The GBP/EUR autumn rollercoaster

Portuguese expats and those looking into a move to Portugal, may have noticed the pound to euro exchange rate has been busy over the last few weeks.

A blend of world events and central bank monetary policies have sent the GBP/EUR currency pair on a rollercoaster ride.

In this article, we’re taking you through the details of what’s been causing the currencies to move and what this means for you.

Power to the pound

The pound has been on a bit of an adventure over the last few weeks but has been strong against the euro overall.

At the start of October, sterling was starting from the bottom. The GBP/EUR pair came into the month at 1.157 but in just seven days, it ascended to 1.186 – the highest we’ve seen since February 2020.

The pound was bouncing back after taking a huge hit from fuel supply issues running petrol stations dry and sending the UK into a panic buying frenzy. But once the supply fears settled, sterling shook its shackles and used better-than-expected UK Manufacturing PMIs to help kick-start its recovery.

The positive market sentiment for GBP grew, buoyed by a solid-performing FTSE100 (the UK’s stock market index). On 26th October, GBP/EUR was trading at 1.186 – its 20-month high.

The Bank of England and Brexit

Sterling’s tail was up at the end of October and was poised for a further boost from a Bank of England (BoE) interest rate rise. Inflation in the UK was soaring, and Andrew Bailey (the BoE’s chairman) said it could reach highs of 5% in 2022 – the highest figure in a decade.

In instances such as these, the BoE would typically look to increase interest rates to stop inflation from raging further. This would usually increase the pound’s demand as higher interest rates means investors get a better yield from their UK investments.

But, to the pound’s disappointment, the crucial vote from the BoE on 4th November, did not go in its favour. The vote to keep interest rates at their record low of 0.1% sent sterling’s value tumbling. As a result, the GBP/EUR pair dropped from 1.178 to 1.166 in just two days.

However, the Bank of England has strongly spoken out about its fear of inflation and economists expect to see a rate hike in the second quarter of 2022. This helped to stop and further slide and instil some faith in GBP’s future.

In addition to interest rate uncertainty scaring off investors, Brexit tensions were also stifling a push from the pound. The debate between the UK and the EU over the Northern Ireland Protocol has been causing on and off concerns for some time. Members from both sides were squabbling about the customs and immigration agreement that affects Ireland and Northern Ireland.

The tensions made the pound volatile, but on Monday 15th November, the European Commission Vice-President Maros Šefčovič said the latest talks with UK Brexit Minister Lord David Frost were much more positive, helping the pound on its recovery to a strong position against the euro.


Tough times for the euro

The euro has been going through a bit of a difficult period. In the last couple of months, Europe has been crippled by a huge energy crisis. Its wind power generation has fallen short of expectation and demand for energy from Asia has left Europe at the mercy of Russia and its natural gas supply.

Russia reduced the amount of gas going into Europe, causing energy prices to skyrocket and scaring its leaders into thinking a cold winter could result in catastrophic gas shortages. The euro felt the full effects as investors feared the uncertainty.

To pile more pressure on the shared currency, the European Central Bank has remained firm on its position to leave interest rates alone. Inflation has been a problem throughout the Western World, with the price for consumer goods – particularly gas and fuel – going through the roof.

But Christine Lagarde, President of the ECB, is adamant that inflation is only temporary and will pass next year without the need for an interest rate rise. In her speech on 15th November Lagarde said the criteria for an interest rate hike is unlikely to be met in 2022 – another blow to the euro.


What does this mean for people wanting to move to Portugal?

If you’re looking to move to Portugal from abroad, now could be a crucial time for you. With the pound performing well against the euro, soon-to-be expats from the UK might want to think about moving their money.

As we’ve seen with GBP/EUR, currency markets are extremely volatile and can change at any time.

At Privalgo, we can help by understanding your foreign exchange needs and creating a foreign exchange strategy. We’ll ensure you’re getting the most for your money through top exchange rates and limit the impact of market fluctuations with our forward-thinking solutions.

We’re Privalgo — specialists in currency exchange. We are authorised by the Financial Conduct Authority (FCA) as an Electronic Money Institution. (Reference number: 900887)

Through leading exchange rates, zero hidden fees and innovative solutions, we help Brits save money and time when they move to Portugal.

Get in touch today to see how we can help you build a rewarding foreign exchange strategy.