Expecting the Unexpected

The week started off with a GBP/EUR exchange rate at 1.19 however the rate started to improve as the week advanced supported by the expectation that the Bank of England, BOE, would announce another interest rate increase in its meeting on Thursday. 24 hours before the meeting GBP/EUR had already escalated to levels above 1.20 even though the announcement had not taken place. On Thursday the BOE confirmed the rise and we saw the GBP/EUR peak at 1.2069, leaving Euro buyers in a great position, receiving the best possible return we’ve seen in 2 years. The movement –after the announcement- was not as substantial as some would have thought precisely because the decision from the BOE was widely expected and therefore had already been priced in during the course of week.

In the afternoon, on the same day, the European Central Bank’s president, Christine Lagarde, unexpectedly announced that whilst the rising inflation would not result in any interest rate rises this year, a potential increase in the future was back on the table. Lagarde’s position took the market by surprise. As a result of this, the GBP/EUR exchange rate shot straight down to 1.18, the lowest we have seen since Boxing Day 2021.

In less than 24hours the market went from the highest we have seen in 2 years to a 2 month low.

For somebody looking to exchange £350,000 into Euros on the 3^rd February 2022, this would have translated in a difference of more than €7,000 in a matter of hours!

So what can you do to navigate the effects of the expected and the unexpected?

Get some expert guidance from a foreign exchange specialist like Moneycorp. Moneycorp can support you through these uncertain events and can help to prepare for them with the help of a dedicated market specialist. Your assigned personal dealer can monitor the market for you and provide insights into market movements as well as access to tailored solutions to protect your budget.

So for those in need of certainty and security, Moneycorp can lock an exchange rate in advance of a payment via a forward contract. This is also a good solution for those wanting to take advantage of a rate move.

And for those who are less risk-averse and wanted to strive for a preferred rate, they can request a market order from their dedicated market specialist that could even maximise their budget.