It’s been an interesting start to the week on the foreign exchange markets. Despite little economic data being released yesterday, the Sterling/Euro rate rose steadily throughout the day before settling around €1.3850. The upwards march continued this morning, with rates touching €1.39, before figures released at 09:30am this morning showed that UK government borrowing was much higher than expected. This halted the steady rise and at the time of writing, GBP/EUR sits just above €1.38:
UK Interest Rates
Last week the Bank of England’s chief economist indicated that an interest rate cut could be on the cards. I mentioned in my last post that I thought that unlikely, and today the chancellor George Osborne also indicated that the next move in rates is likely to be a rise. However, I still think that this is still quite a long way off. Indeed the Bank of England deputy governor has suggested that disinflationary forces from abroad meant there was no immediate need to raise interest rates, so I expect this to halt any rise in Sterling.
European Central Bank (ECB) president Draghi to speak tomorrow
Tomorrow at 2pm, Mario Draghi, the ECB president gives a speech. There is a good chance he will talk about how the EU economy is doing, and I think this could have an impact on Sterling/Euro rates. On the one hand, he might hint that further Quantitative Easing is needed in order to boost the economy, and there are also rumours he may float the idea of an interest rate cut. If one or both of these things happen, then I would expect the Euro to weaken, pushing GBP/EUR rates back towards the €1.40 level. If however neither of things are mentioned and he is positive about the economy, then we could see the pair drop back away.
Do you need to buy or sell a foreign currency?
If you have a currency transfer to make and would like to save money, then get in touch with me for a free quotation. I can also explain the various contract types we offer so that you can hold out for a higher rate than is currently available, without leaving yourself exposed to a sharp drop in the rate.