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Currency Markets at most volatile since 2008 Credit Crunch

Alastair Archbold FX ManagerWritten by:
Alastair Archbold
FX Manager
E: aja@fcgworld.co.uk
T: 01442 892 066

It’s been a tumultuous month for exchange rates, and with the Sterling/Euro exchange rate plummeting by 8 cents as you can see from the chart below:

Currency Markets at most volatile since 2008 Credit Crunch

Pound/Euro plunges from 8 year high

Just a month ago Euro buyers were experiencing the best exchange rates for 8 years. However, things can change very quickly in the currency markets, and those buying levels now seem like a distant memory. As we warned in last month’s newsletter, it looked like a 3rd bailout for Greece was on the cards. This has now been agreed and the single currency has been gaining strength and becoming more expensive to purchase. The EU economy is now performing fairly robustly, and as a result the Euro has continued to gain against Sterling.

Global stock market crash and the effect on exchange rates

At the end of August there was turmoil in the financial markets, when a global rout in the stock markets was prompted by a huge share sell off in China. Fears of a global slowdown intensified after China devalued its currency and data pointed to further signs of weakness, triggering volatility in global stock and currency markets.

The effect on exchange rates was huge. Currencies like the Euro that now seem quite stable benefited, along with other safe havens like the Yen and Swiss Franc. Commodity currencies suffered considerably, becoming much cheaper to buy. Exchange rates to buy NZD, AUD, CAD and ZAR have risen further and are at their best in many years.

Interest rates

Another factor of the recent market turmoil is interest rate expectations. Only a few weeks ago it was almost certain that the USA would be raising interest rates this month, with the UK following suit within a few months. The global slowdown means that it’s now probably a year until the Bank of England will raise rates, and the Pound has weakened off, compounding the drop in GBP/EUR rates.

Do you have an upcoming currency transaction?

Those that need to sell Euros should consider taking advantage of this huge move in their favour. (Converting €300,000.00 from a house sale in the EU is netting you £12,000.00 more than a month ago.) It’s not such good news for those that need to buy Euros as exchange rates have fallen significantly. Many clients that read last month’s update placed ‘Stop Loss’ orders to protect themselves against a market downturn, and this proved to be a prudent move, limiting the effects of the huge fall in the rate and saving thousands of pounds. If you still need to buy Euros in the coming weeks and months however, there are still options you can consider to help you take control of your currency requirement in what is a very volatile market. Contact us today to have a detailed discussion regarding your currency requirement and discuss the options available to you within your timeframe.

-Ends-

Notes to editors:

Alastair Archbold is an FX manager on the dealing floor, having been with the Foremost Currency Group for over 6 years. With over 16 years’ experience in the Financial Services sector, he has a wealth of knowledge for any clients entering the often daunting world of the currency markets. In addition to providing clients with incredible exchange rates, he has also written countless FX articles for various national newspapers and international publications.

About Foremost Currency Group

“We are committed to shaking up currency exchange by operating in a smarter, leaner and more efficient way, passing the savings onto you and getting you a better rate – every time you trade. Say goodbye to impersonal service and hello to your new dedicated broker. Committed to working on your behalf to get you the very best deal possible.”
Robin McEwen, Managing Director

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