The UK pound vs. Euro exchange rate

I have a savings account still in the UK and I'm wondering when might be the best time to take the plunge and convert it to euros. I messed up big-time I think, by not converting it a year ago while the rate was still around 1.5 as can be seen on this chart.

We're looking to buy a house here in Germany (and have been for over a year) and I'll want to be converting those UK savings into Euros, but I can't bring myself to do it with the exchange rate as it is now.

Does anyone watch/listen to CNBC? I lost the channel when I went freesat, so I don't get to hear those currency experts they'd have on once a week. I'd just like to hear that someone thinks it'll bounce back up to 1.5 again. Even if it'd take a year to do it. Or on the other side of the argument, the general currency trading and financial community might think it's still got a long way to go down. In which case maybe I should get off my butt and get it converted now.

I also wonder if GB will ever drop the quid and go Euro, and if they did, what kind of exchange rate they'd feel they deserve to get in at, or if it would simply be whatever the current rate was at the time.

the pound won't be going up for any time soon I would guess. Not with the current dumb-arses in charge of the economy. At best it will hover around the 0,80 €/£ (or 1,25 £/€) to 0,83 (1,20 £/€) point for some time to come, though there is a real risk of it deteriorating much further. I wouldn't bet against it falling beyond 0,85 (1,17 £/€)at some point. The pound fell through the 0,67 (1,50 €/£) barrier in February 2007 and has been on a steady decline ever since until recently plummeting.

I don't see it bouncing anywhere but down within the next 2 years. The problem is, any bad economic news from the UK is going to weaken the pound (and there is bad economic news every day at the moment). Bad Economic news from the continent is also bad for the UK economy so won't strengthen the pound unless there is contrastingly good news from the UK (which seems very unlikely).

Interests rates have been left quite high for fear of inflation, so the only way forward in the near term for them is down, which would weaken the pound.

The PM and Chancellor have recently announced measure after measure of increased government spending without stating where it is coming from, so my only guess is deficit spending, which is again bad for the pound.

Add to that a Chancellor of the Exchequer who seems the best thing for an economy is talk it down and what do you have?

Seems like I might have missed that last sideways trading level of 1.28 too. It was there a good few months and there was me thinking it was bad. Now we're at 1.23 and I miss it. Ho hum. I wonder how long it'll be before the UK starts to rebound. I'm sure euroland must be due for a decline soon. It's been on a high for the last 5 years. Against the dollar at least.

Wondering now whether I should just leave the money in the UK very long term and not use it during the house purchase here.

Tell me about it. Each time a transfer some money out here I think I get hard done-by & the next time when I look at the rate I got the previous time I wish I had xferred more.

I'm thinking of transferring my savings to the UK right now.

I agree that I personally can't see it getting back to 1,45 any time soon. I think that sort of wishful thinking needs to be forgotten. That was a peak that reflect (as we now see) a boom that was not built on substance.

Doesn't have to be all or nothing though? You can hedge by converting part but not all. Or by using financial instruments, if that's your sort of thing.

It's easy to say but at some point we have to just get on with stuff. If you need the money in Euros to buy one here (or a bigger one than you could otherwise), convert it and move on. We don't have perfect knowledge. We can all say we missed opportunities - and living a life involving two currencies increases that inherent risk significantly. Meantime, we have a life to live.

The weighted price of a Big Mac in the Euro area is €3.37 (economist article) while in the UK a Big Mac costs £2.29.
Today's exchange rate is 0.81£/€ which means that the Euro is already 19% overvalued against Sterling according to the Big Mac Theory.
I do see all the gloom surrounding the UK's economy but a lot of Eurozone economies are also facing huge problems and very high inflation

It's hard to see the pound getting much worse.
I convert my Euro income to £UK and just leave enough in Euro to live on.
I believe by the time I really need those savings I'll either be back in the UK or the pound will be stronger plus there are some good interest deals in UK.
I'm also selling my Bulgarian flat as the Euro rate is now a bit less than when I bought it.

P.S. Why are you buying here, last time I did the sums, unless you can 1million percent guarantee you'll be staying in that property for a substantial time then it just made sense to rent and given the security afforded renters here you can still go ahead and make your rented place feel like home.

Hello there,
Could you give us a for instance - several even - please?
Advance thanks.
Cheers

Alliance & Leicester, Halifax, Abbey and Bradford & Bingley are all offering interest rates around 6%. I don't keep up with their current rates all that often, but it's somewhere around that number. This is for "Internet savings" accounts.

"I'm sure euroland must be due for a decline soon. It's been on a high for the last 5 years. Against the dollar at least."

Ok, it's short term...but have you seen the chart today?

yes but doom and gloom for Euroland economies is not, per se, good news for the pound. Europe is Britain's largest export market, accounting for something like 50% of the value of all goods and services exported. If the euroland economy staggers, so too do British exports. Only if the UK can counter falling exports in Euroland with increased exports in other markets will this sort of news bolster the pound.

it is actually fairly easy to see the pound getting worse. It will bounce back slightly from its recent lows due to profit taking but there are no fundamentals at the moment supporting the pound. The UK economy is set to under-perform the Euroland over the next 12 months, going into recession over the next two quarters. My view is for it to move between 0,80 and 0,83 for at least the next six months but any bad news could push it down much further.

See Moneyfacts for the best savings accounts.

If you can leave money in pounds in an investment account and let it accrue interest there and try to live on euros. Typically you get much better rates in building societies in the UK than any cash based investment will give you here. I have the same problem and will try to do exactly this. I got lucky and moved a load of money at £:EUR 1:1.5 and now it's really hard to see how much less I'd get, but c'est la vie...

UK interest rates are expected to be reduced over the next few months which normally weakens sterling further.

