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The latest EU summit takes place over the next few days with expectations so low that they could be viewed as indecent. The choices are fairly clear and the obstacles are well-known and now it becomes a battle of politics over economics. The French are looking for a growth pact and Eurozone bonds, Italy and Spain want something to lower their debt yields and Germany are still unprepared to shoulder the burden of others’ frivolity.

The longer-term will see some form of “United States of Europe” with states joined by monetary, fiscal, political and banking unions but this is plan for the next decade and not one that shifts focus away from where the pain is now. As we have stated in the past, Spain is a lot more powerful than Greece, Ireland or Portugal were when they had to cap in hand to the authorities and Rajoy seems like a man who is willing to play chicken for as long as is needed to get what he wants. He, alongside Monti, wants the ECB or the sovereign rescue funds in the EU to buy their debt in order to release some of the pressure on their borrowing costs. Without some agreement soon to deal with this the markets will make sure that the panic lasts long through the summer doldrums.

The meeting kicks off today and although expectations are so low that European leaders would probably have to set the building on fire to miss them, you can never rule out the market seeing a chink of light in a speech and driving risk onward; it’s the path of most pain for traders out there at the moment.

The run-up to the meeting has been apocalyptically boring with most currency pairs in a holding pattern. Risk currencies retouched recent lows overnight but have since bounced back and investors will be looking to sell them again if no joy is seen from Brussels.

Elsewhere we have UK and US GDP readings to concern ourselves with although they are both final readings for the 1st quarter and are unlikely to rock the boat. The UK number is expected to confirm that we did contract by 0.3% in Q1 whilst the US figures should show that growth in the US was around 0.5%. In any case, these measures will be overshadowed and ignored in favour of the news from Europe.

There is also an Italian auction of 5 and 10yr money this morning just in case those round the meeting table were unaware as to what the market wants. That is due just after 10am.

Indicative Rates Sell Buy
GBPEUR 1.2475 1.2504
GBPUSD 1.5600 1.5624
EURUSD 1.2489 1.2512
GBPJPY 123.89 124.16
GBPAUD 1.5427 1.5453
GBPNZD 1.9624 1.9653
GBPCAD 1.5963 1.5993
NZDUSD 0.7937 0.7958
GBPZAR 13.08 13.13
USDZAR 8.3763 8.4154
GBPPLN 5.3009 5.3287
EURJPY 99.18 99.44

Please note these rates are “interbank” rates ie they indicate where the market is currently trading and are not indicative of the rates offered. Rates are dependent on amount transacted. It is important to remember that foreign exchange rates fluctuate all the time. The rate you will receive will depend on the amount and currency you require.

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