Will the GBP/EUR hit 1.20? (Matthew Vassallo)

Pound to Dollar Rate Drops to One-month Low

The Pound has surged against the EUR during Wednesday’s trading, providing euro buyers with some excellent opportunities. When you consider the low we were at back in March of this year (1.1370) and predictions at that time was for further EUR strength, we can see what a marked improvement there has been over the past couple of months.

The question many are asking now is whether GB/EUR rates will hit 1.20 over the coming weeks and personally I think we have a fair chance. Whilst problems in the Eurozone are almost certain to continue, there are signs of the green shoots of recovery here in the UK. The housing market is rapidly improving and when you take into account today’s Service Sector data, there are certainly reasons to be optimistic. The UK’s Service Sector, which accounts for approximately 75% of the economy, grew at its fastest rate since March 2012 and will give hope that incoming Bank of England (BoE) governor will be taking over an economy, vastly improved to the one we saw even 6 months ago.

However, despite this recent upturn I am still very sceptical about a full blown recovery, especially whilst our trade deficit remains so wide. This trade deficit has come about due to the fact we are spending far more on imports than we are making from exports and until this situation changes, the UK economy will never be performing at its full capacity. I believe any further spike for GBP will be short lived, as we may find the new BoE governor stamping his own authority on the position with aggressive rounds of Quantitative Easing (QE). The aim of further QE will be to devalue the Pound, in order to enhance our chances of the Eurozone (our largest trade partner) trading again, which in turn will kick start the UK economy.

We have some more key economic data coming out tomorrow, so anyone with a GBP/EUR requirement should keep an eye on the BoE and European Central Bank (ECB) interest rate decisions and Mario Draghi’s subsequent press conference. Whilst rates are expected to be kept on hold, any deviation could cause additional volatility on GBP/EUR rates.

Here at www.gbpeuroforecast.co.uk we are able to provide our clients not only with award winning rates of exchange but a bespoke service designed to give you the client, as much insight into the markets as possible. If you would like to find out the type of rates or contracts we offer, or need to be kept up to date with all the latest market movements, then please call us on 0044 1494 787 478 or email me directly at [email protected].