Pound/Euro starts to fall
This morning the Pound/Euro rate looked like it was going to have another good run, touching €1.19 vs. the Euro. However economic figures released this morning have halted the decent run the pair had been having, pulling rates down to €1.18.
The catalyst for the drop was the release of the latest preliminary GDP figures from the UK. These were lower than expected indicating that the economy is not performing as well as thought. This started pulling the Pound lower. Half an hour later at 10am this morning, the EU released it's latest inflation figures. These were better than expected, and with inflation rising in the EU it's more and more likely that they will end their stimulus programme and start raising interest rates. Higher rates strengthen a currency due to the higher return on offer. The stronger Euro therefore became more expensive, pulling GBP/EUR lower as you can see from the chart below. With the French elections a week away, it's likely we'll see further Euro strength if Macron wins the presidency. For this reason, Euro buyers may wish to consider a Forward contract, where you can freeze the rate now and protect against a further drop.
Pound/Dollar riding high
It's a different story for GBP/USD however. We often see the EUro and Dollar move inversely, so that when the Euro strengthens as it has done this morning, the Dollar weakens. This is illustrated in the chart below showing the rise in Pound/Dollar rates that are now pretty close to $1.30. This is a huge rise considering the pair was nearly at $1.20 a month ago. Given the 6%+ rise in this pair and the fact the USA are likely to raise interest rates several more times this year, I don't think the pair will break $1.30 any time soon though.
Do you need to exchange currency?
If you need to buy or sell foreign currency, to buy or sell property abroad or pay an invoice, then get in touch to find out what we can do for you. We offer much better rates than bank and other brokers usually offer, and have a range of contract types e.g. a Forward contract that lets you freeze the currency exchange rate for up to 2 years by paying a small deposit.
Have a great bank holiday weekend. I'll be back in action on Tuesday morning.
Labels: Election effect on exchange rate, Exchange Rate Forecast, Pound/Dollar Forecast, Pound/Euro forecast, Will the Pound rise or fall