Thursday 5th April 2012
Good morning. Why have Pound/Euro rates gone up April 2012? As is often the case, a day can make a big difference in the currency markets, and yesterday was no exception. In my most recent post I pointed out rates had dipped below €1.20, however throughout the day yesterday the GBP/EUR rate surged and touched €1.21 – this is nigh on the best rates we have seen to buy Euros for 20 months. Today I will look at the reasons why.
The Pound gained well throughout trading yesterday, as the chart shows. Much better than forecast UK services sector survey eased UK recession fears, and they also highlighted a contrast with a struggling euro zone economy. As a result we saw Pound/Euro rates push up by 1% – a huge gain for one days trading.
A disappointing auction of Spanish government bonds also weighed on the Euro, as worries grew about Spain’s high debt levels and weak economy. Europe’s economic prospects look very poor indeed, and debt problems in Spain and Italy mean that the European Central bank will have to do even more to support banks and its weaker economies. This has caused significant Euro weakness and made the Euro cheaper to buy.
As I forecast yesterday, there was indeed no change to EU interest rates in yesterdays meeting, and also no further quantitative Easing for the UK. As these decisions were as expected it made little to no difference to exchange rates.
What did make a difference however were comments by the ECB president Mario Draghi. He said the euro zone economic outlook is subject to downside risks relating to the debt crisis and commodity prices. This was another reason for GBP/EUR rates climbing as the single currency weakened.
Getting the best exchange rates for Euros
In my opinion it’s an excellent time to consider fixing a rate for buying Euros, when you consider it’s sitting just below the best rates in 20 months. With UK recession fears on the horizon, it wouldn’t take much to knock rates back down, and indeed that’s the trend we have seen the last few times rates have been at this level.
We can now offer €1.20+ as a trading level for trades of £20k+, and very close to that for amounts of £1k+. Even if you don’t need your Euros now, you can still lock the rate in now with a Forward contract. You simply lodge 10% of the total you want to convert, and we’ll guarantee the current rate for up to 2 years. Certainly worth considering if you need Euros in the next 6 to 12 months, as it will protect you against rates dropping back away.
Pound/US Dollar rates drop away
In contrast to the Euro, the GBP/USD rate fell yesterday. This was due to the U.S. Federal Reserve’s March meeting showing only two of the 10 policy-setting committee members saw the case for additional monetary stimulus in the light of an improving economy. This strengthened the US Dollar and made it more expensive to purchase. In turn, the flght towards the Dollar also compounded the Euros weakness.
Today is very important for the Pound, as we have a raft of UK data. Industrial Production, Manufacturing Production and an interest rate decision for the UK. Later in the day we have the NIESR GDP estimate. This is very important as it could signal the UK is heading back into recession. In the Eurozone there are also Industrial production figures from Germany.
Today’s GDP figures from the UK could easily wipe out the recent gains in the GBP/EUR rate, so contact us by clicking below to find out more about how we can protect you against adverse exchange rate movements.
We are now closed for the Easter break from 6pm today until 08:30am Tuesday morning. Live rates will continue in the sidebar. Enjoy your weekend.
If you need to buy or sell foreign currency, send me an enquiry by clicking below and I will call you to discuss your requirements on Tuesday.