Pound/Euro rates climb September 2011 - Why?

Friday 9th September 2011

Good morning. Well, what a difference a day makes! This time yesterday the Pound/Euro rate was €1.1320, with forecasts for it to drop further. Instead, the Euro weakened significantly on the back of the press conference by ECB president Jean Claude Trichet, and this caused GBP/EUR rates to rise by over 1.5% to near €1.15. Today we'll take a look at his comments and what caused the gains. Rates at 08:30am this morning are as follows:

• GBP/EUR 1.1497
• GBP/USD 1.5973
• GBP/AUD 1.5036
• GBP/NZD 1.9125
• GBP/CHF 1.3923
• GBP/CAD 1.5795
• GBP/ZAR 11.475
• GBP/JPY 123.68
• GBP/DKK 8.5610
• GBP/NOK 8.6456
• EUR/USD 1.3891

Pound makes significant gains vs Euro
















These charts show the GBP/EUR and GBP/USD rates as they moved throughout the day yesterday. There was a general strengthening of Sterling in the morning as a UK clearer purchased the Pound, creating strength.

Then, we had the BoE decision to hold interest rates, and no mention was made of QE at all. This helped the pound further, although we'll have to wait 2 weeks to see if the minutes show any discussion of QE. Rates then levelled off waiting for the ECB press conference at 13:30pm.

In the press conference, ECB President Jean-Claude Trichet highlighted "downside risks to economic growth" in the euro zone after leaving interest rates on hold. Markets believe future rate hikes are off the table in the EU and the ECB may even need to cut rates by the end of this year. The comments significantly weakened the Euro, which through the day climbed from €1.1320 to nearly €1.15 - this represents a £2000 saving on a €150,000 property purchase in only one day!

So will the Pound continue to go up against the Euro?


Despite sterling's rally, analysts cautioned that signs that the economy is continuing to weaken while the euro zone's debt crisis festers could prompt the BoE to add to asset purchases in the coming months.

"Although the case for more stimulus (QE) has certainly strengthened, the deterioration in the demand outlook was evidently deemed insufficient to warrant an immediate move," analysts at Barclays Capital said in a note. Translated, this means although no QE for now, there probably will be some to come soon, and this will likely limit any further gains in the rate.


So what to do if you need to buy Euros?


You could either fix the rate now while it's very good with a Forward contract; you only lodge 10% of what you want to convert, and we can hold the rate for up to 2 years for you.


If you think the rate may gain further, then you can place a 'Stop Loss' order. This means you can still aim for a higher exchange rate, but should rates fall back away, you can set a lower limit where your currency will be purchased automatically, thus having a safety net should things not go your way.

Whatever you need to do, send us an enquiry now so we can discuss the different options with you. Our exhange rates are up to 5% better than offered by banks, so take the first step to making the most of your currency now and click the link below for a free consultation.

Pound gains almost 2% against Euro

6th May 2011
Good morning. Well, after weeks of GBP/EUR rates falling, we saw a significant gain in rates yesterday after the Euro weakened. We'll look at the reasons why after the usual rate snapshot, as at 08:30am:

• GBP/EUR 1.1270
• GBP/USD 1.6373
• GBP/AUD 1.5346
• GBP/NZD 2.0822
• GBP/CAD 1.5825
• GBP/CHF 1.4271
• GBP/ZAR 11.020
• GBP/JPY 131.60
• GBP/HUF 298.70
• EUR/USD 1.4526

Pound vs Euro rates gain nearly 2%

Yesterday both the Bank of England (BoE) and European Central Bank (ECB) left interest rates on hold as expected. It was the comments from the ECB president, Jean Claude Trichet, that caused the Euro to weaken and rates to rise.

He offered a much less hawkish tone on the central bank's rate outlook than markets had been expecting after April's hike, prompting traders to book profits on the euro's gains versus sterling after weak UK services data earlier in the day drove the pound lower against the common currency.

"The ECB sounded more dovish at its press conference, which is weighing on the euro," said Raghav Subbarao, currency analyst at Barclays Capital. "Today's move is a euro story rather than a sterling story."Markets are now not pricing in a BoE rate hike until November or December, while many in the market see the possibility of another ECB rate rise in summer.

So, because he signalled no futher rate rises in the EU are likely in the coming months, the Euro weakened and became cheaper to purchase. At one point yesterday rates sat at €1.1055, however by the afternoon rates had recovered to €1.1260.

Summary

A 2 point gain in one day is quite unusual. If you need to purchase Euros you may wish to take advantage of the single currencies weakness, as many analysts think that the general downward trend may continue in the coming weeks and months.

Today's Data

We end the week with PPI for the UK which can often cause volatility for Sterling. US and Canadian unemployment figures are released today also. The only EU data of note is French Trade balance figures and German industrial production.

If you need to buy or sell foreign currency, click below now to send us an enquiry for free. Our exchange rates are up to 5% better than offered by banks. Take the first step to making the most of your currency now.