Last week was a largely positive one for Sterling/Euro rates, with the pair recovering its losses from earlier in the month. The rate climbed to around the €1.18 mark before dropping away on Friday:
The gains were due to a continuing stream of positive economic data, including 2 consecutive quarters of 0.6% growth and consumer confidence remaining high. It’s the latest in a stream of indicators showing that the vote to leave the EU has not unsettled consumers, yet.
Despite this, the rate doesn’t seem to want to break the levels it’s tested 5 or 6 times in the last 6 months. We’re seeing a trend where rises to these sort of levels, before investors book their profits, selling GBP and causing it to drop back away again, and this is exactly what we saw last week. Those that need to buy Euros should therefore consider this, and think about locking in a rate and taking advantage of the 4% over the last fortnight.
Will Pound/Euro go up or down in 2017?
Whether you are buying or selling property abroad, or a business that imports or exports in the EU, exchange rates form a crucial part of your finances. Ultimately you can’t forecast which way things will go, but with a sound knowledge of what is moving the market, you can make an informed decision on what action to take, and when.
For example, GBP/EUR rates may fall as we edge closer to the UK invoking article 50. Uncertainty is what has been keeping Sterling under pressure since last June, and while negotiations are on-going this uncertainty could increase. Also, as inflation is expected to rise, in part due to a weaker Pound, goods will become more expensive and consumers may then start to reconsider their carefree approach that currently seems to ignore the economic headwinds. Wage growth is unlikely to keep up with inflation, and the effects of a weaker Pound will be more keenly felt.
On the other hand, the uncertainty may evaporate as it becomes clearer what a post-Brexit UK economy will look like, which could increase business confidence and drive the Pound higher. Political events in Italy and France in the coming months could also be a big driver for the value of the Euro, weakening it and making it cheaper to buy.
So as you can see, GBP/EUR is being pulled in both directions by events both in Britain and abroad, and this metaphorical tug-o-war will be the main driver of exchange rates for the short to medium term. Those with a currency requirement should get in touch for a more in-depth discussion of the risks and options available to those that would rather not leave things to chance. We offer a free consultation to any private or business clients that would like to find out more about the options available to them, to help decide what action to take. Simply click here to get in touch today.
This week’s economic data releases.
Listed below are the main economic data releases that could affect exchange rates this week. The expected result will already have been priced into the market, however if the actual figure differs from forecasts the respective currency could be affected. Unscheduled political events may also affect rates. For a detailed analysis of what could move the particular currency pair you are interested in, get in touch for a free consultation.
Monday 30th January – There is nothing of note from the UK today however GBP/EUR could be affected by a raft of data from the EU, including measures of Consumer and Industrial Confidence, Business Climate surveys, and an Economic Sentiment indicator. Germany also releases inflationary measures. The USA releases income and spending along with home sales data that might move GBP/USD.
Tuesday 31st January – UK releases today include Credit, Mortgage approvals and consumer confidence. From the EU we have preliminary GDP figures expected at 0.5%, Unemployment and inflation. Elsewhere, Canadian GDP is seen at 13:30pm and this evening New Zealand Unemployment numbers are at 21:45pm.
Wednesday 1s February – GBP/EUR could move this morning when both the UK and EU show their latest Manufacturing figures, along with EU Economic growth forecasts. The most important data of the day however is across the pond where the US Federal Reserve gives its interest rate decision and accompanying policy statement.
Thursday 2nd February – Super Thursday in the UK, when the Bank of England announces its interest rate decision, minutes, any change to QE, and a speech by the governor Mark Carney. Lots for investors to chew on and the most important day this week for those buying or selling Sterling.
Friday 3rd February – We end the week with Jobs day in the USA, when we see the latest unemployment figures including the notoriously difficult to forecast non-farm Payrolls. Expect a choppy day for cable. https://form.jotformeu.com/jsform/62452062907353