Thursday, 2 October 2014

Pound falls away from 6 year high vs Euro

Thursday 2nd October 2014 
The Pound has fallen quite sharply today, falling from 1.2875 to 1.2750 against the Euro. Against the US Dollar we have seen rates fall from 1.6250 to 1.6125. What’s been going on? 

Pound/Euro drops as single currency strengthens 


Earlier this week GBP/EUR rates were close to a 6 year high, peaking at 1.2875 yesterday afternoon. It looks like investors have had enough of buying the Pound however, and as soon as markets opened this morning the Pound steadily lost value, as you can see from today’s chart:  

Euro gains strength, but remains on a tightrope


Today we had the European Central Bank (ECB) announce its decision to hold interest rates at the record low of 0.15%. Not really a surprise, as they can’t really cut it any lower than they already have! This was expected, so all eyes and ears were on the press conference that followed, to see if the ECB president Mario Draghi said anything about their Quantitative Easing programme. 

It turns out that what moved the currency markets wasn’t to do with what he said; it was more to do with what he didn’t say. The BBC are reporting that the ECB are starting it's asset buying programme, however in his speech he declined to actually give any figures on how much this would involve, so we don't really know any more about these plans than we did already. The fact that he didn't clarify 'QE proper' means that the Euro actually gained strength causing Pound/Euro rates to drop by 1% on the day so far. This doesn't sound like much but if you're converting a large sum, small changes like this can be costly. 

Given the recent figures showing that inflation is at a 5 year low in the Eurozone, many including myself thought that Draghi would have to pursue a proper QE programme, much like the UK and US have done in recent years. However he gave no indication of an imminent stimulus program through the purchase of sovereign bonds. He simply said that their mandate is to bring inflation back to a level that is close to but below 2%. 

As markets were expecting a little more from his comments, the Euro gained strength and became more expensive to buy, pulling levels down from the recent highs we have seen. 

Do you have Euros to buy or sell in the coming months? 


Those that need to buy Euros and took advantage of the recent highs, or had a ‘Stop Loss’ order in place to protect against a downturn in the rate will be pleased as the rate has now dropped. If you still need Euros in the coming months however, there are tools to help you achieve the best rate of exchange within your timeframe. 

Don't just leave things to chance, speak to a specialist currency broker like myself to discuss what is happening in the market to help you make an informed choice on when to fix your rate. Contact me today by clicking here for a no obligation consultation on what I can do for you and the rates we can offer. 

Those that need to convert Euros back to Pounds should consider taking advantage of this spike in your favour. I think that in the long term, the ECB will pursue more aggressive stimulus, and this coupled with higher interest rates in the UK should eventually put GBP/EUR back on its upward path. 

Click here to make an enquiry on how I can help you achieve the best possible exchange rates.