Friday 17th February 2012
Good morning. Sterling gained well against the Euro yesterday as the single currency suffered from delays to a second Greek bailout. The pound was also supported by fresh questions as to whether there would be further UK monetary stimulus. Sterling was also up slightly on the day versus the dollar, as risk sentiment declined over Greece. The below charts show how rates moved throughout the day yesterday.
~Currency Movements on Thursday 16th February 2012~
Doubts over Greek Bailout weakens Euro; Pound/Euro up
Why have Pound/Euro rates gone up? Eurozone finance ministers have demanded much greater oversight of Greece's economy in return for the €130 billion bailout package. In a three-hour conference call this week, the ministers scrutinised Greece's planned budget cuts.
The single currency bloc praised Greece's "substantial progress", but demanded more detail, including a full timeline for implementing the measures. A decision on the bailout is expected to be finalised on Monday
The effect on the currency markets was a weakening Euro and a decline in risk sentiment. Investors worried about the continued wrangling have moved to the safe haven of the US Dollar – the net effect was a much weaker Euro that was cheaper to buy, and rates are now close to re-visiting the recent 18 month highs.
Pound/Dollar rates could fall due to EU uncertainty
Why may the Pound/US Dollar rates fall? As the bailout for Greece has been thrown into doubt, it has renewed the flight to safety. This is when global investors are worried about economic uncertainty and flock to the ‘safe haven’ status of the US Dollar. This in turn strengthens it and makes it more expensive to buy, pushing the exchange rate lower.
Getting the best exchange rates to buy Euros
As I’ve stated before in the blog, it should be noted that this is the 6th time rates have broken €1.20 in the last few years, and each and every time the spike is short lived, to be followed by a correction lower. If it were me needing Euros in the next 6 months, I would fix the rate as soon as possible, considering back in October it was €1.13. There is no way to predict exactly where rates will move, but looking at the historical movements, in my opinion there is more chance that rates will fall than continue rising.
Even if you don’t need your currency for up to 2 years, you can still lock in the current rate with a Forward contract, and only lodge 10% with us at the outset. The remaining 90% bulk remains with you until you need your currency transferred. In this way you are protected against markets going down, and allowing you to budget effectively.
Click here to find out more about our commercial exchange rates, and find out how much you can save. Our exchange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.