The pound to euro exchange rate has performed well this week in a very volatile time. “GBP / EUR hit a new nine-month high, closing above € 1.13 for the second time since May last year,” said George Vessey, currency strategist at Western Union Business Solutions, yesterday. That success continues this morning as the GBP continues to rise.
The hike is “largely thanks to the successful and rapid introduction of vaccination in the UK, which has raised hopes that social distancing restrictions will be lifted sooner and that the economy may get back on its feet faster than currently projected,” Vessey said.
However, “concerns” about tomorrow’s Bank of England interest rate announcement may have prevented the pound sterling “from significantly expanding its profits,” experts said.
New data is available today but is unlikely to have much of an impact on the GBP.
The pound is currently trading at 1.1342 against the euro, according to Bloomberg.
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Michael Brown, currency expert at international payments and foreign exchange firm Caxton FX, spoke to Express.co.uk this morning about the latest exchange rate figures.
“Sterling remains supported against the euro by the impressive introduction of vaccination in the UK.
“Although [it] has so far been unable to extend its profits significantly, possibly due to concerns about BoE news of negative interest rates tomorrow.
“As a result, today’s PMI numbers are likely to be ignored by the market, shifting attention to tomorrow’s BoE, even though 1.13 seems like an important line in the sand for now.”
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Vessey commented on the volatility risk during the BOE tomorrow.
“It’s a ‘Super Thursday’ policy meeting of the Bank of England (BOE) tomorrow at noon, which means that new economic forecasts will be released along with the usual policy decision, minutes of the meeting and press conference,” he said. “A negative interest rate review will also be released and markets are warning of increased volatility.
“The pound sterling has been on an uptrend against most of its major currency rivals since the beginning of the year. This was supported by the UK-EU trade deal, the successful UK launch of vaccines, the waning negative interest rate outlook and the improvement in global risk sentiment.
“Sterling’s positive run could gain momentum tomorrow if negative rates are completely eliminated from the BOE, but traders betting positive should beware of any mild surprise and likely downgraded economic outlook.
“In both cases, the currency options market is showing warning signs of increased volatility. Implied volatility is a measure of expected exchange rate fluctuations over different time periods and has increased since the BOE meeting was recorded.
“A slight increase in the GBP protection premium versus the GBP surge protection is also a warning of the expected downside risk for the GBP. GBP / USD could fall below the USD 1.36 key while GBP / EUR to 1, € 12 could fall back. “
What does all this mean for your vacation and your travel money?
Post Office Travel is currently offering a price of € 1.0921 for over £ 400, € 1.108 for over £ 500 or € 1.1136 for over £ 1,000.
The holidays are currently suspended as the UK continues to go through a third lockdown.
International and domestic travel are banned and the British are encouraged to stay home.
What should vacationers with unused vacation pay do at this point if they can’t escape?
James Lynn, Co-CEO and Co-Founder of Currensea, advised, “It can be tempting to exchange any leftover travel money or even take out foreign currency in anticipation of a future vacation while the exchange rate is cheap.
“I would advise against it, however. In reality, market movements are often more marginal than they appear.
“Especially during this volatile time, it is safer to keep your money in your UK bank account than to buy or convert money and earn vacation pay.
Lynn continued: “As soon as we are allowed to travel again, it will mean the end of the COVID bump and I expect the pound has improved even more than it is today.”
“When it comes to your consumer rights, using a travel card is always a safer and cheaper option than using cash.
“Multi-currency travel cards that allow you to spend in local currency (in the case of Currensea directly from your own bank account to save international fees) are always the best way to save money.
“This way you can spend money directly with local services while on vacation and only withdraw cash from an ATM when needed.
“The absolute no-go is to withdraw money from an airport office, which can result in an exchange rate of up to 10 to 20 percent when exchanging or buying back cash.”
