Thursday, 3 December 2015

GBP/EUR falls from €1.42 to €1.38

We've seen a huge drop in the Pound/Euro rate today. The markets have been anticipating today as key to GBP/EUR, and it has certainly caused significant volatility. As you can see from the chart below, the rate has fallen from the recent highs of €1.43, down into the €1.38's today. This is a huge drop, and as I warned in my last post the rate was unlikely to go any higher and may in fact drop back away, and this has proved to be the case:


Why has the Pound/Euro rate dropped?


As expected, the European Central Bank (ECB) have today announced that they have cut the bank deposit rate to -0.30%, and increased their Quantitative Easing programme. This had been priced into the market already, and clearly it was overly priced in, as once the announcements came, the Euro really gained strength. This is because the actions taken today will ultimately be positive for the Eurozone, and as such the Euro has pushed higher and become more expensive to buy.

There was some initial confusion, as just before the decision, the FT leaked that no action would be taken, pushing the GBP/EUR rate up to €1.42. However this was clearly wrong, as the ECB have taken action.

GBP/EUR rates are now well below €1.40 and as I predicted would happen, the market has again failed to sustain itself at the recent €1.43 levels. If you are converting Euros back to Pounds, this is great news. Converting €200,000.00 now nets you £4000.00 more than earlier this week. Those that need to sell Euros should consider taking advantage of this spike.

For clients that still need to buy Euros, you have various options. Those that read my last post and chose to place 'Stop Loss' orders or Forward contracts will be very pleased, as this will have protected against the sharp drop in the rate. All the recent highs for GBP/EUR were caused by speculation that the measures today would be taken. This is now done and dusted. The rate will probably recover some of today's losses and head back towards €1.40 again, but it will struggle to break through this barrier as it's such a key level of resistance.

Do you have currency to convert?


Get in touch with me today for a quote and to discuss your requirements. I offer rates up to 5% better than bank and other brokers can achieve, and also have several tools available to protect against sudden changes in the rate like we have seen today.