This Euro update examines factors that could affect exchange rates in the short term. In the table below you’ll see high to low GBP/EUR exchange rate movement and the difference when exchanging £200,000 Pounds to Euros in the last 30 days.

Currency Pair% ChangeDifference on £200,000
GBPEUR5.8%€12,560

Will the ECB taper the Quantitative easing program this month?

Over the last couple of years the European Central Bank have been running a €60bn quantitative easing program in order to stimulate the economy. Below is a basic 6 step guide to quantitative easing:

  1. A central bank buys government bonds
  2. This increases the price of the government bonds, leading to more money available in the banking system
  3. As a consequence, borrowing rates tend to fall which means lending becomes cheaper
  4. Borrowing becomes cheaper, which means businesses and people start to borrow and therefore spend
  5. Investment and consumption receives a boost which in turn helps economic growth and job creation
  6. Prices then start to rise (inflation), and the central bank then start to reduce and bring the program to a halt
ECB Decision Thursday

For the Eurozone inflation has been steadily rising over the last 12 months and the President of the European Central Bank has announced a sustained period of growth across the bloc. In addition the President last month announced that the bulk of the decisions surrounding Q.E would be made at the interest rate decision on the 26th October.

For clients that are exposed to Euro transfers the ECB decision towards the end of the month has the potential to shift exchange rates by a substantial amount. I would be shocked if the President announced that the Q.E program would be cut this month, however I expect he could hint towards tapering the program early next year. If this is the case less Euros will be entering the banking world which in turn should strengthen the Euro. For clients that have just read the Sterling section of this report, another reason why buying Euros now seems sensible.

Spain causing a period of unrest for the Euro

Overnight it has been reported that Catalonia will declare its independence from Spain in a matter of days according to President Carles Puigdemont. However the kind of Spain Felipe VI has exclaimed that voters have put themselves ‘outside the law’. All major news stations in recent days have shown the Spanish police violence towards voters and I don’t expect this trend to stop anytime soon. Regardless of the outcome this story could continue to put pressure on the Euro short term.

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 at drl@currencies.co.uk.

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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.