Sterling continues to fall against the Euro

1st October 2010
Good morning, welcome to a new month. It's not started well for Sterling, as we have falen to a 4 month low on a trade-weighed basis on as the pound stayed under pressure after sharp falls on Thursday.

Nervousness that a UK manufacturing purchasing managers' index due at 09:30am this morning could be weak, exacerbating concerns about a fragile economy and the possibility of more monetary easing, weighed on sterling versus the euro. Rates at 08:30am are as follows:

Why has the pound fallen so much against the Euro?

Over the course of September Sterling fell almost 6% against the Euro, falling from a high of around €1.2250 down to where we sit this morning at €1.1531. This is the lowest in many months, and the cost of buying Euros has increased significantly.

The reasons for the fall are various. On the UK side, expectations of more Quantitative Easing, fears of drastic spending cuts and tax rises, and poor economic figures suggesting the UK is in real danger of dipping back into recession.

On the EU side, strong figures from the major economies such as France and Germany have outweighed fears over the weaker economies such as Portugal, Italy and Spain. Coupled with this, the growth forecasts for the Eurozone have been revised upwards, and so the Euro has gained strength over the last month, making it more expensive to purchase.

Where will rates move the remainder of the year?

It's impossible to predict. If we continue to get more weak UK economic figures, and the Bank of England fail to reach a consensus on the best way to tackle the economy, then the pound may well continue falling.

Conversely, if the EU figures are stronger than forecast, we could see a reverse of the recent trend. Given all the uncertainties, analysts are not sure which direction things will take.

What options are available to make sure I get the best rate?

There are various tools that can be employed in volatile times. A Stop loss order lets you place a level below the current market, and if rates drop that far we'll automatically secure your currency. This way you can aim for a higher rate, but not leave yourself exposed if rates drop.

A limit order can be placed at a higher market level, allowing you to take advantage of what are often very short lived spikes in exchange rates.

Contact us today to discuss your currency requirements, by clicking below and sending us an enquiry.

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