Euro strength returns as Greek deal edges closer

This week has seen a significant change in trend GBP/EUR rates. Following last week’s MPC votes for a UK interest rate hike which returned one vote for, we saw the pound begin to lose ground as seemingly the markets had priced in at least 2 members voting for an increase.

This saw the start of the descent in rates down from the dizzying highs and that trend has continued since. Wednesday’s announcement of an increase in UK unemployment coupled with a decrease to average earnings pushed rates down further despite on the same day Euro production being down. Yesterday again saw rates continue to push down as a raft of low level data from Europe almost all came in better than expected. As a result throughout the day’s trading GBP lost another cent against EUR now taking it to a near 5 cent loss in around a week.

Interestingly whilst the US posted an improvement to their headline retail sales figure – up to 0.6% from a predicted 0.5% – throughout the day the Euro also gained against the USD, which would suggest a significant change of fortune for the single currency.

The Greek parliament is currently holding emergency talks to ratify the €85 billion Euro bailout ahead of the 20^th August when the next payment is due. Whilst Greece’s creditors remain concerned over spiralling debt levels and the IMF also warn this has however seen a degree of stability return to the Euro and as such rates strengthen. In the short term the Euro is actually the strongest of the 3 major currencies so don’t be surprised if we see rates continue to drop.

Certainly any of you with imminent Euro purchases who have been holding off may like to take this into consideration as despite the 5 cent drop we could well see a further 2/3 cents drop in the coming weeks. 

Today may well provide an interesting marker as we see Europe take centre stage in the way of data. German and Eurozone GDP alongside Eurozone inflation reports dominate the morning, with the US releasing some PPI data in the afternoon. There is no data releases from the UK today. Given the lack of data from the UK we may see a continuation of trend so don’t be surprised if rates continue to drop, particularly given the slightly weak USD at present and the USD/EUR see-saw effect which we have seen in recent weeks allow the Euro to strengthen against Sterling.

Stay in close contact with your C.I account manager if you have any upcoming transfers to make. With so much going on globally at present and rates so volatile, we can help you stay abreast of events and help you get the most out of your transfer.

Currency Index can help you stay well informed and well head of the market.