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Euro exchange rate

Fed stimulus aids the euro, but spain limits gains

Euro exchange rate Fed stimulus aids the euro, but spain limits gains;

01.10.2012

Peter Lavelle

Welcome to the Pure FX account of this month’s changes in the euro exchange rate.

This is intended as a brief guide to movements in the euro, to put you in the best position for when you exchange currencies for your Cyprus property.

Euro Exchange rate changes:

Pound to euro exchange rate (GBPEUR)

1.2598 on August 29th 2012

1.2559 on October 1st 2012

-0.31% change.

September was a month of two halves for the pound-to-euro exchange rate. The Federal Reserve announcement of quantitative easing 3 first lifted the common currency against sterling, before trouble in Spain brought the euro back down to earth.

Hence, though the euro may have come out 0.31% ahead against the pound across September as a whole, it’s easy to imagine the pound making up those losses and more in October. That of course would be beneficial if you plan to buy property in Cyprus.

What affected the euro in September

The biggest influence on the exchange rates last month was the US Federal Reserve’s announcement of QE3.

Announced on the 13th September by Fed chairman Ben Bernanke, this is intended to kick-start the US economy and reduce unemployment. Crucially, unlike the previous two rounds of QE since the financial crash, this one will be unlimited, with the Fed purchasing $40bn in mortgage-backed securities each month until the economy recovers.

However, though the unveiling of QE3 may have left the markets jubilant, it also signalled the end of the euro’s six-week ascendance against the pound, because it gave investors very little else to look forward to. Hence, Spain and its problems dominated our attentions throughout the last fortnight of September.

Perhaps the most pressing problem for Spain comes from Catalonia. Last week, Catalan president Artur Mas announced an early election in the region, as a proxy to decide whether it should seek independence. This follows weeks of discontentment, stemming from what Catalans feel is a lack of self-governance.

What’s going to happen next to the euro exchange rate

As I mention, there’s very little on the horizon that could give the euro the same lift as QE3. Spain’s problems for instance look set to fester, as Catalonia’s fate hangs in the balance until November 24th, when it holds its election. And even then, just because it’s held the vote, doesn’t signal its constitutional haggling will be at an end.

Given that, it’s easy to see the pound gaining this month, as the UK’s comparatively stronger position attracts investors. (The latest data suggests the UK would have left recession between April and June, if not for the Jubilee bank holiday, for instance.) That would of course benefit you if you plan to relocate to Cyprus.

Get in touch

I do hope you’ve enjoyed reading this post.

If you’d like to find out how what I’ve talked about here affects your money transfers, call us at Pure FX on +44 (0) 1494 671800 or email enquiries(@)purefx.co.uk. We’d be delighted to help with your enquiry.

Euro exchange rate Fed stimulus aids the euro, but spain limits gains

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