Euro Rate Forecast – How will the Euro react to the Coronavirus?

Euro Rate Forecast – How will the Euro react to the Coronavirus?

Firstly, my best wishes and thoughts to those negatively impacted by recent events, this situation seems to have affected everyone I am talking to whether through work, personal life or both. This is a unique situation for many of us but we will continue to provide content for our readers, and wider support for anyone seeking our assistance in understanding the currency market and looking to transfer money in a friendly, fair and frictionless manner.

The Euro had actually initially lost ground on the COVID-19 fears, falling to 1.2070 on GBPEUR interbank rates and fresh lows on the US dollar, as concerns that Chinese factory shutdowns announced in January and early February would harm the European automotive industry. Since then and in particular this week the Euro has risen, largely against the pound but also at times staged a brief comeback against the US dollar, as the Euro has grown in popularity owing to its negative interest rates. This has seen the Euro become a popular funding currency for investors increasing its demand, and the strength has been further fuelled by a series of announcements and measures taken by the European Central Bank have really helped to shore up confidence in the single currency. This is why the Euro has reached a 12-year high against sterling this week, nudging 1.0533 on the interbank on Wednesday.

With the virus sweeping across the world and swathes of Europe closed, the longer term economic implications may be significant. With the lockdowns in France, Spain and Italy only having happened recently, it will take some weeks and months for the data to be known, and for the real effects of the closures to be seen. Nonetheless, the news is predicted to be grim reading and recession and depression is being regularly debated and discussed. One saving grace has been the response of the ECB and governments, to pay wages and to provide loans and stimulus where needed. This strong response to the crisis has helped the Euro to remain in strength so far, but it’s fragility may well be exposed ahead.

The Euro is ending this week hovering between 1.09 and 1.10 against the pound on the interbank rate, having touched it’s strongest since the financial crisis in December 2008 on Wednesday at 1.0533, breaking the best rates last year of 1.07 seen in August. The Euro has appreciated 14% since the middle of February when the interbank rate was 1.2070. It is tempting to believe that the uncertainty already present within certain European economies would mean that the Euro may weaken ahead, this is perhaps warranted given that Italy has been on the brink of deeper economic uncertainty following the tightrope of recession as we ended 2019. Such concerns may well turn out be validated in the future as we learn more regarding the overall outlook, clients looking to buy or sell Euros may need to prepare for further volatility ahead.

If you have any Euro currency transfers to consider, whether buying or selling property in Europe, or making payments for business, we can help with a proactive and friendly service to help manage your exposure to the currency market. We can discuss in depth the market, and relavant strategy to help maximise any transfers you might need to consider. We have a number of options to help manage your risk including the abaility to target and guarantee specific levels you wish to trade at, and provide the option to ‘forward buy’ your currency. This allows you to lock in current levels for payment in the future, providing peace of mind and certainty of future costs.

For more EUR/GBP news or if you have a currency requirement you can get in touch with me, Tom Holian, directly using the form below.