Why GBPEUR is likely to drop further soon!

GBP EUR Exchange Rate: Weekly Review July 16  

GBPEUR has been under lots of pressure in the last month all due to the fact that the UK economy is on the back foot and further losses for sterling are expected. The dire performance of the economy in the UK has been the main reason for GBP weakness in recent years. Just when will things improve? Well it could take a very long time and quite simply things look set to get worse!

A slowing down of the economy means that the we will probably see more QE. Quantitative Easing is a process whereby a central bank (in this case the Bank of England) buys up the bonds of the government which essentially provides money into the financial system. The idea then is that this money makes its way into the wider economy and kick starts economic activity. Does it work? Well according to many measurements, yes it does. But it is generally an unpopular measure as it erodes the value of savings by pushing up inflation. Where the money actually ends up is also a point of debate as it will take time to filter down into the wider economy. Ask the man in the street if they feel ‘richer’ as a result of QE and the answer is more than likely no. Another idea floated is to give money directly to consumers. For example depositing £1000 into every bank account in the UK. I for one would be very happy if this happened!

Essentially QE weakens the currency concerned by increasing the amount of money in the economy. At times QE has caused GBP to lose 3 or 4 cents against most currencies. I do not think this would be the result but there is a very real threat. These expectations make any moves higher for the pound very difficult and this is why GBPEUR is likely to drop further soon.

If you have a transfer to consider I can keep you up to date with the latest news and movements and help you get the best rates. For a full explanation of the current forecast and to learn more about how it all works, please feel free to contact me directly. You can contact me on email using [email protected] or even call me during UK office hours on 01494 787 478. Please ask to speak to me Jonathan otherwise any questions over email are more than welcome.

I look forward to hearing from you.