Sterling/Euro rates had been stuck at around the €1.17 for quite a while now, but we’ve finally seen an upward move with the pair breaking out of its range, briefly hitting €1.19 today which is the highest we’ve seen in 2 months. The spike was brief however, and the rate has already slipped a little but it’s still comfortably above €1.18. Not too bad considering a month or so ago it was 5 cents lower. If you need to buy Euros it’s certainly worth considering taking advantage of the gains while higher rates are available.
Why have GBP/EUR rates gone up?
I mentioned on Monday that its politics driving the currency markets at the moment, and that is the reason for the rise on this occasion. We have elections in France soon, and the far right candidate Marine Le Pen gas gained ground in recent polls, and as a result the Euro has weakened and become a little cheaper to buy.
She still has to make it through the second round but the latest polls increase her chance of getting a surprise win. Markets took notice, brushed off Brexit concerns and that’s why the Pound has seen a little respite in the last few days. Le Pen has talked about leaving not just the EU, but leaving the single currency and returning to the French Franc. If we see surprise results in France or Holland in the coming months, the whole EU project could fail which is why the single currency is under pressure.
Sterling at risk of drop in value
So that’s why GBP/EUR is up a little, but the fact remains that Sterling is still much lower than last year, and the reason for the fall in the value of the Pound is the uncertainty over ‘Brexit’. Well, in a few weeks time it won’t just be speculation, we will have triggered article 50 and negotiations will begin on the UK leaving the EU. At this point, there is a very big chance the markets will sell Sterling causing the Pound to plummet. You can’t predict these things of course, but given how much the Pound weakened in the last 8 month based on nothing more than market jitters and the fear of what is coming, there is a good argument to say when the process actually starts, it’s unlikely to cause the Pound to rise in value, at least not in the short term. Personally I think that longer term, GBP/EUR rates will recover to €1.20/€1.25 within the next 6 to 12 months, but in the short term it may get worse before it gets better.
Protecting against exchange rates dropping
If you need to convert Pounds to another currency and are worried about Sterling falling, then consider fixing the rate now using a ‘Forward Contract’. We can fix today’s rate and guarantee it for up to 2 years, and you only lodge 10% of the total to be converted. This protects you against the rate dropping and allows you to budget, which is essential for those purchasing property abroad.