Major Currencies Continue Surge on the Euro

By Ashley Finill

This week we have seen a continuation on Sterling’s dominance over the Euro, as the pound has gained around a cent and a half since this time last week which has seen one of the biggest shifts in the market for some months, breaking out of the range it has been trading in over the past couple of years. This has bought Euro buyers delight, as an influx of forward contracts continue to be purchased throughout this week to take advantage of these fortunate but unpredictable movements in the currency market. Emmanuel Macron’s shock call for a snap election in France last weekend due to a rise in popularity for far-right groups in the European Parliament elections forced the French president’s hand, coupled with the announcement of the European Central Bank being the first major bank to cut interest rates which paved the way for sterling’s rally with both announcements crushing the Euro. Over the past couple of months, the Euro has been the most underperforming currency due to continued talk of rate cuts which have now come to fruition. The single currency has in the past week alone seen the US Dollar gain close to 1.5%, the pound just over 1.1%, the Canadian dollar 1% and the Aussie Dollar just under 1%. If you have a requirement for Euros in any of the above currencies, then it may be prudent to strike whilst the iron is hot. As we only know too well, these gains can quickly be reversed. As mentioned, our forward contracts are massively popular due to their ability to secure a favourable rate for future settlement with only a 10% deposit, giving you peace of mind in knowing you’re within your budget and crucially removing the risk of the market going against you during the time of the completion on your property. For example, if agreed a price on a property last week for €150k, then since your deposit payment you are saving around £1k which could go towards other costs. Speak to your currency consultant at A Place in the Sun Currency today should you want to take advantage of the current highs and to go through your options.

BoE Interest Rate Decision Looming

The Bank of England is expected to hold interest rates at 5.25% when it meets next week, which would follow the same decision back on May 8th. There had been an expectation that the monetary policy committee could vote for a cut at their next meeting next week, but due to the steady fall of inflation towards 2% and the Prime Minister Rishi Sunak calling for a general election which is set to be held on the 4th of July, a cut in rate is all but off the cards with the decision likely to be already priced into the market. This could mean the meeting may have little to no effect on Sterling, however, should the Governor of the BoE Andrew Bailey set out his plans for a cut in the next meeting then we could see the Pound start to wobble with rate cuts imminent, given the currency’s interest-rate-driven support against the majors over the past couple of years. Uncertainty is Sterling’s foe, so with a general election approaching with what looks to be a landslide Labour victory, if the polls are anything to go by, and a rate cut seemingly not on the horizon, should any of those scenarios take a different direction then we can expect Sterling to do the same in the currency market.

Data Today

With it being the end of the week there is not much data to shout about. This morning Consumer Price Index was released which came in lower than expected and gave the Pound some support to start off the day. The only other event to take not of is at 2pm in the US Michigan Consumer Sentiment is to be announce, and there is a Fed member Speech by Austan Goolsbee at 6pm.