Today could be a big day for GBPEUR exchange rates with the release on inflation data due for the Eurozone this morning. With inflation having fallen previously to 0.4% we could see further Euro weakness if the data comes out lower.
The ECB cut interest rates in June to an historic low of 0.15% which led to investors selling Euros which created a 2 year high on GBPEUR rates. If the inflation data is low this could pile more pressure on the ECB to intervene next week with either a further interest rate cut which I think is unlikely or further Quantitative Easing in the form of LTROs.
In more simple terms QE involves printing money which in turn should increase inflation. This often causes the currency to weaken so we could see some very good buying opportunities to buy Euros with Sterling over the next few days if the inflation data is low.
GBPEUR rates are currently trading at levels of 1.26 on the mid-market which are the best levels in a couple of weeks.
Eurozone unemployment is also due this morning with the expectation of 11.5%. I think this will not cause too many surprises as the currency markets will focus mainly on the inflation data.
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The Euro has taken a hit after last Friday the President of the European Central Bank Mario Draghi hinted at the annual Jackson Hole Economic Symposium in Wyoming that broad-based asset purchases (QE) have become more likely and necessary for the euro zone.
This sent the Euro down to the lowest level against the USD in 11 months and also caused it to weaken by a cent against the pound as the Euro block is in a completely different place economically wise to that of the UK and the States.
While in the UK and US the central bank is considering hiking interest rates, in Europe they are monetary easing, which is what the UK and US have already halted. The European economy is a good couple of years behind the UK & US so I expect we will continue to see a weak Euro for the foreseeable future until interest rates seem like they could be hiked. A long road ahead is in store for Europe!!
Tomorrow Key unemployment data out of Germany could heap further pressure on the single currency so if you are looking at selling the Euro you may wish to act sooner to minimize any further losses.
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The EUR had broken through 1.25 against GBP earlier this week but the spike was short lived, with the latest Bank of England (BoE) minutes pushing the Pound back above this threshold. The EUR made gains against Sterling earlier this week primarily because UK inflation data came out worse than expected, which in turn pushed the Pound’s value down. This is interesting as it shows when the EUR has strengthened recently it is not because any specific market confidence in the single currency.
Poor Eurozone PMI data released today will do little to change the perception of a EUR, which has been handicapped by a struggling, stagnant economy. GBP/EUR looks likely to remain range-bound between 1.23-1.27 in the short-term and I do believe the EUR will find protection in this range.
EUR/USD rates remain above 1.30 for the time being but with the recent improvements in the US economy, including yesterday’s Federal Reserve minutes, this level could soon be breached.
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The Euro has had a day of declines against many of the major currencies out there by an average of 0.3%
Against the pound the Euro dipped from 1.2475 (0.8016) to 1.2545 (0.7971) in the space of a few minutes after the minutes were released by the Bank of England of their last interest rate decision. For the first time since 2011 2 members from the central bank voted for interest rates to rise. It was a little surprising as we expecting one member at best to vote for the hike. The pound could have easily strengthened by more but cemented itself around the 1.2520 (0.7987) level.
In Europe German PPI dipped and tomorrow we await all the manufacturing data out of Germany and the whole Euro block. In the UK for those trading GBP/EUR the retail figures will have a big impact on tomorrows movement. We are expecting the sector to grow and any change will have an impact on the rates on teh single currency.
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The Euro appears to be on course for future losses which may manifest in the next month or so owing to continued pressure on the Eurozone economy to show some improvements in their economic outlook. Some months ago we were in a similair position and Marios Draghi announced a range of measures to ease liquidity in the Eurozone – that is making money more cheaply available to try and stimulate the economy. Unemployment is still a big problem in the Eurozone and boosting growth will help to combat this problem.
The cutting of their base interest rate has so far failed to ignite the economy and stave off the deflationary pressures in the Eurozone. Last month’s data has so far all been rather worrying and I am of the opinion anyone holding out expecting larger moves back in their favour in the future should beware of the risk involved. If you look at the historic charts the GBPEUR rate used to be much higher in the past flirting with levels of 1.50 – 1.60 for a period of time. Therefore the more favourable recent moves which we have seen could be viewed as an anomaly never to return as the economic recovery in the UK gathers pace.
All in all a strong pound and rising Eurozone concerns seems to indicate to me a deterioration in the current levels for those selling euros for GBP. If you need to make an exchange now or in the future please contact me Jonathan on email@example.com
After the big drop in GBP EUR rates last week following the Bank of England Quarterly Inflation Report it did look as if the pound was making some headway yesterday. However inflation figures this morning showed official figures has dropped from 1.9% to 1.6% whereas they had expected to come in at 1.8%. This lower than expected inflation figure means it is less likely the Bank of England will have to raise interest rates soon and reinforces their position from last week.
However Euro sellers beware as this spike in favour may not last indefinitely with a lot of European jobs and CPI data out next week, all of which is expected to be weak. This could put pressure on the ECB for their September meeting and see the Euro slip so if you are selling Euros I would be inclined to take advantage of current levels either on spot or forward contracts.
If you are new to currency exchange and want a better idea of how it all works, or even if you are an experienced hand and just want to get the best exchange rate, then feel free to email me, Colm, at firstname.lastname@example.org and I would be happy to explain how our services work.
Following last weeks run the Euro has lost ground against the pound shifting back above 1.25. This comes on what was a relatively quiet day in the euro zone and the UK.
Should you be looking at the GBP/EUR pairing then much of this week will be dominated by UK data starting with UK inflation figures tomorrow at 09:30. This will be followed by what i my view is likely to be the biggest market mover this week in the form of the Bank of England minutes on Wednesday at 09:30. These minutes will show how the nine members of the monetary policy committee voted at the interest rate meeting held at the start of the week. For me it is highly likely the vote will have been 9-0 in favour of keeping the base rate on hold at 0.5% – however should any member have voted for a rate hike then expect a strong day for the pound.
This week data from the euro zone is relatively light with the most notable data being consumer confidence figures on Thursday at 15:00. Figures are forecast to fall further into negative territory. I would expect the euro yto lose some of the gains seens last week.
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