In recent weeks, the pound has been falling against the euro and GBPEUR exchange rates have declined 1.75 cents over the last 2 weeks. To put this into monetary terms a £200,000 transfer now achieves our clients that are buying euros €5,500 less. I expect this trend could continue in the weeks to come.
|Currency Pair||% Change in 30 days||Difference on £200,000|
The ongoing Brexit saga is the main reason for the pound's decline. The EU are suggesting that there now needs to be a ‘backstop within a backstop’ and the UK Prime Minister is not prepared to offer this (for more information see today's sterling forecast). It looks like December 13-14th is now being labelled as deadline day and exchange rates could continue to slide until a deal is secured in regards to the Irish Border.
It’s not all good news for clients selling euros to buy pounds, as described by President of the European Central bank Mario Draghi yesterday. The President confirmed that Brexit is also having an impact on the momentum of the Eurozone recovery, and that a no deal Brexit will cause major problems within markets.
He also went on to say that Italy’s economic data is causing a problem for the ECB, but at this stage the draft Italian budget hadn’t had an impact on the European economy.
Earlier in the day the ECB confirmed that interest rates will remain on hold at 0% and the QE program will be ending in December.
My fear for the euro is that in the upcoming weeks the draft Italian budget could start to cause problems, which could lead economists to question whether the ECB should continue with the QE program in a bid to keep the economy stimulated. If this were to happen, you would think the euro would weaken dramatically.
With limited data releases expected, all eyes turn to another speech by President Mario Draghi today. It will be interesting to see if Mr Draghi elaborates further on how Brexit and Italy’s debt problems are influencing the euro. This is the event to look out for today if you are converting euros.
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