Choppy day for the pound and euro

Arron Morris Currency Broker - Sterling still under pressure.Written by
Arron Morris
Senior Currency Broker
T: 01442 892 065

Yesterday’s trading session was a volatile one for the GBP/EUR cross, with investors left in a state of limbo after conflicting messages from the European Central Bank (ECB) and Bank of England (BoE).

Early on Wednesday the pound had slipped to a seven month low against euro, with the GBP/EUR cross falling to €1.1261, a level not witnessed since 8th November.

With political and Brexit uncertainty still looming, the pound was left fighting against a resurgent euro, after ECB President Mario Draghi hinted the days of the central banks stimulus programme could be coming to an end. Investors were quick to jump on the back of what they thought were positive comments.

However, that all changed yesterday afternoon, when the euro suddenly started losing ground while the pound started to rise. Just after midday the ECB stated the market had “misjudged” Mario Draghi’s speech on stimulus, while Bank of England Chief Mark Carney stated that raising interest rates later this year is something that might happen.

Only last week Carney said that “now is not the time” to raise rates, which caused the pound to fall, but his apparent change in stance has given sterling a much needed boost.

The announcements from the ECB and BoE shocked investors and market players and caused the GBP/EUR cross to recover some of the ground it has lost over the past couple of days. As the London session drew to a close the currency pair had climbed over one per cent and was pushing back towards €1.14.

GBP/EUR twenty-four hour graph

17 06 29 GBP to EUR exchange graph

Should I buy my euros now or wait?

In my opinion I think it would be worth taking advantage of these unexpected gains, as they could turn out to temporary.

Before yesterday’s statements from the ECB and BoE the pound was on downward trend and it seemed there was little chance of a recovery.

Based on the move we witnessed yesterday and although we have seen the GBP/EUR cross drop slightly from yesterday’s high, purchasing €200,000 this morning will still cost you around £1800 less than it did twenty-four hours ago.

Of course the rate could continue to climb over the next few days, but we should remember the recent rise is mainly down to euro weakness rather than sterling strength.

The UK or pound is not an attractive option for investors at the moment, especially with Brexit still dominating the news. If the initial divorce talks do not run smoothly we could easily see the GBP/EUR cross come under even more pressure, and it would not take much to see exchange rates down at the €1.10 level we witnessed last year.

Next week will also bring with it a new month, which means the latest UK economic numbers will start being released. If the construction, manufacturing and services sectors give any indication of slowing, it could be a very rocky start to July for the pound.

Do you need to buy or sell euros?

Foremost Currency Group are specialists in currency exchange, not only are we here to help you get the best possible exchange rate, we can also help you with the timing of your transfer to ensure you maximise the return.

We have a range of tools at our disposal, all designed to protect you against adverse market movements and help you budget efficiently.

For more information about the range of tools available or to find out what rate of exchange we can offer, click the link below or call us directly on 0044 (0) 1442 892 060.

Today’s data

It’s the penultimate day of the month and it’s a quiet one in regards to data.

There are no major releases coming from the UK or Eurozone, the only major announcements will come this afternoon from the U.S. when they release the final Q1 GDP reading and their weekly unemployment claim figures. Any deviation from the expected could impact the value of the dollar.

Arron Morris
Senior Currency Broker
T: 01442 892 065