Find the best exchange rate when converting your euros to British pounds
If you’re a forex investor or simply looking to trade euros for pounds, get the most for your money with a strong exchange rate.
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How does the euro trade against the British pound historically?
On January 1, 1999, the euro was introduced in 11 states of the European Union (EU) as a “single currency” — or a currency used by all members of an economic federation. At the time of its debut, the euro was at a rate of 1.42 euros to one pound. Despite being an EU member state, the UK chose not replace its country’s currency with the euro.
In the first three years after its introduction, the euro was used only for bank transfers, online transactions and travelers’ checks. But this all changed in January 2002, when euro notes and coins were introduced in the now 12 participating countries, with Greece also willing to use the euro as its official currency.
From 1999 to 2007, the euro held a stable value average of 0.6 against the pound. However, in late 2008 the euro became caught up in the European sovereign debt crisis, which led to an increase of 0.70 pounds to one euro by the end of that year.
What is the European sovereign debt crisis?
The European debt crisis began when the peripheral eurozone member states of Greece, Spain, Ireland, Portugal and Cyprus found themselves unable to repay their government debt due to slowing economies and rising interest rates, among other economic issues. Its effects are still being felt in 2016.
In an attempt to stabilize the euro, the European Financial Stability Facility was created to address the crisis. Rates improved as a result, reaching 0.93 GBP to 1 EUR by October 13, 2009.
The effects of “Brexit” on currency exchange
Since Brexit — or Britain’s proposed exit from the European Union — in June 2016, the GBP has declined against several currencies. For the euro, Brexit could potentially mean that it gains against the pound. We saw the euro jump from 0.79008 against the pound in June 2016, shortly after the Brexit referendum, to 0.841735 in July 2016. Since July 2016, the euro has remained stable at around 0.8 to the pound.Back to top
Using historical data to forecast the EUR > GBP exchange rate
The past can be a good indicator of the future. The sociopolitical atmosphere, interest and inflation rates, foreign trade, public debt and export-to-import price ratios all influence exchange rates.
What affects EUR > GBP exchange rates?
In general, five factors affect how the euro trades against the British pound.
Prices and inflation
Inflation affects all currencies, including the euro. Countries with high levels of inflation relative to other countries will typically see its currency depreciate so that the prices of goods between countries remain equal. In the eurozone — or the group of nations that trade in the euro — inflation is measured by the Consumer Price Index (CPI), which calculates the price of a selection of goods that an average household is likely to purchase.
Confidence and sentiment
By looking at confidence and sentiment reports, you can also gauge economic conditions in countries that trade in the euro. A popular sentiment report to follow is the German ZEW Survey, prepared each month by the Center for European Economic Research.
All currency is affected by monetary policies, which are constructed by currencies respective to a country’s central bank. For the euro, that’s the European Central Bank. Monetary policies include interest rates that significantly affect the euro.
The growth and health of the eurozone significantly influences the euro, measured by the gross domestic product. For the eurozone, the GDP is a periodic measure of the value of the total goods and services produced in the area. For all currencies, including the euro, growth in GDP is a sign that the economy is strong and healthy.
Balance of payments
The balance of payments is like a country’s accounting record of interaction with the rest of the world. It’s made up of three accounts, but only the current account affects exchange rates. This account reveals how much a country is exporting and importing, as well as the flow of income and transfer payments.
Did you know?
The EUR/GBP currency pair is often referred to by forex traders as trading the “chunnel.”
When transferring money internationally, do your research to ensure that your money goes further in an exchange. With Brexit and other current events, the British economy is shaky — which could mean a better deal when converting your euros to pounds.