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 for the past 2 weeks.
|Currency Pair||% Change||Difference on £200,000|
Eurozone Markit Flash PMI’s (which is seen as a good overall indicator for economic growth) dropped this month, falling to 55.9 from 56.7 the previous month. This wasn’t seen as a major setback for the Euro yesterday as a reading above 50 still shows expansion in the industry.
The recent events in Spain involving Catalonia have started to feed into businesses – Germany and France posted higher than expected orders particularly in the private sector, whilst Spain and Italy have caused businesses to withhold orders for now.
The Eurozone economic recovery is still on track and therefore leaves the European Central Bank very little options but to start slowing down their Quantitative Easing programme or asset purchasing programme.
The announcement is expected on Thursday this week, when policy makers will decide on how much they are choosing to reduce their programme by. Expectations are for the amount of asset purchasing to drop to €30bn every month until September 2018, which has been labelled as ‘dovish tapering’. Any clients with a Euro requirement should keep a very close eye on this event, if the event turns out to be more hawkish than anticipated then the Euro could strengthen and if the event is more dovish than expected the Euro could weaken.
I personally feel that Mario Draghi will be extremely tight lipped and cautious as to when the asset purchasing will end, and indications could cause investors to pile into the Euro and trigger a sharp movement in market, something that he has tried to avoid.
The Euro strength against Sterling yesterday has largely been attributed to the markets now factoring in the tapering, as the Euro continues to strengthen against the Pound. I would expect this trend to continue for now, all eyes are now firmly focused for tomorrow’s event.
Considering there is an expectation of change it’s hard to see how that won’t result in Euro strength, especially with the movement yesterday. When the GBP/EUR rate did fall to the 1.07’s earlier this year a £200,000 transfer would have achieved you €10,000 less than yesterday. With this in mind contacting your broker before the decision on Thursday could make sure you’re trading before any market changes.
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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