Tuesday, 28 February 2017

GBP/EUR and GBP/USD forecast

Pound/Euro currency forecast


GBP/EUR rates remain stuck the familiar territory it has inhabited for most of 2017, the low €1.17's. It has been driven back from last week's 2 month highs due to political concerns over another Scottish referendum. I think it's unlikely the government would allow one while Brexit negotiations are underway, however the market reacted to the potential uncertainty sending the Pound a little lower.

It's only a week or two until article 50 is invoked, and in the short term I expect the Pound to move lower when it's triggered. After that, much will depend on how the negotiations go. I'm sure there will be leaks and counter leaks from the British government and the 27 EU member states, and each one will impact GBP/EUR rates depending what the markets think. One thing is for sure, and that's the fact that we are in for a very volatile few months for Sterling/Euro rates.

Long term I feel that when the uncertainty is lifted and there is a clearer picture of what our future relationship with the EU will be, GBP/EUR should recover back to levels around the €1.20/€1.25 mark, particularly if we get political upsets in Holland and France.

Short term though, I think that any clients that need to convert Sterling to Euros that are worried about the rate falling in the short term would do well to consider fixing a rate sooner rather than later to remove their exposure to a volatile market. It wouldn't surprise me to see the rate drop back to €1.12/€1.13 in March. Contact us today if you would like a Pound/Euro quote and see if we can get you the best exchange rates.

Pound/Dollar currency forecast


For the Sterling/Dollar pair, what I've outlined above in terms of Article 50 holds true; there are short term downside risks for the Pound. Of more importance to the GBP/USD currency pair however is events in the USA, and what President Trump will do next. Overnight Trump will give his first speech to congress, in which he will outline his near-term policy agenda. There may well be new info on his 'tremendous' tax plans amongst other things, and there could be a big effect on exchange rates when markets open in the morning.  He has already marked himself in the news this morning, giving himself an 'A' on what he has achieved so far, but a 'C' on how he's communicated how great he is.

If his words worry investors, then the USD will weaken pushing GBP/USD rates higher. At the same time, the Euro would strengthen and pull Pound/Euro rates lower. Conversely if his words are interpreted as positive for the US economy, the opposite will happen - Pound/Dollar dropping and Pound/Euro going up. Either way, I think that there will be some movement in rates come this time tomorrow.

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