Friday 1st May 2015
Well, we’ve all been saying the Pound/Euro rate was at risk of a serious fall, and that’s exactly what we’re now seeing. GBP/EUR has absolutely tumbled in the last few days. On Wednesday morning the rate was sitting at a near 8 year high of €1.40, however when I walked onto the trading floor this morning, I was shocked to see the market sitting in the €1.35’s. That’s a drop of more than 3% in just a few days as you can see from the chart below that shows the GBP/EUR rate over the last 2 days:
Will the Pound keep falling against the Euro?
The only reason rates were holding at €1.40 was the concern that Greece would not be able to meet its debt repayments. This had been causing real uncertainty over in Europe, and the Euro was very weak. As I outlined in my last post, actually the Eurozone economy is looking much more robust. Their QE programme is taking effect, and it looks like Greece will play ball with the IMF and its creditors.
Focus has now shifted to the UK election. This uncertainty is starting to weigh on the Pound and is pulling exchange rates down across the board. We may see a recovery after the election, depending how the markets react to whatever coalition is put together, which could take a few weeks to do after polling day. Personally I think it will get worse before it gets better. Hopefully we won’t see a Labour/SNP deal, as without meaning to sound political, I don’t think the financial markets would react favourably to that given the effect it may have on business and the economy as a whole! I expect rates to be as low as €1.30 to €1.33 over the next month before recovering back to around €1.40.
Do you need to buy Euros in the next 6 months?
Buying a €250,000.00 property abroad has become more than £5000.00 more expensive in the last few days, really illustrating how quickly things can change in the currency markets. There is no way to predict the market, but what you can do is have a strategy to ensure you don’t get a low rate unnecessarily.
If I needed Euros within the next 6 to 8 weeks, I would give serious consideration to fixing a rate now. Yes it’s a little lower, but bear in mind in January it was down at 1.25, and actually you’re still doing very well. If I had longer to play with and didn’t need Euros until maybe much later in the year, I would probably hedge my bets and fix a rate on at least 50% of what I needed, allowing me to take advantage of a recovery in the rate should that happen, and reduce my exposure to the market. I can fix commercial rates of exchange for up to 2 years, and clients only need to lodge 10% of the total they want to convert.
Do you need to convert Euros back to Pounds?
Well the last few days has really helped! You’re getting a much better rate due to the renewed Euro strength. Things may get better for you as the election approaches, but I think in the medium to long term we’ll see things get back to €1.40 and above.
If I was selling Euros to Pounds, I would probably place a ‘Stop Loss’ order. This is an instruction to lock in a rate if the market starts moving against you and goes through a pre-agreed level. In this way you can still take advantage of any further Sterling weakness, but not leave yourself exposed should the rate snap back to where it has been in the last few weeks.
Getting the best exchange rates
The above is just a brief outline of the kind of things I can offer, from market knowledge to help you make an informed decision on when to fix a rate, to sourcing exceptional rates of exchange and a range of contract types to help you make the most of your currency.
I can source rates of exchange for over 30 currencies, that are up to 5% better than the bank can usually offer. I have worked in the financial services industry for 16 years, with the last 10 specialising in commercial foreign exchange for private and business clients. If you need to exchange currency on a bank to bank basis, then get in touch with me for free to see how I can help you. Whether you’re buying or selling property abroad, want to top up a foreign account, or have business requirements to make or receive payments in foreign currencies, I can help you get the best possible rates.