This Euro update discusses factors that are likely to affect EUR exchange rates in the short-term. In the table below you’ll find high to low GBP/EUR exchange rate movement and the difference when exchanging £200,000 to Euros in the last week.
|Currency Pair||% Change||Difference on £200,000|
The dominance of the Euro continues and we hit fresh highs on EURUSD and EURGBP last week. There is little sign of any quick change in that situation. Part of the move is as we have previously explained political and economic uncertainty elsewhere. With little sign the UK or US will get their house in order quickly politically, the Eurozone is a beacon of political certainty. The German elections in September are only more reason to be positive for the Euro.
Currently Angela Merkel and her centre right coalition is polling around 41% with her CDU (Christian Democratic Union) party and their CSU (Christian Social Union) party coalition. Next in the polls is the centre left Social Democrats who are at 24%. The right wing AfD (Alternative for Germany) are polling next around 9% but are struggling with no credible leadership and a calming in the migrant crisis which had helped them so much previously. The Euro should remain strong and might even rise further on this further political good news.
There is very little economic data this week but last week’s solid data on growth at 2.1% year on year shows the once troubled Eurozone is on the mend. Attention has rightly been turning to the likelihood of the withdrawal of QE (Quantitative Easing) program. This program has been credited with boosting Eurozone confidence and growth but at some point this will need to be trimmed.
The ‘free money’ it creates in the financial system has to be tapered at some point and this will have repercussions. When the US Federal Reserve started to taper their QE program the US dollar actually weakened as markets feared the outcome.
The Euro too might longer term weaken as investors raise concerns about turning off the stimulus too early. Euro sellers should not be too hopeful of a never ending run but the market should favour them for now.
If you need to buy Euros a more defensive strategy as we have been advocating seems to continue to be worthwhile.
Essentially clients buying Euros are waiting for something unexpected. We talk of known ‘unknowns’ such as the Greek crisis and Italian banking issues but these issues seem largely settled for now. There is always another day and something to hang on for in the currency markets but as many clients buying Euros continue to find, there are no guarantees rates will rise.
The best way to predict the future is to create it and with this in mind however painful it might be, if you need to buy Euros, getting something done sooner than later to protect the rate seems sensible. Speak to your account manager today about securing the best rate possible to buy Euros this week.
Thank you for reading my Euro currency update. If you have any queries about Euro exchange rates I would be happy to discuss them with you, you can contact me directly at email@example.com.
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