GBP/EUR Rates Touching 1.25 = Great Buying Opportunities But Concerns Continue Over Benefit to UK Economy

GBP EUR Looks to Employment Figures for Support

GBP/EUR rates touched past 1.25 today before quickly retreating back to the mid 1.24’s at time of writing. The spike may well of come about following yesterday’s BOE (Bank of England) meeting, as I feel the markets were anticipating talk of another round of Quantitative Easing, which in the end never came about. This assumption may well of been based on the fact the UK is officially back in recession, although as written in my previous report, this figure could well be revised up in the coming months. This would surely give our economy and most likely Sterling a further boost.

With GBP/EUR levels at a three and a half year high this is certainly a great time for those looking to buy euro and whilst it is tempting to wait for levels to continue to rise there are a couple of issues that need to be considered. At present we are seeing Sterling gain sharply on the single currency due in part to better economic data in the UK but more so because of the on-going, well documented problems in Europe, which seem to be over shadowing any of those on our shores. This means Sterling is being over valued and for this reason it has the ability to snap back to some extent and if we saw some sort of shift in momentum or public opinion on Europe, then a move back to 1.20 very quickly is not out of the question.

One of the other issues to consider is how much higher our government will actually let the Pound go, especially against the euro? We have to remember Europe is our largest trading partner (over 40% of our exports) and any continuing rise for Sterling against the single currency will seriously hamper our ability to trade, as goods will be too expensive for economies already struggling with high unemployment and poor growth prospects. Personally I feel they will talk down our economy in order to dampen expectation and hopefully keep the Pound at a reasonable level against the euro, in order not to alienate the region our exports rely on the most.

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