Sterling makes gains against the euro since ‘Black Monday’ (Dayle Littlejohn)

GBP EUR Drops After GDP Misses BoE’s 5% Target

At the beginning of the week GBP/EUR plummeted to 1.3490 off the back of carry traders reinvesting back into the euro.

‘Carry trading’ is where a trader borrows money from a bank that has a low interest, the euro is popular for this. They then convert the euros to a currency with a high interest rate and buy shares to make money. Throughout Black Monday carry traders wanted to eliminate their exposure. therefore they sold there shares in the high interest rate countries and reinvested back into the euro. That is why the euro strengthened against all major currencies, and we saw an immediate drop in GBP/EUR.

Now the Chinese government has lowered interest rates to try and settle the stock market, it appears carry traders are now selling there euros and reinvesting back into high interest countries.

What should I do, if I need to buy or sell euros?

If you are selling euros a window has presented itself and I would take advantage by trading as soon as possible. If you are buying euros I would look to trade on the back of a spike. (A spike is where the exchange rate moves in your favour). For clients looking to buy long term I would monitor the market and wait to see what the Bank of England do with interest rates towards the end of the year.

For free advice and a live quote feel free to email me directly [email protected] or call the office on 0044 1494 787 478 and ask for Dayle Littlejohn.