The Pound is not the only currency facing problems at present with the EUR coming under pressure recently.
This trend could be set to continue over the coming weeks and months, with a host of key economic & political decisions likely to impact the single currencies value.
GBP/EUR rates have been more volatile than usual of late, with highs of 1.20 and lows of 1.10 over the past few weeks.
The current levels of 1.1310 are being driven by market sentiment surrounding the UK’s Brexit from the EU and comments made by Prime Minister Theresa May, who is taking a hard-line stance ahead of the triggering of Article 50 in March.
The EUR has benefitted from the uncertainty surrounding Brexit and detrimental effect this has had on investor confidence and ultimately the value of the Pound. I do not believe the highs mentioned for the single currency were reached through an overriding confidence in the Eurozone and as such you could look at the current value as over inflated.
If we delve deeper into the current economic climate inside the Eurozone and all is not well. The ECB have extended their monetary policy (QE) programme to support their flagging economy and with key elections in Holland, France and Germany this year and an uprising of far right parties, the landscape could look significantly different in 12 months’ time.
The EUR itself has dropped to over 10 year lows against the USD and this is poignant in my opinion. The USD has gained support over recent months and with further interest rate hikes likely this year, the EUR could struggle to make any sustainable impact against the greenback for the foreseeable future.
I feel that the EUR is going to find life extremely tough going as we head through 2017. If we see any positive information released from the UK government regarding how we will facilitate our Brexit, then GBP/EUR rates could recover as the Eurozone will be negatively affected by the UK’s departure, with some arguing the impact will be more severe for them that us.
Therefore I would be extremely tempted to secure any Euro transfers sooner rather than later, to take advantage of the current levels against Sterling and to protect further losses against the US Dollar.
Looking ahead and there are some key data releases for the EUR this week, starting with today’s trade balance figures this afternoon. With so much focus on the UK’s Brexit, it will be interesting to see how the Eurozone is performing in this sector, as the trade landscape between the UK and the Eurozone could change dramatically over the months ahead.
Wednesday we have a host of inflation data, which is expected to show an improvement and this could help to solidify the Euro position against the Pound early this week.
Thursday could hold the most weight for investors, with the latest ECB interest rate decision and subsequent monetary policy statement. Whilst rates are expected to be kept on hold at 0%, the following press conference will give us a key insight into the central banks thinking and due to the economic pressure across the region it may be wise to sell any Euro positions before Thursday and remove the element of risk from the market.
The Brexit position will likely take centre stage this week, when Theresa May reveals her Brexit strategy tomorrow. If you have a Euro requirement with Sterling, now could be a good time to get in touch with your dedicated broker to discuss your options. Call us on 01494 725 353 or email me here for more information.
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