The dynamics of foreign exchange lie in the interpretation of economic phenomena. With the coronavirus pandemic reaching its peak, people have devices measures to curb its spread while remaining active on online trading. Home delivery is now entrenched into our ways of life to reduce human interactions.
Euros and pounds are major currencies in Europe and the world, coming in at positions 2 and 4. Their relationship dates back to 1999 when the euro was launched. Over time, their relationship has grown to mirror growth. Whereas the euro serves 23 of the 27 nations in Europe, the pound is only used in the United Kingdom and some of the commonwealth nations.
Figuratively, the value of the pound is larger than that of the euros, but the latter has a larger demand base. It makes it stronger and more reliable, especially when doing international transactions. The valuation between the two currencies observes the purchasing power, overall economic demand, and ease of doing business. The times when the euro is at its highest has to be when its demand compared to the pound is high, its purchasing power is high and people find it easier to use euros than pounds for their daily delivery.
Factors affecting Exchange Rate
Since last year, the state of exchange between euros and sterling pounds has been affected by both natural and economic causes. The following are some of the factors.
- Competitiveness – the euros and pounds sterling have a different competitive approach based on there are of jurisdiction. Although the pound is one of the strongest currencies, its coverage majorly revolves around the United Kingdom. The euro covers an entire continent, with its demand continuously increasing to reach other continents. In this case, the euro is more competitive compared to the pound from a demand perspective. The more competitive a currency is, the stronger it becomes.
- Economic growth – Europe’s economy brings together different countries, their fiscal strength, and their general reaction to economic stimuli. As for the United Kingdom, its economic structure covers a smaller region with its parameters organized around one nation. If one factors money supply between these two macro-economies, the demand will be more for the continent compared to one nation. A positive growth rate of any economy makes its currency stronger.
- Inflation – if the purchasing power of money is affected, prices of commodities respond commensurately. The pandemic has had mixed fortunes for commodity prices. In some areas, production is in surplus since markets have been closed. In some areas, prices are high due to the short supply of goods. The preferred currency between the euro and pound sterling with gain significantly based on its demand.
- Speculations – it is the biggest cause of the marginal difference in the latest exchange rates. COVID-19 has grounded the world economy in all spheres. People spend less on a working day if there is a looming negative growth rate. Production levels are at their lowest while commercial transactions have significantly reduced. Economists are left speculating on the effects of lower money supply in the economy. The lower the supply level, the lower the exchange rate. Concerning the demand levels and speculative propositions, the euro has a larger demand base compared to the pound, effectively growing faster.
What is a good euro exchange rate?
Its definition lies in the value it accrues during the transactions. From a small scale perspective, how cheaper it is to order your travel money from another country in Europe make a good exchange rate. The following are factors one should consider when choosing a good exchange rate:
- Elasticity – the difference between buying and selling euros determines its elasticity. If the difference is significant, then the rate is not market-friendly. A stable exchange rate has a reasonable margin between buying and selling, despite the free market system. Study the high and low these currencies go and find an average. It creates a base from which future high street forex bureaus will derive their estimations.
- Ability to Forecast – long terms forex traders rely on long term planning to evaluate their take-home. Such estimations can only be a reality if use established financial organizations to buy and sell currencies. They have a clear trading history that a trader can look into. Also, they underline reasons for the surge in the price of euros, which creates a pattern that one can use to predict future market prices.
- Timing is also an important aspect when trading in currencies. Currently, it is a good time to invest in Euros. The demand is slowly but steadily rising and the anticipation of economic growth is gaining momentum. Monday 6th, 2020 is a good place to start, with positive prospects lingering.
Is it a good time to get euros?
The world is witnessing a pandemic currently, which offers a mixed signal on investing in euros. In this regard, the following are the reasons why you should consider investing now.
Increase in Demand
The pandemic has passed the critical stage in the majority of European countries. Economies will need money to finance their investment in healthcare and other sectors that were shut down. This will increase the demand for the euro for the next 5 years from the European Bank. If you invest in euros now, you are guaranteed of significant returns in the long run.
Improvement in the European Economy
For the last 1 year, the European economy has been registering negative growth. The disease affected both human and capital reserves. Having undergone a critical phase in the European economy, countries have begun the economic recovery process. The European bank will be issuing out loans for reconstruction and modernization. The top priorities are the healthcare system, which will need capital to effectively manage the effects of the disease.
