The market for the EUR – GBP exchange rate is one of the most important relationships that does not involve the US Dollar, owing to the amount of trade between the UK and the rest of Europe.While the market for this pair of currencies can be periodically benign, forecasters still recommend that investors and traders pay attention to reports that have recently come out from the European Central Banks’ monthly report.
The reason is that this particular report will provide a detailed look at current conditions within the Euro Zone. Additionally, this report will provide an analysis for the Monetary Policy expected in the future. While the information contained in this reported would be important for investors and traders of the GBP and the pair of currencies of EUR and GBP, it would prove to be the most beneficial to investor of the Euro, as well as Greece.
Although the report will cover a number of topics, one area in particular that is of interest has to do with claims of unemployment coming out of the United States and figures of the US Trade Balance. With these figures, people would be able to see variances of imported and exported goods and services. If trade for US surplus were to fall, this means the US Dollar exchange rates are growing stronger, which in turn, could be good for the EUR to GBP exchange rate.
One thing that forecasters mention is that many people do not understand the true value of reports such as these. In fact, these and other reports are so influential that they can actually make money transfers more expensive and move the market. A prime example is with the Sterling. When this currency hit a one-week low against the US Dollar and Euro, it was immediately after a report showed that manufacturing in Britain had fallen. Seeing manufacturing in this part of the world drop by 0.9% in January alone, which was the fastest drop since August of 2009, it caused significant concern.
Currently, forecasters state that ongoing political opinion polls from the parliament and sovereign ratings, which happened after Fitch Ratings focused on Britain’s deteriorating credit profile, investors and traders are still very concerns about the GBP. However, a British official quickly came forward, defending the current economic position, stating that the country would still hit the highest credit rating and if the budget deficit needed to be calmed, senior civil servants and military officers would experience some type of pay freeze.
The question now becomes whether to invest and trade in the EUR to GBP or not. Forecasters are saying is that with current market conditions being volatile, it would be best to focus elsewhere, at least for the time being. Trading would certainly not be as bad but for anyone interested in buying, this is not the time. Too much focus is currently on the country’s political instability, which forecasters believe is causing the ongoing budget deficit. Therefore, most experts agree that for the EUR to GBP exchange rate, it would be best to sit still to see what will happen over the next month or two.
Finally, because inflation is higher than usual, interest rates are being forecasted more than 3% during the first quarter of 2010. There is some good news in that experts believe by the end of this year we will see a strong economic recovery. Even so, long-term for the EUR to GBP exchange rate is that in 2012 and 2013, some market weakness will be seen but by 2014, recovery will be great. This is simply a market that needs to be handled carefully with investments and trades taken serious.
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