This week on Thursday and Friday respectively we have the latest UK interest rate decision and EU summit, which both have the potential to affect GBPEUR rates. The table below shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
Politics and economics is keeping the Euro firm against most currencies including the pound. The recent ECB (European Central Bank) meeting saw the ECB drop their ‘easing bias’ with markets now expecting an end to the QE (Quantitative Easing) program by September or the end of the year. The QE program was a response to low growth and low inflation, both of which have now picked up.
Angela Merkel was sworn in for her fourth term as Chancellor last week, this reinforces a very positive view of the Euro as Merkel is seen as a very safe pair of hands for Germany and in the Eurozone itself. Despite little economic data from the Eurozone this is a very key week for Euro exchange rates where we could easily see some volatility on existing prices.
From the UK we have a series of data releases, all of which are covered in the sterling section of the report. The main news is Thursday and Friday with the UK’s latest interest rate decision and EU Summit. GBPEUR Rates have been rangebound for much of 2018 but the general trend has been gently upward as a less negative view of the UK and Brexit emerges.
With little Euro news to combat any positivity for the pound, GBPEUR rate may well rise as news of a transitional deal for the UK is reached at the EU Summit. Any bolder clues from the Bank of England they are looking to raise interest rates will also help GBPEUR to rise.
If there is more positivity from the Bank of England and the EU Summit, those buying Euros with Sterling could have a very good end to the week.
It is well worth bearing in mind that at the last EU Summit much of the news was already priced in leaving many clients hanging on to catch a spike, ultimately disappointed. The same happened with the last UK interest rate rise, at November’s meeting sterling dropped against the Euro, despite the BoE raising rates.
If you have a transfer buying Euros with pounds I think the best strategy remains to purchase on any spikes since the Eurozone is outperforming the UK both economically and politically. Any of the data releases early this week might present an opportunity. Starting with Tuesday’s Inflation data for the UK tomorrow, Wednesday Unemployment data and then Thursday’s Retail Sales data. If all of this has been good news, plus there is more positivity from the Bank of England and the EU Summit, Euro buyers could have a very good end to the week.
Today at 10:00am Trade Balance figures or Thursday's PMI figures for Construction and Services could affect shorter term movements. However, if concerned with GBPEUR the UK data will I feel, play a greater role. It seems overall there are more reasons this week to favour the pound over the Euro if events at the BoE and the EU Summit go certain ways. With longer term uncertainty on Brexit and interest rates remaining, any spikes for the pound against the Euro should I believe be viewed as buying Euro opportunities.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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