Euro Pound Exchange Rate Graph June 2011 – Pound Plunges Sharply

EuroEuro Pound Graph for June 2011 – June was an appaling month for Sterling against the Euro seeing the pound plunge sharply over the past two weeks.

The GBP/EUR rate plummeted last week to the lowest since March 2010, falling against a basket of currencies as well as the Euro. Britain’s currency slid against the Euro in particular on predictions that a faltering economy will limit the policy makers’ scope to raise interest rates, as the European Central Bank lifts borrowing costs to curb inflation. A report on Thursday showed U.K. consumer confidence fell more than economists forecast in June while the Bank of England’s Credit Conditions Survey said mortgage demand is predicted to drop in the third quarter.

It was a dramatic week with market sentiment swinging from worries that Greece would go bankrupt to relief that it would get through the crisis, against a backdrop of violent protests and general strikes over austerity steps. The Greek parliament approved a detailed austerity plan on Thursday, paving the way for 12 billion euros of international aid.

Euro Pound Exchange Rate Graph –  June 2011

Euro Pound Graph June 2011

“The market is bullish on risk and looking to buy euros,” said Paul Mackel, director of currency strategy at HSBC. “The Greek issues still linger, but there is a bit of calm now with the markets’ focus on data.” Barclays Capital pushed back its forecast interest-rate hikes for the UK, saying the central bank will now most likely keep its main rate unchanged until May 2012.

The bank, which previously forecast a rate increase in November, said the change reflects weaker than previously expected economic growth and recent comments from central bank officials. This is in stark contrast with the euro zone where even with weak manufacturing surveys, little changed regarding strong expectations that the European Central Bank would raise interest rates next week.

Sterling has fallen 9 percent in the past 12 months, making it the second-worst performer among 10 developed-market currencies after the U.S. Dollar, according to Bloomberg Correlation-Weighted Currency Indexes.

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.

21st February 2011 – Euro versus Pound status

Euro21st February 2011 – The Euro versus Pound status and what could affect values during the coming week.
Last week was quite volatile as contrasting economic figures drove Sterling up and down against the Euro.  Due to high inflation and robust retail sales, Sterling ended the week not far from a 3 month high against the Euro. As the chart illustrates, rates have increased by 3% since the end of last month:

To summarise the events of the past week, initially Sterling was buoyed by figures on Tuesday showing that inflation is yet again well above the Bank of England’s (BoE) target of 2%. This caused renewed speculation interest rates may be on the rise soon, and thus strengthened the pound.  The gains were short-lived however, as high unemployment figures pushed Sterling back down again mid-week.

Euro Pound Graph Jan 2011 – February 2011
Euro Pound Exchange Rate Graph Jan - Feb 2011

The upwards trend returned however later in the week, with robust Retail Sales on Friday and a BoE member calling for interest rates to rise sooner rather than later.

Interest Rates in the UK have been on the agenda for several weeks, as rising prices are causing inflation to spiral out of control. So how do interest rates affect the exchange rate? Well, as a rule of thumb low interest rates mean little return for investors and results in a weak currency. In normal times, banks would raise interest rates to combat inflation as a result from the economy growing faster than its sustainable rate. A rate hike is thus a sign of economic strength. Usually rumour and speculation of an interest rate hike increases the value of Sterling and exchange rates rise, and indeed this is what we have seen in recent months.

The Bank of England is well aware of the economic risks that inflation poses to UK economic growth. On the one hand Mervyn King has as usual been talking down the value of Sterling, while in contrast another member of the MPC has been calling for a rate hike for some time. So, the lack of consensus at the BoE over whether they want a strong pound or weak pound is doing little to stabilise expectations of when rates will rise.

Most analysts expect the soonest rates will rise will be in the summer.  When interest rates do start to go up, it’s likely this will be the catalyst for a decent recovery in the value of the Pound. In the short to medium term however, due to the fragility of the recovery meaning interest rates need to stay low, exchange rates could well get worse before they get better.

We’re close to a 3 month high for GBP/EUR, and the last 4 times this happened the rate fell back again very quickly. For this reason if you need to purchase Euros and are worried about losing out, it may be wise to consider fixing a rate sooner rather than later to take advantage of the recent 3% gain. To put this into context €150,000.00 is over £4000 cheaper today than several weeks ago. Even if you don’t need your currency straight away, you can fix the current rate with a ‘Forward Contract’ where only a 10% deposit is payable initially, protecting you against adverse rate movements for up to 2 years.

If you have yet to open a trading facility to gain access to commercial rates of exchange click here to open an exchange rate account today and an experienced trader will be in touch to discuss your requirement and offer expert market knowledge.