The release of the Federal Reserve Bank of America’s minutes last night has changed the entire calendar for global interest rate rises. Most were expecting an interest rate hike in September, but the opinions of the FED’s policy-makers seem to put this in doubt – mainly due to the slowdown in China.
What does this have to do with GBP/EUR rates?
Firstly, a lot of the strength currently in Sterling is based around the accepted truth that we will be raising interest rates soon after the US. For various reasons, such as worries that the Pound will get too strong for the Eurozone to afford our exports if we raise rates before the US do (and we receive all of the global currency investment that had been earmarked for the USD), the UK’s timeline for raising rates is intertwined with that of the United States. So the delay in America will likely delay the UK’s timeline as well, which is why the Pound is weakening across the board against all major currencies this morning.
Furthermore, Euro strength is also a factor. Yesterday rates were already sliding with the ratification of Greece’s bailout, increasing confidence in the Euro. But traditionally, when the USD weakens, this does translate into Euro strength, as USD/EUR is the most traded currency pair in the world. When the USD weakens, it is simply likely that a lot of capital is flying into the Euro as an alternative investment. This is even more true now that the Euro is so cheap and investors are looking for greater returns.
Without much data to be released today to counteract this accelerated crash in GBP/EUR rates, I would expect more of the same today. Those with Euros to buy over the next month may see budgets tightening further down the road, as this change to interest rate timelines is a long-term phenomenon and I would not expect any correction in this within a two month period. Call me on 01494 787 478 and ask for Joshua for a free quote on your transfer, and advice on how to peg the current rates before they fall any lower if you cannot complete your transfer until later in the year. email@example.com
Similarly those with Euros to sell, call me to discuss how to ride these current moves in your favour and maximise the value of your Euros in a timeline we can discuss.