Last week a gloomy Bank of England outlook pushed Pound/Euro rates into the €1.10’s, and while the rate has steadied, it hasn’t as yet managed to recover the losses. Many of our clients are asking if the rate will recover, and if not, how low could the rate drop?
Why is the Pound/Euro rate so low?
There are two main reasons for the GBP/EUR rate being so low. Firstly, the EU is now growing faster than the UK, and analysts predict that the ECB will scale back their stimulus programme in a few months. This has strengthened the Euro and made it more expensive. Here in the UK, Brexit negotiations have made little progress, and this uncertainty has meant both the IMF and BoE have lowered their growth forecasts. While the BoE have indicated interest rates will rise later this year, it’s not likely to happen soon, and that’s keeping the Pound under pressure.
Could it drop below €1.10?
With little economic data due from the UK over the next couple of days, there isn’t much that we can see that will cause rates to rise in the short term. The next key release is on Thursday when we’ll see the latest Industrial & Manufacturing production figures, along with a GBP estimate and Trade Balance figures. If GDP comes in below 0.3% than the Pound could fall further. If we also see the production numbers drop into negative territory, then this could cause rates to drop below the €1.10 mark which would be close to the lowest we’ve seen since 2009. The numbers could surprise to the upside however, and if that is the case then we may see a slight recovery for Sterling exchange rates.
However until we see any positive developments with regards to negotiations with the EU, it’s unlikely that Sterling will rise much, and we don’t expect any significant progress until 2018.
Protecting against adverse exchange rate movements
If you need to buy Euros and are worried about rates getting worse, then speak to us today about how we can help. We offer various contract types that protect you against rates getting worse, and offer rates of exchange between 1% and 3% better than banks and other currency brokers can offer. To get a quick quote or find out more about how we can help, click here or complete the form below.