Euro exchange rate makes surprising gains

3 October, 2014

Tom Arnold

Today sees the last day of a mixed week for the Pound, with rates a little below the highs achieved following the Scottish referendum. As is always the case at the start of a new month, there has been lots of key data out and the UK economy has thrown up a mixed bag – the biggest movement was caused by lower than anticipated manufacturing PMI, which saw a significant blip for the Pound, but was slightly offset by higher than expected construction PMI and better than expected GDP. Today’s services PMI is likely to be in focus as a result of this variance and the UK’s large and normally strong services sector.

The Bank of England are not giving their monthly policy statement until next week as a result of the rule that it falls in the first full week of the month. So unusually the ECB were left to deliver theirs yesterday without the prior accompaniment from the UK. Mario Draghi is under significant pressure at the moment, with the European economy as a whole and many of the member state’s economies individually, failing to impress. The ECB have not been afraid of taking action though, with drops in interest rates already used and a new debt purchasing scheme also coming through. As a result the Euro has actually managed to make some gains for the first time in some weeks – taking a cent back against both the Pound and the US Dollar.

The US Dollar, which has undoubtedly been the darling of the markets for a couple of months now, has seen a bit of a stall in recent days. There has been a sudden spate of less than impressive data releases, notably house sales, PMI and durable goods numbers. Also with Middle East tensions back in the foreground and therefore fears in the oil markets, it could be a turbulent time for the Dollar. Today sees the monthly employment rates released in the US in the form of the Non-Farm Payrolls – always a major release, this is likely to add to the potential volatility.

In summary we have rates for buying the Euro that are only a cent or so below the best we have seen for six years and a Dollar rate, which while around ten cents lower than the peak has at least stopped dropping, and may throw up some decent buying opportunities with the likely volatility in the pipeline.

Make sure you stay in close contact with your CI account manager to be kept informed of exactly what is happening and how it is likely to affect your upcoming currency purchase. Remember there are various contract options that we can offer, which can help you to secure your currency even if you don’t need it immediately.