GBP/EUR up, GBP/USD down. Pound/Euro rates have settled in the low €1.14’s today. The main reason for the slight uptick in rates is solid jobs data from the UK yesterday, that came in as forecast. The numbers were good, and wages are now growing faster than inflation, so the UK economy continues to perform well.
In the Eurozone, inflation figures came in as expected earlier today. We did see a slight rise in GBP/EUR however, but this is Euro weakness rather than Sterling strength. If you look at the Pound against other currencies you can see it’s fallen. The Euro is weak due to a slowing of growth, particularly in Germany which is the EU’s largest economy – growth was halved in the last quarter, which doesn’t bode well for the value of the Euro.
We could see the Euro weaken further in a few hours when ECB president Mario Draghi speaks. I think there is a good chance that he will be rather dovish in his comments about the EU economy, and if he is, I expect the Euro to weaken pushing GBP/EUR higher up into the mid €1.14’s, possible getting up to the €1.15 mark. He speaks at 1pm so watch for any volatility in GBPEUR around this time. If the rate does push up, it would be very close to the best Pound/Euro has been for almost 1 year. Looking for the best Pound/Euro rates? Get in touch for a quick quote.
Sterling/US Dollar drops due to USD strength.
The USD has been on a real march in the last few weeks, strengthening significantly against Sterling. It’s dropped from $1.44 into the $1.34s in a month. This is partly due to the Pound weakening a little at the start of May, but it’s mostly due to a stronger Dollar.
US treasury yields are very attractive to investors at the moment, which means they need to buy USD in order to purchase them. This demand for Dollars is driving its strength, along with its safe haven status also favouring it.
In my view, sooner or later this run has to come to an end; the Dollar can’t keep marching ahead. Those with USD to convert back to Pounds may wish to look at fixing a rate while it’s the best it’s been all year.
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