GBP/EUR Exchange Rates – This week will likely see the best exchange rates available in 2015 (Joshua Privett)

Very rarely do you see currencies making the headlines. It is the largest market in the world but currencies work based on other events that make the front page. They are patrolled by government policies, tweaking them to maintain balance and allow some sort of forward financial planning in the global market place. Yesterday blew conventional operating out of the water.

The move to remove the cap on the Swiss Franc exchange rate with the Euro at 1.2 clearly came as a shock for the markets, with the Franc briefly rising as high as 0.85 to the Euro, before dropping back down to 1.02 by lunchtime.
Why is this significant for Pound-Euro exchange rates?
This event is further evidence to expect the introduction of Quantitative Easing on the 22nd January. It would have been very expensive for the Swiss Franc to keep printing money to keep the exchange rate at 1.2 with the Euro when the Euro’s value has been reduced as far as it has. So while the Swiss Economy will take a hit from this, facing deflation and defaults on loans, it was simply another example of currencies pricing themselves ahead of an expected event.

With this added certainty, we also saw a large spike of Sterling to the Euro yesterday, seeing 6 year highs as markets became more confident with what the future held next week for the Euro. The positive is that this is a golden week to be purchasing Euros. You do not have to gamble on the event taking place next week, you can take advantage of the rates as they are now! As such the announcement itself will have little effect on the markets, but there is still scope for poor data to come out from the UK economy in this period. Should the Bank of England announce delayed interest rate rises until early next year, a possibility given our record low inflation figures, this will drive down the value of Sterling.

Rarely do you have a crystal ball on the currency markets, here you do not have to. The rates have preceded the event, and with the British Election looming later in the year, it is very likely that we are seeing the best rates for Euro purchases in 2015.

Do not despair if you have no requirements until later in the year. Our exchange services provide forward contracts to peg current rates for up to 12 months. Or if you would like take advantage of the rates as they are now please email me on [email protected] and I will be happy to discuss your options with you in further detail. Or you can reach me directly on the trading floor by calling 01494 725353 and asking for Joshua.