Friday, 10 July 2015

Pound/Euro rates slide as it looks like a Greek deal is imminent

Friday 10th July 2015
It looks like we’re edging closer to a deal over Greece, and the GBP/EUR has been edging lower ahead of a possible deal this weekend. (Take a look at my live currency charts, a snazzy new feature I've recently added to my blog that regular readers may have noticed!)  

Let's take stock of where everything stands...

Yesterday the Greeks delivered their proposals to European creditors as promised. Today they are rallying support ahead of a vote by the Greek parliament at 10pm tonight. If they vote it through, which looks likely at the moment, then on Saturday EU finance ministers will have to all vote to agree to the proposals. On Monday morning, the parliaments of the EU will vote on whether to agree the deal. If all of this happens, then Greece will be given the €3.3bn they need to pay their outstanding debts.

What affect could this have on the Pound/Euro exchange rate? 

It’s very hard to say and the currency markets are impossible to second guess, but logic would dictate that if all goes to plan, then the crisis is averted and the Euro could gain significant strength, and that would pull exchange rates lower as the single currency becomes more expensive to buy. This could be good news for clients that will need to move Euros to Pounds, however if you need to buy Euros then there is the potential for a sharp drop in rates.  We'll see how things pan out when markets open on Monday morning.

If you need to buy Euros, how can you protect yourself? 

If you have an upcoming Euro requirement then it would be wise to put a strategy in place rather than just sitting back and waiting to see what will happen to the GBP/EUR exchange rate. Some examples of the things you could consider are as follows: 

  • Fix the rate now on a Forward Contract – This means locking in the exchange rate now for up to 2 years into the future. You lodge 10% of the total you want to convert, and the remaining 90% is due when you want the Euros to be transferred. This protects you against the rate going down, but leaves you unable to take advantage should the rate go higher. You fix the rate, and that’s what you get regardless of what the market does. 

  • Use a Stop Loss Order – This works by setting a target level, below which your order to buy Euros is executed. For example if you place a ‘Stop Loss’ at €1.35, then if the market drops to that level, your currency is purchased. It’s useful as it gives you a worst case scenario should the market fall. If however the rate climbs higher and the Stop isn’t filled, you can still take advantage of a higher rate of exchange. 

  • Hedge your bets – If you are unsure which way the rate will go and want to gamble on Greece failing to secure a deal and the rate going higher, then one strategy you can consider is fixing a rate on a portion of the funds you need to buy, 50% for example. In this way you reduce your exposure significantly, and have some level of protection regardless which way the rate goes. If it does drop, then at least you bought some of your funds beforehand. If the rate climbs, then great you can buy the remaining amount needed at a higher rate. 


The above are some examples of the services I can offer, along with excellent rates of exchange. If you would like to receive a quote on the rate that I can offer you, or discuss your currency requirements in more detail,click below to get in touch.

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