The Pound has been coming under pressure against most currency pairs recently, but the drop against the Euro appears to be one of the stand-out price fluctuations in my opinion.
On Friday the pair plunged as low as 1.1125 at one stage, with tabloid media jumping onto the headline tourist exchange rates as new spread that £1 was buying €0.88 cents as some airport bureau-de-change.
The Pound to Euro exchange rate has moved from the top end of its current trend all the way down to an 8-month low over the past couple of months and there are a number of reasons for this.
Firstly confidence in the UK moving forward has waned as Brexit negotiations are unlikely to be as smooth as they would have been had Theresa May won the snap election she called earlier this year. At the same time economic data coming out of the UK has begun to disappoint, and the likelihood of an interest rate hike from the Bank of England has dropped, especially after the shock drop in UK inflation levels which we found out just last week.
This turn in sentiment for the UK has come at a time of positivity for the Eurozone and therefore the Euro. Earlier this year there were fears surrounding the increasing popularity of the populist parties within Europe, and the Euro weakened as a result. But now those fears seem to have waned, especially after Emmanuel Macron won the French Presidency a while ago, and with Angela Merkel currently expected to win the German election later this year.
What issues could cause the Euro to drop in future?
Those converting Euros into Pounds are in a good position in terms of recent history, and I think anyone with a future requirement should be aware of the potential downsides to the Euro’s value in future.
The Greek debt crisis could always resurface, and I think the wave of populism within Europe isn’t over, especially in Italy as they face many of the issues of the migrant crisis. There is also the issue of Catalonian Independence and if that issue arises once again it’s worth noting that the region is responsible for 20% of the country’s GDP.