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Why is the euro so high against the pound?

By Dan Wilson September 4, 2017 - 10:38 pm

Having not been getting much in the way of euro value as I’ve been withdrawing money on a trip to Spain these past few weeks, I thought I’d ask some people who know. At one point I was paying more than a quid for a euro but it has been a bit better in recent days.

Currency exchange is something that will be on your mind as you sell on marketplaces in the eurozone. Indeed the recent doldrums of the pound could well be causing you either joy or despair.

Jake Trask is the FX (foreign exchange) Research Director at OFX and he offered this analysis :

“GBP/EUR is currently trading around 1.09 and touched a low of 1.0750 recently, its lowest level since 2009. Sterling took a huge hit on the back of the Brexit vote and the resurgence in confidence in the euro since the French election has seen the shared currencies value rocket over recent months. Although Sterling is still vulnerable in the face of upcoming Brexit negotiations between UK/EU leaders later this year, there is now a feeling the euro’s rally may be fading. The European Central Bank (ECB) will have noticed the currencies appreciation and may be concerned its rapid ascent could stifle growth, especially with inflation still lagging behind target. Because of this, we may see the ECB delay its expected announcement on tapering, until later in the year and not this week as previously expected. Because of this, we should see GBP/EUR continue to trade around current levels for the rest of 2017.

Sterling has fared better against the dollar throughout the year, as President Trump’s promises over growth, tax reform and infrastructure spending, have not been met. Tensions re: North Korea have been the most recent event to impact the dollar and we could see sterling gain towards the end of the year should the President get bogged down with sabre-rattling against President Kim Jong-un.

Expectations that the UK and EU will agree to a two year transition period have seen Sterling propped up recently with a Brexit divorce bill likely to be outlined before Christmas; clearing one obstacle needed to get trade negotiations going. We could see Sterling trade back above 1.30 before too long however its unlikely we will get much higher given its susceptibility to movements with bad news from Brussels.”

1.30 sounds pretty good to me right now. And probably you.

  • 3 years ago

    Another analysis. Another horoscope or palm reading – that’s what it feels like to me sometimes. However, I sense your respect, Dan, for allowing uncertainty and risk in predictions and the last line is just a hook to generate responses. However, its a good hook so I feel compelled to kick off.

    I believe 1.30 is wishful thinking and it will be beyond the lifetime of the current government with such poor leadership (Tory or Labour, I don’t care) and Brexit. God, it’s hard to write that word – Brexit. People of the UK must be sick of hearing about it. I’m writing from Cork, Ireland and I find it frustrating. I have an image of a car crash in slow motion and feeling helpless. Whatever about the rights and wrongs (trying not to create a political discussion) of the decision, the execution has been dismal. And it’s not black and white. Yes, there will be some winners (finance jobs going to Dublin, Paris or Frankfurt) but there will be losers also outside the UK (you guys are our biggest trading partner and correct me if I’m wrong vice versa). And the uncertainty for some many people and businesses – God, where to start?

    So the only lift Sterling will see, apart from the background noise generated by the the stall holders to make commissions, will be due to other currency weaknesses rather than UK economy strengths. Of course, I’ve just contradicted myself by giving my own analysis. Why am I thinking of chimpanzees now?

    Getting back to ecommerce, I find myself more cognisant (spl?) of FX thesedays buying and selling between Euros and Sterling. Thankfully my winners and losers seem to balance out. I hope everyone else who in the Tamebay community is coping too.

  • 3 years ago

    In my opinion – and that is all currency speculation is – a collection of differing subjective opinions – It will take a few years for the £ to get back to its pre brexit levels of 1.40+, it is very undervalued at the moment but is in fairness worth 1.25, the subdued value is due to the persistent talking down and pessimism of the state of the UK on all fronts. The Euro on the other hand, apart from been brilliant for the German economy the past 15 years, is fundamentally flawed and will not exist in its current format, the timing cannot be judged, but it will fail and at which point I believe you will see very briefly levels of at least €2 to the £ before it is suspended and replaced, not that I expect our Euro fanatical fans to agree !

  • Marc
    3 years ago

    There is a lot of hype about currencies, especially from the Anti-Brexit press like the Guardian, FT, Independent, Mirror and of course the BBC.
    All markets whether it is currencies ( US$, Yen, Euro £ etc.), Indexes (like FTSE, S&P), Bonds and Commodities (Gold, Silver, Sugar, Cocoa etc.) go up and down and trade in cycles. With people like the Finance Trader, William Gann, developing technical analytical tools to predict future movements using past trading cycles.

    So looking at some of the currencies on their last 10 year average rates, they do go up and down. So I look forward to the currencies going back to around their 10 year average after all the scare stories of Brexit is over and the London centric press has something else to grumble about.

    US$ is 16% down ($1.55)
    Japanese YEN is 7% down (Yen 153.33)
    and the Euro is less than 5% (Euro 0.87)

    And currencies like the Turkish Lira, South African Rand, the pound is actually stronger.

    It does proof that the Euro is a basket case, for everyone in Europe except the German economy. So it might be the Irish exit next.

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