Friday 20th February 2015
Sterling/Euro rates have broken through the €1.36 level today, which is a fresh 7 year high. It looks like for the moment the rate is now comfortable above the €1.35 barrier that it had struggled to break through in recent weeks. Now that it’s firmly above this level, it will become a level of support, meaning it’s likely to stay above this threshold and struggle to drop below it should the market fall.
UK Trade Balance surplus
The Pound gained today partly due to this morning’s Public Sector Borrowing figures. UK government finances showed a surplus of £8.8bn in January, which is the highest for seven years. This better than expected number caused Sterling to gain.
The main reason for the gains however we’re weakness in the Euro. The ongoing crisis in Greece is causing uncertainty which has been weakening the single currency. Today, Eurozone finance ministers are preparing for a 3rd meeting in order to solve the crisis over Greece's bail-out.
The Greeks have proposed a 6 month extension of its Eurozone loan programme, as opposed to renewing its existing bailout deal, which would involve continuing harsh austerity measures. Earlier this week Germany rejected this, but I think there is a chance it will be agreed. Time is running out, as the existing bailout deal expires at the end of the month and Greece could run out of money without a new accord.
There are lots of reports in the media about the possibility of Greece leaving the Eurozone, but personally I think this is unlikely. The most likely outcome in my view is an agreement to the extension the Greece is requesting. This could be seen as simply kicking the can further down the road, but I don’t think the Eurozone would accept Greece exiting as it would be bad news for all concerned.
Once an agreement is made, how could it affect exchange rates?
There are several things that could happen, but I think if an agreement is reached, it removes the uncertainty that has been weakening the Euro lately, and this could cause the single currency to regain some strength and bring GBP/EUR rates down from the currency 7 year high.
Getting the best exchange rates
In the current climate of uncertainty, the market is very volatile. For Euro buyers this has presented the best exchange rates for over 7 years. It could go higher of course should the Greek situation unravel further, but as I’ve stated above, an agreement could easily bring rates down.
That’s where having a good currency broker like myself can help you. Unlike a bank I can provide much better rates of exchange, by as much as 5% which can save you thousands of Pounds. It’s not just better rates I provide however, as I can also offer various contracts like Forward Contracts (locking in the current rate for up to 2 years with only a 10% down payment), Limit Orders (placing an instruction to trade should the market hit a target level of your choice), and Stop Loss orders (your currency is bought at pre-agreed level, lower than the current rate, which gives you protection against a market drop while still allowing you to take advantage of further gains).
These types of orders are very useful to ensure you get the best exchange rates, and banks don’t normally offer these sorts of tools.
If you have a currency transaction to perform, would like a quote, or to simply discuss the market or anything I’ve covered above, contact me for a free no obligation consultation by clicking below.
Labels: Greece, UK deficit