Thursday, 8 September 2016

GBP/EUR falls further into the €1.17's

Sterling/Euro exchange rates have taken another hit today, falling down to the €1.17's, but this time it's a strengthening Euro that has caused the drop. Here's this week's GBP/EUR graph:


European Central Bank (ECB) strengthens the Euro


Earlier, the ECB announced that interest rates will be left as they are for another month, and decided not to extend their QE stimulus programme, despite the low inflation rate of 0.2%. The markets had been expecting them to at least increase the QE, and the markets had priced in a 50% chance of them doing so. Because they didn't do anything, the Euro gained in strength, becoming more expensive to buy, and pushing GBP/EUR rates into the €1.17's.

Will the Pound go back up against the Euro?


Since the EU referendum, GBP/EUR has climbed up to the €1.20 level 4 or 5 times, and each and every time it slumps again. This is because it's a key level of resistance. Personally I think that there are still so many unknowns regarding what 'Brexit' will mean and the effect it will have on the economy, the Pound will struggle to make any significant gains until well in to 2017. But, it all depends on the data. Simply put, if we get negative economic data from the UK economy, exchange rates are likely to head lower. If data is decent and shows the economy is proving resilient to the dangers leaving the EU may pose, then rates could recover.

When will GBP/EUR get back to €1.30?


I think it will be some time however before we get back to pre-brexit levels, but I also think that we will see rates back at €1.30 next year. Once article 50 is invoked, and we get a clearer picture of what our trading agreements will be like both with Europe and the rest of the world, I think that actually the UK economy will prove to be stronger than if we had simply left ourselves tied to Europe. Whatever your view on 'Brexit' the fact remains that the EU is a graveyard of low growth. In fact the only continent with lower growth is Antarctica, with a population of around 4000!

Many confuse the EU with Europe. My partner is European, I love Europe and travel regularly across the continent, and Britain will remain part of Europe after we've left the EU. You will still be able to buy holiday homes and retire to France or Spain of you wish to. However I'm also 'Generation X' and can remember Europe before the Lisbon treaty and the Maastricht Treaty, and what the EU has become is far more than the common trading area that it was supposed to be. Nobody really knows what a post Brexit Britain will be like, but as the old saying goes "if you do what you've always done, you'll get what you've always got". Sometimes change should be embraced. I appreciate the decision of the UK people is a huge roll of the dice, but let's wait and see what happens.

Anyway, there is a long way to go and while I think there will be light at the end of the tunnel, we've not even entered the tunnel yet. I think that things will get worse before they get better. This can have a big impact on any sizeable currency exchange, and that's where we can help you. We don't just provide commentary on what's happening in the currency markets, we are a UK based FX brokerage with a turnover of around £300m. This gives us access to incredible rates of exchange that we pass on to our clients. Our margin is very small, meaning that the rates we provide are incredibly competitive. Interested in finding out what we can offer you? Click here or complete the form below.