France and Germany announced a return to economic growth this week – signalling (technically) the end of the recession in two of Europe’s biggest economies. This is in stark contrast to the Bank of England who are painting a downbeat picture in the UK.
Mervyn King, the Bank of England’s governor, said in his quarterly inflation speech this week that any recovery in 2010 in the UK is likely to be “fragile”. Coupled with the unexpected additional quantitative easing announced last week, exchange rates for sterling against the euro have taken a tumble from a peak of nearly €1.19 to around €1.15 today.
The concern for anyone needing to transfer money to Europe is that, if France and Germany continue to recover from the economic crisis quicker than the UK, then the Pound is likely to suffer in the medium term. What are the likely effects on the euro exchange rate?
Simone Eastman, analyst at brokers Currency Index, said “many of our clients were holding out to achieve rates of €1.20 against the Pound – but now that the upward trend in rates seems to have come to an end, buyers of overseas property and importers of goods from Europe are scrambling to fix exchange rates as soon as possible.”
Over the weekend, the monthly Righmove house price data will be of interest, and Tuesday’s inflation and retail sales figures will also be an important indicator of economic performance – and therefore of likely movements for exchange rates.
