EDITOR’S NOTE: The Pound has been yoyoing against the Euro in recent months. Foreign currency exchange specialist Luke Trevail looks at the factors driving exchange rates, and what the future might hold.
The currency markets, much like this time of the year, can be exciting, enticing, but always full of surprises. The mystery of the presents under the tree is as attractive as the uncertainty of the markets can be frustrating, and as we hurtle towards the year end, volatility on the Pound-Euro remains as busy as the high street on a Saturday.
A quick look at the last two months defines the uncertain nature of the market; October showed how weak the pound can get whereas through November, it was the euros turn to bring the rate the other way. In the space of 8 weeks we were trading at €1.32 to €1.42. An incredible range that continues to confuse market analysts, and should act as a warning to anyone looking to buy euros in the coming weeks.
Looking at the growth forecasts for 2017, things in the UK do look fairly good as opposed to the European outlook. The danger of ‘another Greece’ is something that the ECB are acutely aware of, and I’d imagine this is what will flood the news and markets next summer. Italy and Portugal are headaches in the making for Angela Merkel and the rest northern Europe. The increase in refugees hitting the shores of Europe will likely have a negative economic impact as the cost of helping the mass influx of these people will hurt the already empty pockets of Greece.
It seems like buying up at €1.38+ would be the optimum result for those of you chasing a higher rate, but with the Bank of England stating the interest rates it he UK will remain at 0.5% until perhaps as late as the beginning of 2017, it’s clear that Sterling still has a long way to go and the downside risk is still very real.
Here’s to a relaxed Christmas and prosperous 2016. Remember the markets have no conscience, so if you see a price you like I’d always say to act now as the rug can and often does get pulled unceremoniously from under the feet of the pound.