Euro Exchange Rate Forecast – Volatility ahead for EUR?

Euro Exchange Rate Forecast – Volatility ahead for EUR?

With an ever changing economic environment and in the midst of a global pandemic, it is no surprise that the euro exchange rate has already seen quite a bit of volatility over the past few months, but it does seem like the vast majority of forecasts see further and potentially more drastic volatility ahead.

Let’s take EUR GBP as an example, this week we saw EUR hit virtually a three month high and those that have been holding on to Euros to change into pounds, either for their business or a property sale would have been getting extremely excited and possibly may have expected the rates to kick on up to the March highs in the 0.94p range.

Unfortunately, in typical market fashion Tuesday saw this pairing turn back around significantly, moving from 0.9175 at its best earlier this week and down to virtually 0.90p.

Most of this has been put down to a market correction from what had been deemed as an oversold pound, but also month end flows appeared to play their part, month end flows can lead to vast market movements without warning on the final day of a trading month, and these can be even vaster at the end of a quarter.

Larger funds may look to net off their currency positions to round off the trading month and this can lead to swift market movements without prior warning, due to big sums of money moving between currencies.

Brexit Still Key for EURGBP

We had mixed messages from Brexit discussions yesterday, with Angela Merkel suggesting that she feels that a deal could be done in the coming months, to EU Chief negotiator Michel Barnier commenting that there were still three points of contention between the EU and U.K and these were as follows;

  • Level playing field provisions
  • EU Fishing rights in UK waters
  • Dispute settlement mechanisms

Talks were expected to continue today but finished a day early for the week yesterday and they are expected to sit back around the negotiating table once again at the start of next week.

It seems like any positive Brexit related news is leading to EUR GBP losing strength as it would be seen as more certainty and good news for the U.K economy, whilst on the flip side negative news, or the likelihood of no deal increasing has generally strengthened euro exchange rates against the pound as a no deal Brexit is seen as worrying for the U.K economy and what it might bring.

EUR USD

EUR USD has remained fairly range bound throughout the course of the trading week, despite lots of jobs data from the US and continuing worries about both a second wave of COVID-19 and global tensions rising politically, with Hong Kong being a key focus.

Gold hit an 8 year high this week as investors rushed to seek safer havens for their money, and often see the dollar gains a little strength alongside gold but it does appear that the various issues around the US, coupled with the political uncertainty are holding the dollar back from gaining any significant ground.

Elections are still scheduled to take place in the U.S on November 3rd and currently both current president Donald Trump and challenger Joe Bidon are neck and neck in the odds, and when investors are uncertain as to who will be steering an economy in the near future they can often stay away.

On top of this, the U.S is still adding a huge sum of Coronavirus cases daily, with some states choosing to back track on their lockdown lifting measures too, which cannot be great news for the US economy as a whole.

Personally, I would not be surprised to see euro have a good run of form against USD unless the pandemic does come back with a vengeance around the globe, and then we may see quite the opposite.

If you have a currency exchange to carry out involving euro and any major currency and you would like to discuss your specific situation with us here at Euro Rate Forecast, then feel free to contact us directly by filling in the form below and one of our experts will be happy to contact you directly.