GBPEUR hits new YTD low

29 August, 2018

Rob Bastin

The return from the bank holiday weekend was something of a worrying one for people looking to buy property in Europe currently. With the UK markets closed on Monday the rest of the markets took opportunity to further sell down the Pound against the Euro, following a number of comments over the weekend from Brexit leaders and from Theresa May herself, all indicating that a ‘No Deal’ was not only something the government are prepared to settle on but is becoming an increasing likelihood with time running out. Many major banks and hedge-funds have advised that this could be the worst outcome for the currency given the height of uncertainty it provides, with rates expected to lose anywhere between 5-10% in a very short period of time. There has been much talk of parity against the Euro and all-time lows against the USD should this outcome become a reality.

As much as the pound continues to be under pressure, the bigger movements are currently being driven by the EUR/USD pair which had dropped from 1.24 in April to just 1.13 a couple of weeks ago. This drop aided the movement in GBP/USD that in the same time dropped over 11% from 1.43 to just 1.26. Everyone will be aware of the political issues surrounding Donald Trump in the last 2 weeks and this having a big effect on USD exchange rates with EUR/USD recovering over 4 cents in that time. This means that the Euro is benefitting hugely and is strengthening against not only the USD but also the pound, with GBP/EUR and GBP/USD going in opposite directions over the last fortnight.

One weak currency and one strong currency is the worst combination for bigger moves on the market and as such GBP/EUR is in a very high-risk position for further losses, especially if the key 1.10 level gives way in the coming days/weeks. Anyone still hoping for a turn in fortunes may wish to weigh up other options to help cut losses and protect from any further drop in rates. Ask your account manager today about our STOP LOSS orders and Forward Contracts that can help you to manage the increasing risk to your property cost.

This afternoon we have the main data release for the end of the month in the form of revised US GDP figures for Q2. Market expectations are currently for a downward correction from 4.1% to 4% which would likely only further aid the recovery in EUR/USD, keeping the pressure of GBP/EUR.