Have we seen the best Euro rate for now

8 January, 2015

Robin Haynes

Yesterday we saw rates for sending Euros abroad stabilise somewhat – despite the morning’s news that the Eurozone economy is technically now in a phase of deflation. Inflation figures for the year to December showed that prices fell by 0.2% – a dangerous situation and one that initially sent the Euro lower in price. However there were no huge spikes, unlike over new year, and the rate soon recovered, ending the day very close to where it started. This was also surprising as the European Central Bank is expected to soon introduce monetary easing, which along with political threats from Greece, has been keeping the Euro cheaper in recent weeks.

Deflation certainly poses a problem to the ECB, which has its next major press conference on January 22nd, and it could be argued that the rate for buying Euros might have peaked for now – surely we have had all the bad news from the single currency bloc for the time being?

No US interest rates rises until April

In the USA meanwhile, the minutes of the recent Federal Reserve meeting revealed that we are unlikely to see an interest rate rise in the USA until at least April. This brought some respite to those of you buying US Dollars, with exchange rates improving for the first day in some time. Expectations of interest rate rises in the States have been fuelling the increase in price of the Dollar; this trend is unlikely to suddenly change. The Fed said it could be “patient” when it comes to interest rate rises, so the guessing game looks likely to continue further in to the year. Those of you looking to send US Dollars abroad might still consider fixing an exchange rate in advance, as assuming the Fed raises interest rates before the UK or Europe, the dollar will likely remain in demand with its price correspondingly increasing.

Data due out today

Today we have Eurozone retail sales at 10am, and the Bank of England’s monthly policy statement at 12pm. There won’t be anything surprising from the Bank of England, and we will have to wait another 2 weeks for them to publish the minutes of the meeting to get their views on the UK economy in the coming weeks and months.