The almighty Euro goes from strength to strength by Max Johnson on 13-Apr-2011

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s those of you who have to transfer money over to Europe probably know, the Euro has been having something of a rally over the past month – and nothing seems to be able to stop in its tracks. This is bad news for those of you exchanging Sterling into Euros with the rates at around the worst levels that they have been in five months.

Why the Euro is so strong on first impressions can be difficult to understand. After all, the news is full of reports on the Portuguese bail-out and the crisis with the Irish banks. Although these debt issues in individual nations may eventually come to a head and pull the Euro down, for now, all currency investors have really been concentrating on is the issue of interest rates. Last Thursday saw Europe raise interest rates to 1.25 percent, whilst rates in the UK were held once more at 0.5 percent. This has confirmed the speculation that, whereas Europe are tackling inflation head on and trying to provoke growth, the Bank of England is much more cautious about the speed of the recovery in the UK and when an interest rate rise could be withstood.

For those of you exchanging money into Dollars, the picture is much brighter, The US is still seen as lagging much further behind both the UK and Europe with an interest rate hike not seriously on the agenda as of yet and therefore Sterling is in a good position against the Dollar.

What will have an impact on movements this week? Tuesday has seen retail figures fall sharply whilst inflationary pressures have been relieved slightly by higher than expected figures. This news has caused Sterling to suffer further across the board as it is now expected that an increase in interest rates may be delayed even further.

For further advice or how to save thousands on your overseas investments compared to the bank, protect yourself from currency movements or set up regular transfers, get in touch with Corporate Broker, Max Johnson of Currency Solutions on +44 (0) 20 7740 0000 or by emailing him: m.johnson@currencysolutions.com

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