The pound has continued its fight back against the euro this morning with GBPEUR exchange rates climbing by 1%. At the start of the week the pound had slumped to multi year lows but over the last 3 trading days we have seen an increase in the pounds value. Some would argue that quite simply the pound has been purchased heavily in recent days due to the currency becoming extremely cheap and that’s the reason for the pound’s recovery.
Why Did the Pound Fall Against the Euro?
Many of my clients have wanted to know why the euro has performed so well against the pound since the Coronavirus begun therefore, I have outlined a few points below.
Carry trading is where an investor borrows money in a low yielding interest rates currency, the euros is great for this as interest rates are 0%, and the investor then transfers the euros into a different currency, for example into the US dollar for higher returns on their investment. However, in times of uncertainty carry traders sell off their positions which means the euro has quite simply been purchased heavily over the last 6 weeks.
EURUSD is the most traded currency pair globally. Over the last couple of weeks, the FED have cut interest rates to 0.25% and announced a Q.E package to keep the economy ticking over. Again for investors that needed to purchase euros now seems as good time as ever and constant flows have left US shores.
What Next for GBPEUR Exchange Rates?
The Coronavirus will continue to force all economies into drastic action in the upcoming months and this will therefore impact GBPEUR exchange rates. The Bank of England have already cut interest rates to 0.1% therefore for the time being I find it difficult to see what more the central bank could do. European Leaders will continue to debate the ‘European Stability Mechanism’ which is being reported as €410bn.
I believe exchange rates will be heavily influenced by how the virus spreads. The longer a country is shut down will determine the GDP for that country moving forward. For clients that are looking to convert GBPEUR, exchange rates are extremely volatile and regular contact is needed. If you want to be kept up to date with how developments unfold feel free to get in contact by filling out the form below.
Get in touch using the form below for more information about the factors likely to impact your EUR exchange. I’ll be happy to get in touch personally and discuss your enquiry.