Wednesday 26th August 2015
Following ‘Black Monday’ there continues to be volatility with Sterling exchange rates. Looking at Sterling/Euro in particular, the recent 8 year highs of €1.44 are now a distant memory. Rates have plunged in the last few weeks, and despite recovering a little yesterday, it fell again last night at is now stable around the €1.36 level as you can see from the chart below:
Further volatility expected on currency markets
This all began Monday when a global rout in the stock markets was prompted by a huge share sell off in China. Fears of a global slowdown intensified in recent days after China devalued its currency and data pointed to further signs of weakness, triggering volatility in global stock and currency markets.
China cut its interest rates this week in an effort to avert disaster, and investors are now questioning whether the Federal Reserve in the USA and the Bank of England in the UK can change interest rates. Much of the Pound’s strength in recent months was on expectations interest rates would rise later this year. Even the recent Bank of England inflation report gave investors’ confidence rates would rise within 6 months, boosting the value of Sterling. However with the latest global developments, it’s now likely to be late next year, or even 2017 before rates rise from their current 0.5%. As a result the Pound has weakened.
Experts expect market volatility to continue until at least next month when the USA decides what to do on interest rates. Just a few weeks ago, most thought they would raise their interest rate, but now it’s more likely up to a year away.
Safe Haven Currencies
An unlikely benefactor of the recent turmoil has been the Euro. Now that Greece is out of the news following an agreement to provide an €86bn bailout, the Euro has gained strength as I had predicted it would do for some time. Their stimulus programme seems to be working, and actually the EU economy is looking more and more robust. This has meant that due to the global turmoil, investors view the single currency as a safe place to park their funds while avoiding stock market turmoil and this strength is also a factor in the GBP/EUR rate falling away sharply.
Do you have a currency transaction to perform?
If you have a foreign exchange need in the next 6 months, then the current volatility should be of concern and you should take steps explore all the options available to you. You can get in touch with me by clicking here, to get a quote and find out about how you can protect yourself against adverse market movements.
Whether you are buying or selling property abroad, a business that deals in foreign currencies, or simply need to top up a foreign bank account, I can help. I have been a currency broker helping private and business clients get better rates than their banks or existing brokers offer for more than 10 years.
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Labels: GBPEUR Outlook, getting the best exchange rates, Interest Rates, pound sterling forecast, Safe Haven Currencies, Why has Pound fallen against Euro