This morning saw a gradual reduction on GBP/EUR rates of exchange into the lower 1.41’s. Seemingly a continuation from yesterday following the overwhelmingly positive news of a reduction in the unemployment rate for the Eurozone, markets were shocked when this reversed dramatically back above 1.42 in a matter of minutes.
The root cause of this was inflation data released by the EU this morning which came in lower than expected, reversing some of the gains seen yesterday for the Euro against Sterling. Whilst still showing a better record that the UK in their current inflation levels, markets move on expectation and rumour. Whilst inflation was expected to come in at 1%, instead a 0.9% growth figure was recorded which is what caused Euro value to lower, translating into a rise on GBP/EUR.
However, this has already proven to be short-lived, with GBP/EUR falling back below the 1.42 mark as I write this article. This is because the current economic climate simply does not justify such cheap buying levels for the Euro against Sterling.
The recent move in the favour of Euro buyers by 10 cents in the space of 9 weeks has very little to do with events in the UK or European economies, and can instead by traced back to recent developments in the USA.
The US are set to be the first country in the Western world to raise interest rates since the 2007/8 financial crisis. This would raise their base interest rate to 0.5%, a much more attractive investment prospect than the current 0.05% for the Eurozone. The expectation of a rise in December was what had caused the mass sell-off of Euros for Dollars which caused the Euro to weaken through lowered demand and saw GBP/EUR rising to 1.43 at its peak.
The hints of a rate hike are so explicit that the event is a near certainty, which is why GBP/EUR rates have begun to correct back below to the 1.41’s – most who are looking to invest in the Dollar have already done so.
These artificial flows were the only feature keeping GBP/EUR rates up at the current buying levels over the past two weeks. By all accounts Sterling has been performing poorly against all other major currencies, at near 6 month lows against the US Dollar and Australian Dollar due to our record low negative inflation which has persisted the past few months. Which is why Euro buyers can expect rates to gradually become more expensive as the month continues.
I strongly recommend that anyone with Euros to buy should contact me on 01494 787 478 and ask the reception for Joshua to discuss a strategy for your transfer to maximise your Euro return. Whilst markets are trending negatively again, today’s short-term bump upwards proves that currency markets never move in a straight line, and opportunities to buy again may present themselves later this week.
These current rates of exchange can be pegged if you are more inclined to secure this higher rates of exchange rather than gamble on further opportunities presenting themselves. I would remind regular readers of my articles that I have never had an issue beating the rates of exchange offered elsewhere. [email protected]