GBP/EUR rates touched past 1.25 this morning and with this resistance barrier seemingly broken, the question was where not if the current trend would stop. However, as analysts around the country are writing the euro’s obituaries, it seems the single currency has decided to buck the recent trend and start a mini revival of its own.
At time of writing the single currency had moved away from the 1.25 mark and was sitting comfortably in the low 1.24’s as we head into the weekend. This may not seem like much to talk about but given the current climate in Europe and the recent market trends I would say this is a mini victory for euro and proof that’s its consistent decline is not quite as cut and dry as some may think. To put it in perspective if you had made a 200,000 EUR/GBP transfer this afternoon, you would have received an additional £1,300 compared to trading this morning.
GBP/EUR levels are at a three and a half year high however and this is certainly a great time for those looking to buy euro. Whilst it is tempting to wait for levels to continue to improve, 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 -1.22 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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