Other sectors include transportation, small and medium-sized businesses, and import and export markets. These policy measures affect all economies in Europe which translates to an increase in demand for the euros.
Stability of the Euro
The Euro is the second most traded currency in the world currently, thanks to its 440 million dependants. How it fares in the international market determines its stability. Comparing the situation in America and Europe, the US dollar has been reducing its value as the global commercial arrangement bypasses its shores. With its position in the financial market, the euro is slowly eating into the American international markets. Its acceptability within trading partners will weaken the value of the dollar. Investment in euros can earn handsome returns in the short runs before the economic world order is restored.
The Brexit Effect
The United Kingdom formally withdrew from the European Union in January 2020. It meant that the joint European economic policies would not affect the United Kingdom. The biggest effect in this arrangement is the free trade and customs union arrangements that the UK enjoyed before cessations. Prices of commodities will increase, which will also affect international payments. Other money issues affected include money transfer and international post office. The long-run risk appetite is the positive valuation of the euro. If you have euros, you can benefit from this trading arrangement. The pound to euro before and after Brexit is an example of how political activities affect the financial markets.
Where can I get the best exchange rate?
The price of money depends on a myriad of factors. The government is the custodian of all currencies passing through its economy. With this in mind, the following are factors affecting the choice of medium one can use for GBP Eur exchange rate
- Legality – money is a legal tender, and its usage is sanctioned by law. If the foreign exchange bureau does not have systems approved by the central bank, then the legality of the business is questioned. Both the trader and the buyer are guilty of participating in unlawful transactions, whose penalty is jail time, fines, or both.
- Reference Portal – each country has a department in its central bank that deals with foreign exchange. It sets the pounds euros rate from which banks and other financial institutions benchmark their rates. If your preferred trader does manual estimates, he or she may be underquoting or overstating. It is illegal by law and has punitive measures.
- Competitiveness – the central bank has an online portal where all the commercial banks exchange rate trade. The trade can compare the rates and pick the rate. If they are doing multiple transactions across different currencies, they should look for the best average among the currencies. For a currency expert, the examination of trading patterns between the euro and the GBP can give you an average. It can help foresee the future where they can plan currency exchange in the long term.
- Interest rates – it is the amount levied on a transaction as its cost. The interest rate is a significant determinant in the price of money as it influences its worth. In a capitalistic approach, the rates vary from bank to bank based on its working model. The buyer can choose the one with the lowest rate because it guarantees them a lower exchange rate. If you are selling, wait until the rates are competitive for a larger margin.
What’s the highest pound to euro rate ever?
The performance of the pound against the euro depends on various economic conditions poised across the continent. There are internal factors involved, like Brexit. It brought direct repercussions to livelihoods and trading arrangements between the United Kingdom and its European trading partners. Brexit trade increased the euro and pound exchange, thanks to the trade policies between Europe and the United Kingdom. Although the country has a positive balance of trade, its margins were significantly affected by Brexit.
Other factors influencing the trading transactions between the Euro and pound is the place of the American Dollar in world trade. America is the commercial capital of the world, with its currency internationally recognized as the base currency for all inter-country transactions. The difference in the price of money between the euro and dollar indirectly affect their exchange rate. Commodities like crude oil largely influence the demand of the American dollar by countries in Europe, including the United Kingdom. Research from different quarters shows elastic demand between the euro and pound when the demand for the dollar spikes.
In instances like the coronavirus pandemic, the curve develops day by day, thanks to the uncertainties. Economies act differently based on the surge. As it stands, America’s response to the disease has stretched its capacity compared to countries in Europe. With countries concentrating on domestic issues, the growth ratio between countries and their relationship to the global economy shows different metrics. The foreign exchange curve tends to plateau with an occasional rise and falls.
The relationship between the GBP and the euro has been stable for the longest time. “What’s the highest pound to euro rate ever” is the question everyone is asking. The previous record of the highest ratio of the pound against the dollar was recorded on May 3rd, 2000. The pound reached €1.752 against the euro when it was introduced to the world market. The ration grew with time and stabilized.
In the recent past, coronavirus has caused some significant havoc in the currency market. Stability is creeping in slowly with July 2020 becoming a stable month since the virus hit the world.