This week is a very important week for the pound and euro rate with the market learning of firmer news regarding the EU Summit and impact on sterling in particular. The expectation is that the pound will rise if there is news that David Cameron has had some success in his plans to renegotiate the UK’s relationship with the EU. Currently there is very little known and there is a high expectation of GBP weakness in general from the Referendum, although this is clearly partly priced in.
Next month is the European Central Bank meeting where we will learn of any plans by the ECB to roll out further Quantitative Easing. QE is a process which weakens currency since it increases the money supply in operation. The ECB did disappoint markets last year just before Christmas and we could easily be in for further disappointment if the market does not live up to expectations that are currently priced in.
We may therefore see GBPEUR rates slip in the coming week before making a recovery in February. Making firm predictions on the currency markets is of course impossible but planning and understanding the market will give you an advantage! If you wish to discuss further the foreign exchange market and the impact this will have on your currency exchanges please speak to me Jonathan by emailing [email protected]