Tuesday, 20 January 2015

ECB key to GBP/EUR forecast for 2015

Tuesday 20th January 2015 
Pound/Euro rates have risen by a cent today, and at the time of writing GBP/EUR remains stable around the €1.31 level, which is the highest rate to buy Euros since March 2008: 



Will Pound/Euro rates climb or fall? 


We’ve seen a significant rise in rates in the last few weeks, pushing GBP/EUR in particular to the highest we’ve seen in 7 years. Being able to trade at levels above €1.30 is excellent news. The main question now is whether rates will drop back below this level, or perhaps even go higher still. 

The next few days will be key to this. Tomorrow we have a Bank of England decision on interest rates, and the latest Unemployment figures. I think both of these will be a non-event and won’t have much of an impact. 

Of much more significance will be Thursday’s announcement by the European Central Bank (ECB), when they’ll decide whether they will start a Quantitative Easing programme where funds will be created to spur an economic recovery. 

If they do, it will likely weaken the euro. As this has been progressively priced into the market, we’ve seen the euro lose value over recent weeks which is the main reason rates are currently so high. Because it is widely expected, for the most part it is already priced into the rate. If QE is announced however it may not actually cause further gains. 

However if there’s no announcement, expect GBP/EUR to fall away as the expectation has already been partially priced into rates. Furthermore, in a week’s time, the Greek election will cause uncertainty for the Eurozone, so there is much on the horizon that could significantly harm the euro. 

If you’re buying or selling Euros, what should you do? 


In the first instance you should discuss your currency requirement with me, to talk about your specific needs and discuss what is moving the market. I can also explain the various options you have at your disposal. 

For example, euro sellers should consider buying forwards to protect against the rate getting worse. Euro buyers should consider a stop loss order, to protect against the market dropping should QE not be announced. It would be a shame to miss out on a 7 year high by holding out for a small gain. 

Whatever your currency requirement, if you’re keen on achieve the best possible rates, contact me today by clicking here to make a free enquiry.