The Pound has fallen against the Euro this week, dropping to the €1.16’s which is the lowest it has been in the last 4 weeks. This is mainly due to the US Dollar weakening, and the single currency gaining strength and becoming more expensive to purchase.
There have been doubts cast on whether the USA will raise interest rates this month, and that has weakened the USD, helping to push GBP/USD into the $1.29’s. It’s also helped to strengthen the Euro, as investors move funds from USD to EUR. The single currency is now more attractive now that political risks in Holland and France have dissipated.
Even higher than expected inflation numbers this morning haven’t helped the Pound go higher against the Euro, due to the fact that last week the BoE stated that even if inflation moves higher, they would not raise interest rates to combat this due to it being caused by a weak Pound. In fact, at the time of writing, since the figures were releases half an hour ago the Pound has been dropping sharply as it’s clear that inflation is going to be higher than wage growth for some time, which means consumers will soon start to feel the pinch.
Below, you can see the GBP/EUR and GBP/USD charts so far this week up until 09:30am this morning. (Click here for the latest live graphs). You can clearly see the inverse relationship between the two, as Pound/Dollar rates go up and Pound/Euro rates go down. This illustrates that it’s not the Pound driving these pairs, but rather weakness in the USD and strength in the EUR for the reasons I’ve outlined above.
We’ve been warning for some time that it was probably a matter of when, and not if, the Pound would start dropping back away against the Euro and that’s what we’re now starting to see. We’re expecting more volatility in the coming weeks, as we approach the UK general election and the start of serious Brexit negotiations. If you need to convert currency and would like a free telephone consultation to talk about which way rates are going, get in touch with us today. We can also offer you a free quote to compare with what your bank, or existing currency broker, may be able to offer you. We often provide significantly better rates of exchange that could save you thousands when converting a large volume.