With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table shows the difference in Euros you would have achieved when buying £200,000 during the high and low points this year to date.
|Currency Pair||% Change||Difference on £200,000|
The Euro strengthened across the board yesterday, and quite substantially against the Pound specifically, making the prospect of converting Euros into Pounds an even more attractive proposition.
While there is talk from many major financial institutions (see GBP section) that the GBP to EUR rate could hit parity, the reality is, the current rate is sitting at an 8-year high with Euro sellers now close to all-time highs.
The reason behind the Euro’s strength, and it’s also worth considering that EURUSD is trading at a 18-month high after increasing by over 15 cents since January, can be put down to a number of reasons. Firstly, the Eurozone economies have been impressing recently, along with talk of the European Central Bank tapering their current Quantitative Easing program.
The Euro has also been boosted by what looks like diminishing support for far-right populist parties, whose main concern is restricting the free-movement of people within the EU.
On top of the aforementioned reasons, the Euro is now benefiting from its current status as a safe haven currency. Late on Monday night North Korea launched a missile that passed through Japanese air space, a move that spread through global news outlets instantly. A number of economies in the area saw a hit to their currencies/equities values due to fears surrounding how this could develop, and the US Dollar also took a small hit due to the strong words exchanged between their respective leaders in recent weeks.
The Vix volatility index (a measure of volatility) moved sharply higher in the wake of this, and hit its highest level since Trump declared that North Korea would be hit by ‘fire and fury’ if it continued to test nuclear weapons off of its coast, which makes it easier to understand why the Euro is benefitting from the ongoing events, especially as Europe is positioned out of the potential areas of conflict.
Moving forward I think the GBP/EUR rate will continue to be driven by sentiment, with the ‘Brexit bill’ and rumours surrounding it being the key as to whether the pair will hit parity. In the meantime, if you would like to be kept updated regarding any short term price movements involving the Pound, do feel free to register your interest with me.
In the short-term there will be a number of releases this week, each morning around 10am with this morning’s covering business confidence in the EU. Feel free to get in touch here if you wish to discuss this week’s releases and how they could potentially impact your currency requirement.
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