Where Next for GBP/EUR Exchange Rates? (Matthew Vassallo)

GBP/EUR rates have been creeping back towards the highs we saw in the summer over the past couple of weeks. With the pair now trading just under an 8 year high, EUR buyers have once again been presented with a fantastic opportunity to purchase their currency.

It’s been a volatile few weeks for the pair, which at one point seemed to be heading back towards 1.35. It is not the first time the EUR has threatened to realign itself after months of negative downturns, only for the Pound to snap back. Investors have been unable to find any sustainable confidence in the single currency, especially whilst the Eurozone remains in such economic disarray and although the EUR has found some support around the current levels, recent market developments indicate it will struggle to make a sustained impact against the Pound.

There was some respite for the EUR this morning, following better than expected Manufacturing and Services data. This has helped to curb any further losses for the EUR and may give it some protection over the coming days. The underlying problem facing EUR sellers is the likelihood of the European Central Bank (ECB) increasing their current Quantitative Easing (QE) programme in December, in the hope this will help to drive inflation levels up. With this news now being priced into GBP/EUR rates expect the EUR to struggle, unless of course there is no increase in QE, in which case it is likely the EUR will strengthen off the back of this.

Looking ahead and it’s a fairly quiet week for UK economic data releases, so much of the focus will be on Friday’s Gross Domestic product (GDP) figures. Market expectation is for 2.3% growth, so anything outside of this is likely to cause additional volatility on GBP/EUR exchange rates.

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