Euro: December Report

26 November 2013

EUR (Euro) Current Rate:
€1/£0.838; €1/$1.355

The euro enjoyed a positive October gaining ground against sterling and the US dollar but there were worries about the underlying Eurozone economy. The European Central Bank (ECB) clearly shared the worries as it took virtually everyone by surprise by cutting interest rates to the record low of 0.25 per cent.

Such a move goes to show that forecasting exchange rate movements is not an exact science and is heavily reliant on the actions of central banks as well economic data releases.

On news of the cut and the subsequent rumours that the ECB is considering introducing its own quantitative easing (QE) programme to combat the risk of Eurozone deflation, the euro slumped against sterling and all major currencies.

The threat of deflation remains high for the single currency bloc and given the ECB’s surprise movement on interest rates, it is clearly acutely concerned about such a risk eventuating. With this in mind, it now seems likely that the euro will remain more subdued than in recent months, at least until some more definitive direction is given about the Bank’s stance on QE.

Volatility in the euro is likely in the early part of December with the next ECB Announcement scheduled for release on December 5 and Eurozone Growth Domestic Product (GDP) data due the day after. Investors will be eagerly looking for more detail on the likelihood of deflation as well as clarification on the QE rumours. The GDP data, as well as sovereign inflation data for Germany (December 11) and France and Italy (December 12), should help to provide an idea of the direction in which these key economies are travelling.

All in all, it’s another disappointing end to the year for the Eurozone and a continuation of the struggles its authorities face well into 2014.

 

 

GBP/EUR expectations for December 2013:

Time Length	Rate
1 month	1.20
3 months	1.20
12 months	1.22

 

 

 

 

EUR/USD expectations for December 2013:

Time Length	Rate
1 month	1.35
3 months	1.34
12 months	1.28

 

 

 

Forecast accurate from 26 November 2013. Data taken from Reuters’ poll.
Data sourced from GBP/EUR and EUR/GBP cross.

For help and advice on making international euro payments, call 020 7898 0500 or send us an email

Disclaimer:
The information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy or sell. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.