Why has Chinese trade data cause GBP/EUR to rise?
As with many of the recent moves in the currency markets, it's to do with risk appetite. Since the start of the year, the slowdown in China has caused global growth to slow, affecting growth across the world including here in Great Britain. This caused investors to become worried, and shun riskier investments in favour of safer havens. That's why safe currencies like the EUR, JPY, CHF etc have gained in recent months and become more expensive.
Today's numbers from China give a little confidence back to the global economy, and investors and markets now have a more 'risk-on' attitude. This has caused them to dump the Euro in favour of riskier bets, and the huge sell off for the single currency is plain to see in the chart below just after 10am this morning. Also, a quick look at the stock markets will show these are rising today in light of the latest Chinese news. As Euros were sold, they became cheaper to buy and this is what caused the push up to €1.26.
I still don't think the GBPEUR rate will continue to rise in the short term though. My overall view remains the same, in that I don't think this is the start of a rally for GBP/EUR. We've seen some nice gains in the last few days, partly due to a strengthening Pound (higher inflation numbers and investors covering short positions) and partly due to the weakening Euro due to today's Chinese data. The underlying reasons for the more general downward trend in GBPEUR rates remain however, and with just over 2 months to go until the EU referendum, it would be a very brave person that would be on the Pound gaining much in that time. If you need Euros, then consider either locking in the rate while it's good, or placing a 'Stop Loss' order to protect you against a drop back to Monday's lows of €1.2350.
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