European news has remained in the background and has widely been ignored over the negative impacts coming from the UK Brexit story. Economic data for the UK has remain relatively stable and the European Central Bank (ECB) has held back from making any changes to central policy. The ECB’s next meeting is one the 20th October and many expected them to extend their current QE program which is currently scheduled to conclude in March 2017, until at least September of the same year.
If this is confirmed this would be a EURO negative event so it’s something that EURO sellers in the short term should be aware of. The challenge however is to calculate whether the GBPEUR climb on this event will be greater than the any further GBPEUR falls before this event, whether the gains for EURO buyers due to this event will be greater than any losses that are to be seen beforehand.
Yesterday afternoon comment from the ECB suggested that they will potentially tapper the QE program, slow it down, before they stop or extend the program. This gave the Euro further strength as a sign that it may well come to an end and that therefore the Europeans economic health may well be improving. All eyes are now on their next meeting to try and understand the plan that has been formalised for the central policy within the EU.
In the nearer term tomorrow EU Retail figures are scheduled to be released at 9:00, this is expected to show a fall in spending and should give GBP/EUR buyers maybe the best levels seen for the remainder of the week. There is also Greek news and data from Europe on Thursday and Friday but I expect these to be over-shadowed again by UK news which are expected to cause Sterling weakness pushing GBPEUR levels down. If you are a euro seller this week I would wait until the end of the week with hopes of better levels still, if I was a GBPEUR buyer I would probably trade this afternoon or tomorrow morning as I expect this to be the best levels this week.
This is a question we get asked a lot as a result of many clients selling in Europe, agreeing to a sell price on the bases of a completion in three months’ time. Currently the forecast for sellers looks promising but there are arguments both for and against with regards to GBPEUR levels in the build up to the end of the year. Some people argue that the UK will remain under pressure. They argue that with more uncertainty about what the UK will look like post brit plus economic data continuing to reflect a contraction in the UK the pound could weaken. This could therefore result in EURO sellers potentially getting more Pounds for their euros once a property has completed. The counter argument however is that the European economy continues to stagnate and that the UK news has already been seen or is now priced in for the next few months.
Large banks are equally none committal with regards to their forecasts, banks have forecasted a GBPEUR level of 1.20 and 1.08 for Christmas. Personally I don’t expect either to be the case but it is very important to be aware of your options and the economic and political events which could impact your position. Not forgetting that you can remove the risk and use a Forward contract to lock in the current 3 year highs for sellers ready for your completion in a few months’ time. If you would like more information on the market or indeed on the Forward contract option, please feel free to get in contact.
Those buying Euros should consider the implications of a deadline for Article 50 on GBPEUR exchange rates. If you are buying or selling Euros, getting in touch with our brokers is now more important than ever. Call our trading floor on 01494 725 353 to discuss further.
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