Yesterday the GBP/EUR rate dropped to 1.081 which is the lowest level in over 8 years. Over the past 3 weeks there has been a continuous weakening of Sterling and this has culminated in the rate reaching record lows. The big question now remains is will the rate continue to fall or rise?
The basic argument would be that there is likely to be further weakness simply as the trend looks set to continue. The Eurozone is showing increasing strength through strong data and this isn’t showing signs of changing anytime soon. Secondly there are current expectations that the European Central Bank’s economic stimulus could be close to being reduced, showing further confidence in the economy. Tomorrow the Head of the ECB Mario Draghi will speak at the Jackson Hole Symposium in the US and this should provide further insight into the central banks position.
From a Sterling perspective the Brexit uncertainty could have finally caught up with investors. Whilst the Government are looking to release economic white papers to provide clarity on their position, there is no solid results coming from the Brexit talks. One potential avenue for Sterling against the Euro could be some concerns that the GBP/EUR rate is dropping to low. The Eurozone could start to see a reduction in exports if the price of goods increase to much with the current rate. We therefore may see Mario Draghi or other ECB members try to talk down the currency by holding off any economic changes.
If you do have a question with regards to my forecast please get in touch. When you come to moving large sums of money a movement of a cent can often relate to a significant difference in your returns. Helping you formulate a strategy could make sure you’re in the best position to exchange currency when the market is in your favor, please contact me at firstname.lastname@example.org