Tuesday 19th May 2015
Sterling/Euro rates continue to remain pretty volatile, and in the last 24 hours we have seen the pair rise from €1.3730 to nearly €1.40, which was due to weakness in the Euro. The gains didn’t last long however, and UK inflation figures this morning have weakened the Pound and knocked the rate down a cent, to around €1.3850 as the chart below shows.
In today’s report I’ll explain what has caused the movements for Pound/Euro rates, and look at where the GBP/EUR exchange rate may move in May & June 2015.
Euro weakness causes GBP/EUR to rise to nearly €1.40
Greece has another large debt repayment to make on the 5th of June. Whether they will make it or not is having a big impact on the value of the Euro. The IMF think they don’t have much chance of meeting the payment, and their acknowledgement of this yesterday caused the Euro to weaken, pushing GBP/EUR rates up from 1.3750 to 1.3850.
The weakness in the Euro continued this morning when European Central Bank officials said the bank could take further action, and pump even more money into the economy than they are doing already, in order to quash euro zone bond yields and boost inflation. If they increase their QE program and the amount of Euros their pumping in, then it will weaken the Euro. More of anything means it’s worth less, and that was the reason for this morning’s GBP/EUR push up to almost €1.40.
UK inflation figures pull rates back down
The rates only got to this level for 20 minutes or so, and then the UK released its latest inflation numbers. This showed that inflation turned negative for the first time in over 50 years. So why did this cause the Pound to drop? It’s because of interest rates. With inflation negative, there is no chance of a rate hike anytime soon. Because rates are going to stay low for a long time to come, there is little incentive for investors to buy the Pound, so that’s why the rate dropped back away.
Where next for Sterling/Euro rates
You can see from the chart that there is a steady line of support and resistance at around the €1.3850 market where it keeps settling back down. I think that whether the GBP/EUR rate goes up or down depends on what Greece is expected to do. Quite simply, if they don’t make their next payment or it looks like they won’t, the Euro could weaken further and push rates back towards €1.40. This is a key technical level so unless anything else unexpected happens I don’t think it will break through this.
Alternatively the Greeks could just be delaying in order to re-negotiate the deal they are getting. If payments are made or an agreement is put in place, then the Euro could gain strength, pulling rates back down again as the single currency becomes more expensive to buy.
Getting the best exchange rates
Rates are very volatile at the moment, moving very quickly. In order to get the best possible rates you need to have a good currency broker who can monitor the market for you, explain the options you can consider on when to fix a rate, and get you a much better rate than banks will offer. The worst thing you can do is just watch the rate and hope itwill move your way, or use the bank to convert your funds.
Why not give me a try? The rates and service I provide are exceptional, and with over 10 years’ experience helping personal and business customers with their currency requirements, it may be prudent to see if I can do the same for you. Send me a free no obligation enquiry today by clicking below.