Getting the best exchange rate can be achieved by understanding what is driving rates and the service of a specialist currency broker. Below are movements effecting your Euro return when buying £200,000 over the past month:

Currency Pair% ChangeDifference on £200,000
GBP/EUR2.7%€6,000
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One step closer to parity for the GBPEUR rate?

The Euro continued its rampant run against the pound throughout august as positive economic data continued to flow out of the Eurozone. With GBP/EUR falling by almost 4% in the last 4 weeks to hit record lows, our well-informed euro sellers have been able to make considerable gains.

The single currency now faces similar questions to those posted at the start of last month. Will this surprising run of data continue to bolster the euro’s value in the eyes of investors? More importantly, will the European central bank make the euro an even more attractive prospect by stating its intentions on its monetary policy to favour higher returns on investment?

Yesterday showed a step in the right direction as inflation levels came in higher than expected. I suspect ECB President Mario Draghi will be waiting for inflation to edge closer to the 2% target before even considering raising interest rates in the near future, however investors will almost certainly be listening into the ECB meeting next Thursday. If Draghi so much as acknowledges that surprise rise in inflation, I would expect yet another rise from the euro against the pound, which could force Sterling into the low 1.07s. With this in mind, if you have a short term euro requirement, it may pay to get in touch with your account manager well in advance of this to protect your returns. Forecasters at HSBC recently released comments saying that they are expecting parity on GBPEUR rates during the last quarter of 2017, stating the recent drive into the single currency from investors will be quickly followed by fund managers later on in the year. I am less convinced by the euro for the reasons mentioned below and as such think it would be optimistic for Euro sellers to be holding out for 1.06 let alone parity.

Potential for long term euro weakness

Despite the positive inflation figures, yesterday’s mixed bag of economic data showed a slowdown in consumer spending across the euro zone and disappointing unemployment levels from Europe’s major player Germany. These could be highlighted by Draghi next week as reason to be cautious with pulling back from their quantitative easing program, and investors will be bracing themselves for disappointment as a result.

The poor unemployment levels from Germany has added significance with the German federal elections soon approaching. Angela Merkel faced heavy protests yesterday with many members of her party questioning her decision to target pro right-wing regions (high unemployment) during her campaign. So far this week, her “stand against the Yelling” has attracted a lot of negativity and although recent polls suggest Merkel’s double digit lead hasn’t flinched as yet, I wouldn’t be surprised if investors begin to wobble ever so slightly as we get closer to the elections.

Thank you for reading my Euro currency report, if you have any questions about Euro exchange rates I would be more than happy to discuss them – you can contact me with any queries here.

 

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.