The GBP/EUR exchange rate has reached a fresh 8 week high this week following the news over the weekend. This is confirmation that the SYRIZA party has been voted back into power in Greece. Generally the party is not well liked by the financial community; as a party which has been extremely difficult to deal with, pushing back or not even keeping payment scheduled previously agreed.
As a result this created further uncertainty about the future of Greece and with it came Euro weakness making the single currency cheaper to buy.
The largest news this week has been the confirmation that Volkswagen (VW), the car manufacturer, admitted misleading global regulators on the emission levels of their cars. In doing so they opened the flood gates for financial penalties to come in which could be significant. The first could be as high as $18 billion potentially from just the state of California alone. The market is now trying the guess the total losses that will be incurred from the fines, the loss in sales, plus the costs of correcting the faults.
We saw a 20% fall in their share values on Monday alone, with a negative tone being established for the whole German automotive industry.
Germany, the power house of Europe, is very heavily dependent on that industry. Figures suggest that as many as 1 in 7 people in Germany are employed indirectly by the car industry. As a result we saw the strength of the Euro under considerable pressure this week as concerns build that the ECB may have to intervene in the future by increasing the amount of Quantitative Easing (QE) in Europe to counter the loss in growth.
I personally don’t expect this to be the end of this with billions being talked about, this story could continue to have a negative impact on the single currency’s value.
Later today at 14:00 BST we have the head of the European Central Bank speaking, Mario Draghi. This will now be of particular interest as the market looks for any hints on the future of their Quantitative Easing program. As it stands they have been pumping over €60 billion into the economy since the start of the year to boost growth and pull the single currency out of the state of economic woes.
With the VW news this week and the potential impact on German growth, where the majority of grown has come from, we could see the bank increase the amount they spend. If confirmed this could weaken the Euro further, as more money is created its value typically falls.
As a result if you are buying Euros I would be ready to over quickly on this event to get the best price. Contact me at firstname.lastname@example.org this morning to register your interest so that we can keep you posted on progress as this event happens.
I am personally of the view that these current levels are towards the top of the range expected for the remainder of the week, potentially the month of September. As a result if you have Euros to buy I would be moving sooner rather than later taking advantage of this opportunity.
If you have any questions about Euro exchange rates, or transferring money abroad you can speak with any of our specialist currency brokers by calling 00 44 1494 725353.
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