GBP/EUR close to a month high this morning

Pound to Euro Exchange Rate with UK Election Heating Up

GBP/EUR had a good start for the third day in a row since the interest rate hike last Thursday and pushed very close to a month long high.

The Euro is now really coming under strain from the PIIGS of Europe, as Italian Sovereign Debt – one of the ‘PIIGS’ that has managed to avoid much media spotlight has really come under fire.

There is now talk that the European Stability Fund may have to be doubled in order to be able to potentially bailout Italy, the third biggest country in the Eurozone.

This really goes to highlight how much pressure the Single Currency is under – despite raising interest rates last week and the UK releasing lower than expected inflation figures this morning (4.2%, 0.3% lower than expected), Sterling has still gained.

Whilst I think this is unlikely to go a lot further in the Short term, due to the UK’s own economy and underpinned strength in the Euro from a higher interest rate (a differential of 1%) and strong economies in Germany (in particular) and France – comparitively at least to the PIIGS and the UK. I think the current Euro weakness acts as a glimpse into the future. I wouldn’t expect the Euro to remain below the 1.20 mark forever – even though it may be until the start of next year that Sterling sits comfortably above that mark.

So what to do? If you are looking to sell Euros keep your finger to the pulse to take advantage of what are still historically very good rates, although if you are buying in the next few months you may want to take advantage of this spike which has seen GBP gain nearly 4 cents against the EUR in only a week.