Wednesday 11th March 2015
I read today that a pretend €100.00 euro note from a toy shop was accepted by a business in a County Down town in Ireland to purchase a sandwich. In the real world, it almost seems that an actual €100 Euro note isn’t worth much more, given the pounding the single currency has taken in the last few days!
Since Monday alone, the weakness in the single currency has meant that the Sterling/Euro rate has risen from €1.39 hitting a high of €1.4255 before dropping back away:
Even today we’ve seen a rise from 1.4075 to 1.4250, before levelling back off to where we are now in the low €1.41’s. What an incredibly volatile few days. We are now seeing a new 7 year high on GBP/EUR, and in 2015 alone we’ve seen the exchange rate rise from €1.27 to the current highs above €1.40. To put this into real terms, a €300,000 property abroad is £25,000 cheaper than in January.
Why has the Pound/Euro rate risen above €1.40?
The fact the rate has smashed through the 1.40 mark and sustained itself above that level has surprised both me and the markets in general. Usually a technical level like that would act as a barrier. Most analysts agree that it’s due to renewed fears over the Greek position in the Eurozone, and this coupled with the launch of quantitative easing by the European Central Bank (ECB) continued to put downward pressure on the single currency.
The weakening effect of the ECB’s bond buying programme seems to be more than offsetting the uncertainty surrounding the upcoming general election. Against the US Dollar, the Euro is now languishing at a 12 year low!
Which way will Pound/Euro rates move now?
As I’ve said above it’s a surprise that rates broke through €1.40, however now they have it’s likely to stay above that level as it will be acting as a level of support. I now think that while the general election could still weaken the Pound, the risks of this are now offset by Euro zone uncertainty.
Some forecasts I’ve read suggest €1.45+ later this year, but of course exchange rates depend on market sentiment, and this in turn will be driven by ongoing events in Europe. If you need to buy or sell Euros, don’t just watch the rate hoping things will go your way. I can help you achieve much better rates than the bank, and also have various tools to help you avoid unnecessary drops in the rate, such as Stop Loss orders, Limit Orders and Forward contracts. If you have Euros to buy or sell, then click here to send me a free no obligation enquiry today to get a quote, and find out how I can help.
Pound/Dollar rates drop below $1.50
In stark contrast to GBP/EUR rates, the Pound/Dollar rate has tumbled below $1.50 today. This is partly due to the Euro sell off. Investors dumping the Euro have been buying the US Dollar, which has given the greenback some strength.
Will it keep dropping? I think so. The US economy is performing very well, and they are likely to raise interest rates this year. This will strengthen the currency, and while Europe suffers, the Dollar will continue to benefit. So I think we’ll see GBP/USD down in the low $1.40’s this year.
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