Tuesday 18th November 2014
The Pound has continued to fall against the Euro, and today has dipped into the €1.24’s. A week ago rates were €1.28+ so this is a big drop in a short period of time. The rate started to drop when the UK inflation numbers came in very low, which I touched on in a post last week. This means that the Bank of England are likely to keep rates on hold for quite a while.
The reason for today’s drop was twofold. Firstly we had further UK inflation numbers that were slightly lower than expected, compounding the view the economy isn’t ready for a rate hike, and the Pound dropped a little. Soon after, we had some sentiment data from Germany, Europe’s largest economy. This showed that sentiment rose in November for the first time in almost a year, surpassing expectations and raising hopes of an improvement in their economy after it dodged recession in the third quarter.
This data gave some strength to the single currency, and made it more expensive to purchase.
What will happen with Sterling/Euro next?
It is very hard to call. On the one hand you can look at the trend over the last 3 months. If you look at the chart above, you can see that rates have dropped to these levels quite a few times, only to then bounce back up. This could well happen again, especially as the EU may well pursue a Quantitative Easing programme which could weaken the Euro. However this is not a given; past performance is not necessarily an indicator of future performance.
Tomorrow we have the minutes from the recent Bank of England interest rate decision. Last time 7 of the 9 members voted to hold rates, and 2 voted to raise them. In the light of the recent inflation numbers, if less than 2 voted to raise rates this time, expect the Pound to fall further.
When should you buy or sell Euros?
Given there is no way to predict the market, the best course of action is to use tools to make sure you don’t get a lower rate than necessary. In this climate if I had Euros to buy or indeed convert back to Pounds, I would use a ‘Stop Loss’ order.
This allows you to instruct me to convert your sums if the exchange rate drops below a pre-agreed level. If the rate gets better for you, great you can take advantage of a swing in your favour without leaving yourself at risk of a further drop in rates.
This is just one example of the tools I offer to help you get the most out of your currency, in addition to very sharp exchange rates that are close to the mid-market level. If you have an upcoming currency requirement, why not get in touch with me by completing an enquiry form here. I can discuss your particular needs, run over your options, provide you a quote and see if we can save you money over your bank or existing broker. It’s free to make an enquiry and does not obligate you in any way.
The exchange rates I achieve for my clients can be as much as 5% better than banks offer, and when converting large sums the savings often run into thousands of pounds.