Pound/Euro rates weakened further last night, as the Euro gained strength and became more expensive to buy. As we thought, the EU Council meeting was dominated by migration talks. It looks like the EU have come to an agreement on this. It’s now less likely we’ll see elections in Germany now, and this is what helped the Euro gain. Overnight the rate to buy Euros dropped to around €1.1250. However this morning the rate has recovered and now seems settled at €1.13.
The recover was due to UK GDP growth coming in a little better than expected at 0.2%. This to me suggests the last reading of 0.1% was largely due to the freezing weather earlier in the year. This helped the Pound fight back and it recovered its overnight losses. However rates are now close to the lowest they have been since March.
If you need to buy Euros, should you buy now or wait?
Regular readers will know that the GBPEUR rate has been largely range-bound for several months between €1.13 and €1.14. We are now at the lower end of this range. The rate was a bit higher a week ago when there was speculation of interest rates going up. However as I mentioned in yesterday’s post, this is now rather unlikely. This coupled with the Euro starting to gain is what has caused the rate to drop.
Focus is now on what Brexit progress will be made. Both sides have said that they want to make a deal, but we need to see progress before the Pound is likely to bounce back. Some key events are coming up. Theresa May will have a meeting in Chequers with her cabinet soon and this is very important. She needs to get back bench rebels on board to get an agreement to present a white paper to the EU. There’s lots to decide such as Trade, the Irish Border and how a future customs union will work. In less than a months time Parliament goes into its summer break. Not much is going to happen over the summer, and this all needs to be sorted out and agreed by the next EU summit in October. I think it’s highly unlikely everything will be sorted out before then.
This all means that Brexit uncertainty will remain for some time. While it does, Sterling is likely to remain weak. The chance of political uncertainty in Germany is now fading, so there’s no much scope there for the Euro to weaken. For these reasons, I think that it’s unlikely the rate is going to get much better in the short to medium term.
When should you buy Euros?
If you need to buy Euros or any other currency in the next 3 months, then one option to consider is a ‘Forward Contract’. This is a type of contract that we offer than guarantees the exchange rate and protects you against any adverse rate movements. It’s very simply to arrange. We freeze the current rate for you, and you lodge a 10% deposit of the total you need to convert. The contract has a ‘end date’ at which point you settle the remaining 90% of the funds due. We then transfer your currency to the account of your choice by priority transfer.
This allows you to budget effectively for things like an overseas property purchase. You will know exactly what it’s costing you in Pounds, while removing your exposure to the uncertainty currently surrounding the Pound. If you would like to discuss this is more detail, get a quote, or just have a quick chat about our service, we would be delighted to hear from you.
Make a free enquiry today and see how much you could save.