 to Euros in the last month:
|Currency Pair||% Change||Difference on £200,000|
With Gross Domestic Product (GDP) figures for the Eurozone initially predicted to fall only slightly during 2018 to 2.5%, the latest figures have made for grim reading amongst investors, with Eurozone economic activity falling to a lowly 1.2% in early April.
This in turn has heaped pressure on the EUR, which has seen its value drop alarmingly against the Pound over the past couple of weeks.
Whilst it has found some support against the Pound around the 1.16 mark, it is unlikely to make a substantial move back towards the lofty heights it achieved last year, under the recently evolved market conditions.
One of the main catalysts for this drop in the Eurozone’s economic output and ultimately the Euros value is a sharp decline in growth for each of its major economies. Even Germany, the powerhouse of the single bloc, has struggled and recorded an alarming dip of late, with growth down to around 1 per cent.
After an almost unbreakable run of positive economic data for over a year, the Eurozone seems to have “come off the boil” according to economists and as such, it is far easier to understand why the EUR itself is suddenly under increasing pressure.
The markets of course do not move in one direction indefinitely and there will be continued opportunities for those clients holding the single currency to take advantage of various improvements. For the time being however, it seems as though the momentum has shifted and as I have said to my clients for many months, the downside risk for EUR sellers always outweighed the upside returns in my opinion.
Whilst the EUR has held it position against the USD above 1.23, this has as much to do with concerns over Presidents Trumps trade tariffs and the negative effect this could have on the US economy, rather than any overriding confidence in the EUR itself.
In fact these trade restrictions could have a direct impact on the Eurozone economy, which could suffer as a result, a scenario that would likely heap further pressure on the EUR over the coming weeks.
Due to this change of sentiment, investors are clearly hedging their bets and moving funds away from the single currency ahead of any prospective downturn.
Whilst the Pound is currently riding high this negative reaction has been accentuated, which means that clients holding the EUR may wish to act sooner rather than later and protect their currency positons from further losses.
In order to look at the available contract options which can offer you protection from further losses, contact your personal currency brokers here at FCD today on 01494 725353.
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