This Euro update examines factors that could affect exchange rates this week.

Why has the Euro been making gains against Sterling?

Since the 1st of December the Euro has progressively week-by-week made gains against sterling. We have seen over a 10 cent movement making a €200,000 purchase just under £11,000 more expensive. I put the shift down to 2 main reasons:

  • President of the European Central Bank Mario Draghi, did not increase the actual amount of Q.E entering the Eurozone each month which led to a mass buy of Euros.
  • Mark Carney stated the UK wouldn’t raise interest rates until 2017.

Further to this Eurozone Unemployment has dropped and the UK has had a poor run with economic data. Manufacturing production numbers hit a 4 year low, average earnings and GDP figures also showed a decline.

Moving forward all eyes will turn to today’s UK interest rate decision. If Mark Carney, Governor of the Bank of England, continues to be dovish and indicates a hike won’t occur in 2016 the GBP/EUR exchange rate could be back in the 1.20s!

If you have Euros to buy, trading before midday may be wise. As for Eurozone economic data it’s a quiet end to the week therefore I would be looking at next week’s releases. Inflation data is released on Tuesday and the latest ECB interest rate decision on Thursday.

To learn more about Euro exchange rates please feel free to email me at drl@currencies.co.uk, or call me on 01494 725353.

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