Why is the Pound dropping against the Euro?

Pound Euro close to 4 month lows

The Pound Euro exchange rate is now close to its lowest level since September of last year.

The Pound has been experiencing a difficult period vs the Euro for weeks since the start of December.

The sudden turn of fortune for Sterling could be attributed to what happened in early December.

The Bank of England hiked interest rates once again but the European Central Bank countered that by also hiking interest rates for the first time in months.

This could be taken as a signal that the ECB are considering to start trying to catch up with interest rates both here in the UK and the US.

This morning we saw a surprise announcement from the Office for National Statistics who confirmed that the UK actually grew by 0.1% in November compared to the expectation of a fall.

This coincided with the football World Cup which saw spending increase during the tournament.

However, in the three months to November it fell by 0.3%.

Chancellor Jeremy Hunt has stated that he wants the economy to improve by pledging to ‘stick to the plan to halve inflation this year so we get the economy growing again.’

This could mean that with inflation continuing to remain at very high levels this could keep pressure on the Bank of England to continue with its current monetary policy by increasing interest rates during 2023.

UK Interest Rates going up in order to combat rising inflation

Even with so many interest rate increases during 2022 UK inflation remains worryingly high so it could mean further interest rate hikes even on top of where we are currently sitting.

This could cause a big concern for the UK economy as although it may help to fight rising inflation it will also cause problems for those with mortgages that need to be renewed at much higher repayment levels.

With the combined cost of living crisis this could see a bleak future for the UK as we move forward in to 2023.

Therefore, if you need to make a currency transfer buying Euros in the short term it may be worth looking at organising a transfer in the near future.

If you would like a free quote when buying or selling Euros or another currency then feel free to contact me and I look forward to hearing from you.

Email me with your requirement Tom Holian [email protected]