With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The table below shows the difference in Euros you would have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The EUR has been one of the main benefactors of Sterling’s downturn this year, exceeding expectations at almost every turn.
The single currency has been boosted by a complete lack of confidence in the UK economy, predominantly brought about by Brexit and the tough negotiations this has entailed. Which direction the EUR takes next is obviously the key question for investors but despite its current status, could now be the perfect opportunity to sell any EUR currency positions?
Whilst the current market is proving increasingly difficult to dissect, there are a number of factors to consider.
The first is that the EUR current value, is at least somewhat fabricated in my opinion. This is due to a complete lack of investor confidence in the UK economy, which is inadvertently boosting the EUR value beyond the levels it would be trading at otherwise.
Yes the Eurozone’s economic output and growth forecast are exceeding expectation but the current levels on GBP/EUR are only holding firm in the lower teens, for the most part, due to the negative perception engulfing the UK economy at present.
I do feel that the EUR is over-valued and even a slight breakthrough in Brexit negotiations last week immediately boosted Sterling, causing the EUR value to weaken as a result. Whilst it has found some support during the early part of the trading week, I am highly sceptical about whether we will see it return to the recent 6 and 10 year highs against the Pound & USD respectively.
This is even more apparent when you consider that the European Central Bank (ECB) have already indicated that they feel the EUR current value is too high. This in turn is likely to have a negative knock on effect on the export industry, as their goods & services become more expensive for trade partners to purchase.
The final and possibly most key component to consider, is that the Eurozone itself is likely to suffer economically when the UK does leave the EU. The UK is without doubt one of the key contributors, particularly our financial sector and as such the Eurozone economy is almost certain to contract following our separation. Whilst there is an argument that the separation bill we are going to pay (rumoured to be more than 50bn EUR) will help to offset this, that is only likely to be a short-term buffer and not a long-term solution.
At some point the market and media’s focus will have to bring these issues to the forefront and when this happens the EUR could be in for a tough ride.
Thank you for reading my Euro report, I'd be happy to assist you with any queries you may have about an upcoming transfer, feel free to get in touch on 01494 725 353 or email me here.
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