By Lauren Buckner
It has been an incredibly rangebound week for GBP/EUR as the Pound adjusts to its new median value (we hope) against the Euro. Many clients seem disappointed with current rates but Q1 2023 has not been an easy road for the Pound. With inflation still crippling disposable income and predictions of recession, eye watering levels of Government debt and strikes heralding in the beginning of the year Sterling sat around 1.11 in early February against the Euro as the EU seemed to outperform in every area.
Since then we have seen further interest rate rises and a change in tone around the economy from both the Chancellor Jeremy Hunt and Bank of England Governor Andrew Bailey both no longer expecting the UK to go in to recession. Coupled with expectations of a further rise in interest rates to come (and then for a pause) investor appetite for the Pound has increased. This has allowed Sterling to move to highs of the year so far throughout March and settle a good cent higher than its previous trend. For clients buying €150,000 this means that you have saved £1200 in general terms through this month.
Euro strength filtering through the market from yesterday’s inflation figures for Germany and Spain did little to cool the Pound’s performance demonstrating perhaps more solid foundations for Sterling. The fact however, remains that the EU economy is recovering from slow growth and spiralling inflation far quicker than both the UK and US. Current EU wide inflation figures sit at 8.6% and are predicted to fall in the next release on 19th April, this allows consumer spending to follow a more normal pattern and for an economy to easily move to stable and sometimes booming growth! This could be a key event given far lower than expected inflation data yesterday for Germany (to 7.8pc from 9.3pc) and Spain (dropping 50% from 6pc to 3.1pc). This settling in inflation is felt to still support the current European Central Bank increase in interest rate predictions and therefore maintains recent Euro strength.
The USD continued to decline following weaker than expected GDP data this week on the back of these EU data releases yesterday back to the 1.09 mark versus the Euro but it was Sterling that took full advantage of some USD weakness. Again reflective of GBPs current favour the Pound is testing the key 1.24 level with the USD – levels not seen since February 2nd! Heavy resistance sits just over 1.24 so Dollar buyers should seize on this opportunity,
As we move in to Q2 2023 the mood certainly seems to be lifting for the Pound – let’s hope the better weather is to follow for those of us in the UK. And for clients with an upcoming payment for their dream ‘Place in the Sun’ please make contact with our friendly team to discuss the current buoyant rates.