The President of the European Central Bank (ECB) yesterday forced the Euro to gain value. The GBP/EUR exchange rate dropped a cent and the EUR/USD rate moved to a 3 and a half year high. Mario Draghi is of the belief that Eurozone inflation will continue to improve during the next year following on from good EU economic performance towards the end of last year.
Even though the Euro has made gains over the last 24 hours the bottom level is slowly creeping up. This suggests anyone who is looking to sell Euros might not see the rates drop back to the levels in the last 6 months. Therefore, if you are holding on to Euros you may see the rate move further against you as Sterling starts to make slow inroads against the Euro.
However, against the US Dollar we could start to see the rate climb up towards the 1.30 level. Steven Mnuchin, the US Treasury Secretary has changed the US Dollar policy and now sees a weaker Dollar as the way to move the US economy forward. If the value of the US Dollar continues to fall then exports will become cheaper and the US trade balance should start to tighten up. This could see currencies like the Euro begin to move to the higher levels that were last seen at the start of the decade.
Over the next 6 months the Euro will continue to put pressure on the Pound and US Dollar however in my opinion it’s unlikely to jump against either currency. Barclays bank have forecast the GBP/EUR rate to be nearer 1.17 by the end of the year and the high 1.20s against the US Dollar. Therefore the expectation in the next few weeks is for strength against the US Dollar but there is expected to be ground lost against Sterling.