Thursday, 22 October 2015

Why has Pound/Euro risen to €1.38?

Pound/Euro surges on ECB comments 

In my last post on Tuesday, I said that today’s ECB press conference would be key to GBP/EUR rates, and that if there were hints they would extend their stimulus programme, the Euro could weaken and GBP/EUR rates would rise. This is exactly what we have seen happen today as they said that their Quantitative Easing programme would need to be re-examined. Look at the effect it has had on GBP/EUR and GBP/USD in the charts below: 

Pound/Euro rises by 2 cents: 


 Pound/Dollar drops by 1 cent:



ECB to re-examine its stimulus programme 

Inflation is low in the EU, but they can’t cut interest rates as they are already at 0.05%. As I’ve been saying recently, the only clear solution is to increase their QE programme. Today, the ECB president said that "The asset-purchase plans are proceeding smoothly and continue to have a favourable impact," adding that "The degree of monetary policy accommodation will need to be re-examined at our December meeting." 

What does this mean? In a nutshell this means more Euros will be pumped into the economy later this year, and as such the Euro has weakened significantly and is cheaper to buy. 

The news has also affected GBP/USD rates, as investors dumping the Euro have instead purchased the US Dollar, causing it to gain strength and become more expensive pushing GBP/USD rate lower by 1 cent. You can clearly see the 'inverse correlation' in the charts above, as at 13:30pm when the news broke, the graphs move in opposite directions. 

Do you have currency to convert? 

Those needing to buy Euro should consider taking advantage of this spike in rates we have seen today. It could go higher of course, but usually a large spike such as this is short lived, and recent gains haven't lasted very long, so while impossible to forecast, I expect rates to drop back away by the end of the week. 

Do you need the best exchange rates? 

If you would like to discuss the currency markets to help you decide when to fix an exchange rate, or would like to get a quote for your currency exchange to compare with your bank or existing broker, then click here to send me a free enquiry today. 

I will get in touch with you personally, and often better rates available at banks or other currency brokers by as much as 3%, so it's certainly worth getting in touch to see what I can do for you.