Spain Falling Into Recession?

28 July, 2011


The Bank of Spain this week announced that Spain is likely to slip into recession by the end of the year – and the entire Eurozone entered into recession officially last week.

What does this mean for Euro exchange rates? In theory, it should be good news if you’re sending money to Spain or any Eurozone country. But there are two sides to the coin – and whichever economy fares worse, the UK or Europe, might expect their currency to lose most value.

As exchange rates are all relative, if you need to buy Euros you’ll be hoping that the UK economy performs better in the coming weeks and months, while the extent fallout from the economic crisis becomes clear.

There is a worry that the UK is less well prepared than the rest of the world for the downturn, having spent heavily during the ‘boom’ years. If this is your worry, then booking exchange rates in advance now would be a safe option.

However, if you think that the inflexibility of the Euro economy is going to harm EU countries more, then you might be optimistic for the Pound to get relatively stronger and give better rates of exchange.

Unfortunately, there’s no way of knowing what will happen, and markets are made of dividing opinions. Time will tell, but keep in touch with your forex broker who will keep you informed of developments..