As you can see from the live graphs and charts, over the last 3 months the Pound/Euro rate has fluctuated between €1.11 and €1.14. The pair briefly hit €1.15 a few weeks ago after the announcement that Brexit talks had moved on to the next stage, but the rally was short lived, and GBP/EUR has now fallen back into it’s familiar pattern of settling just below the €1.14 mark.
Most of our clients are those purchasing property overseas in France and Spain, and therefore need to convert their Sterling to Euros, and a common question at the moment is when will the Pound/Euro rate go back up.
What causes the GBP/EUR rate to move?
Usually exchange rates move around on economic data, with positive news strengthening a currency and vice versa. UK economic
data has been quite strong all year, with GDP growing, unemployment at record lows, and interest rates slowly starting to rise. However, for the last year, markets have largely disregarded this data, with politics instead being the main driver of which way the Pound has going.
In particular, Sterling is largely being affected by developments with Brexit, with any news of progress sending the Pound higher, and any signs of uncertainty sending the Pound lower. A case in point was last week when the news that trade talks would soon begin pushed GBP/EUR up to it’s highest level in 6 months. However once the dust had settled it became clear that while the news was positive, markets realised there is still a long road ahead.
Brexit progress affecting Sterling
Considering that it’s taken this long to sort out 3 key issues (divorce bill, citizen rights and the Irish border), the next stage of negotiations (trade) are infinitely more complex and will likely take years to complete. Ultimately it’s ‘uncertainty’ that is keeping the Pound in check, and until there is more clarity of what a future UK/EU trade agreement will look like, that’s likely to remain the case.
In time, GBP/EUR will recover back to €1.20 and above, but until trade talks have made progress, I can’t see any reason for any gains in the short to medium term.
If you need to purchase a large amount of Euros, what are your options?
Option 1 – Fix the rate now. You can do this using a ‘Forward Contract’, and freeze the rate now by depositing 10% of what you need to convert. This allows you to budget and removes your exposure to a volatile market.
Option 2 – Wait and hope the rate climbs. There’s no way to accurately forecast which way the rate will move, and it could well increase. in this scenario, Stop Loss and Limit Orders are useful to automatically fix a rate if it goes above, or falls below, a pre-agreed rate of your choosing.
Option 3 – Hedge your bets. Fix a rate on half of what you need to buy, and take a gamble on the other half. This option gives you some level of protection regardless which way the rate goes, and removes 50% of your exposure.
The right solution for you depends on your timescales, budget and attitude to risk. If you would like to discuss our services in more detail, or simply get a quick quote to compare with your bank or existing broker, send a free enquiry today. We offer access to a free online trading platform that allows you to see our exact trading rates, and set free ‘rate alerts’ so you get a text when the rate gets to your target level.