QE IN EUROPE- GREEK ELECTIONS, ALL TIME LOW ON EURUSD, GBPEUR AT 1.34, GBPUSD BELOW 1.50

Last week we saw a lot of volatility with the Euro due to the stimulus plan that was announced by Mario Draghi on Friday.

The ECB confirmed that they will print 60 Billion Euros every month until September 2016 in order to eradicate deflation in Europe. This decision didn’t have a massive effect on the market due to the fact that it was rumoured on Thursday that it would be at least 50 billion Euros being printed every month, the main market mover was the press conference afterwards (For future reference, the press conferences always seem to have more of an influence than the actual decisions).

Following this we saw the markets move massively, as you can see below;

GBPEUR- 1.3450

EURUSD- 1.11

GBPUSD- 1.49

Now for those of you who have been following my articles will know that these exchange rates are completely in line with my forecasts, but I am sure many of you are wondering why the Dollar has strengthened on the back of the weakness in the Euro-Zone, so let me explain how this works;

Right now investors who had their money in Europe, would be looking to take it out due to low interest rates and high risks due to deflation, so they will be looking for a safer place to put their money- which is what we call a “safe haven”- The U.S Dollar right now is the safest place, they are no longer doing QE, and their economy is slowly strengthening, so most investors end up taking their money out of Europe, and putting it into the U.S Dollar or gold- We are even seeing more investors putting money into the Pound, this is why the GBPEUR exchange rate has gone from 1.28-1.34 within 10 working days. For someone transferring £100k into Euros that is a gain of around £5000 just by waiting for 10 days!

The next question on everyone’s minds is how long will this last? The first thing we are looking for is the results of today’s Greek election, the most recent poll show that the Syriza party have more popularity in Europe, and they are proposing a Euro exit; However, though they are more popular, it is not certain if they will win enough seats to control government alone, which will mean a coalition, so the results of this election will dictate where the Euro will go next.

If you do have a transaction that is imminent then please don’t hesitate to contact me, I am an analyst and my job is to help mitigate your exposure on these volatile markets, so please don’t hesitate to contact me directly at prem.raja@currencies4you.com or give me a call on 01322 319 550.