Yep, that's the reason I've been saving in the UK for the last 8 years or so. Definitely out-performing any German banks. It's hard seeing the Euro value of it drop 20% though.


Maybe it really is time to get on with it then I suppose. Half of me wants to keep hoping it'll come back up in a year or two and I get to cash out higher. I think I might just manage to buy this house without having to dip into UK savings. I've got a bunch here in Germany too.

I transferred my savings last year when it was at 1.50, and shortly afterwards I talked to a financial advisor who told me that it was a bad move. Goes to show how much those guys know.

Anyway, I think your whole idea is bad. You can get a better savings rate in the UK than you can in Europe. If you bring it over, not only will you get hardly anything for your pounds, but you're going to put it in a house, which for the most part in this region is also throwing your money away. House prices haven't moved here for years, and the British mentality of "Your throwing money down the drain if you rent" simply doesn't hold true here.

I have done the sums, and it's cheaper to rent in Munich than it is to buy. I imagine Ausburg is similar.

Topic split: It's cheaper to rent in Germany than to buy

There are three major factors which influence the exchange rate: 1) purchasing power parity rate, 2) interest rate differentials, 3) balance of trade. If these factors signal differing directions in currency movement, then it is quite difficult to forecast the resulting movement since market participant do quite erratically concentrate sometimes on one of the mentioned factors only while ignoring the others. If all three align to the signal the same direction though, you can be quite sure that the market will indeed move into that direction. Now what are these signals in regards to the EUR/GBP exchange rate?

1) PPP: Euro is 8% overvalued, should therefore decline against the Pound.

2) Interest rates: UK interest rates are slightly higher, Euro should therefore decline against the Pound. But market participants might price in a larger weakness in the UK economy and therefore future interest rate cuts by the BOE which might soon eradicate the slight UK interest rate advantage. Overall the signal is therefore probably for the Euro to stay stable against the Pound.

3) Balance of trade: The UK still runs a trade deficit with the Eurozone, the Euro should therefore rise against the Pound.

Overall the signals are mixed, we got one pointing for the Euro to decline, one for the Euro to stay stable and one for the Euro to rise. Best assumption is therefore probably to assume that the Euro will range trade against the Pound in the near future. But as I told you before, even if the signals are mixed market participants do still sometimes irrationally concentrate on one of the factors only, you can therefore never rule out wild swings. You should probably hold half your money in Euro and half in Pound in order to protect yourself against those potential swings.

Things have shifted quite a bit in our favour (for those of us with pounds thinking about converting to Euros).

http://uk.finance.yahoo.com/q/bc?s=GBPEUR%...amp;t=1y&c=

Which is kinda interesting as UK interest rates will be going down 0.5% on Thursday.

Is it the EUR going to weaken again I need to transfer my EUR salary to GBP, wait or do it now? bugger wish I'd done it in September

Well its only ticked up 3 cents!! Still zillions better off then when it was living at 1.48 if switching your €uros into Sterling.

I lied. They shat their knickers and dropped 'em 0.5% today instead.

The market doesn't seem to have liked that:

http://uk.finance.yahoo.com/q/bc?s=GBPEUR=...&q=l&c=

wooooo hooooooo..more more more ...down down...
what's the bottom this month? 1.25 to the pound? I gotta shift 3 months salary across, was less than 1.23 at beginning of September

booooo hooooooo..less less less ...up up...

get the bonus in november what the euro to be mega strong against the pound!

ohh... 1.245
that's low enough for me so I called the bank.
turns out they (Cater Allen) set the rate for the day at 9 in the morning (1.259)
under exceptional circumstances they'll revise it during the day.
the guy on the phone told me the did the rate he saw on the screen was 1.23

blimey...told him I'd hang on and wait till tomorrow's 9am rate is set (hopefully at about 1.24)

I don't like this currency business...I do my work ...i get my invoice paid, and then I have to gamble 3 or 4% of it on currency markets..not funny

In think you have to stop see currency fluctuations as a "gamble" or "stress" but more as an inherent risk of the life that many of us immigrants choose.

Life would be ideal and easy if we could always call the optimum position for us and act right then. The reality is that a 2-3% variation is going to be all the best we can do.

And it tends to even out over time. Sometimes we will miss out, other times we will pick right.

But I know what you mean. I went the other way (GBP to EUR) a year ago and was miffed at getting 1,44 when it had been 1,47+ just before. It's nothing over a lifetime of income though. I can earn back the "loss" if I really need to.

We can also do stuf to hedge it - like not changing it all at once etc - if we are not sure but drip feeding" it.

Whoa!! just on BBC website Pound/Euro is 1.1959 .

Germany is going to announce it's in recession also by Thursday due to 2 negative growth quarters and the US is now not going to buy the toxic debt but buy a share in the bank (sounds a bit northern rock to me...),

Crazy times...

Germany has announced already today that they are in recession. Which is no surprise. Everyone else will be too when they announce their figures.

pound is still dropping against the euro.

I don't get it. Why isn't Germany's bad news Britain's good news?

Guardian:

Shape of things to come
• Bank chief warns of deep recession
• Deflation bigger risk than inflation
• Sharp rise in unemployment

Aaah. The old "you've got bad news but we've got worse news" story.

Xrate 3rd May 2000 = .5711. example 20K sterling = 35.02K euros
Xrate 13th Nov 2008 = .8442. example 20K sterling = 23.69K euros

should i continue to transfer my euro wages to the UK or just keep a hold of my euros?

We can only give an opinion of course (not advice). You can only go on your own circumstances - your longer term plans and what that may mean for financial needs etc.

I can only say that what I have has been in Euros for a long time now and boy am I glad. I would not be sending Euros to the UK now but that fits my own needs.

Another key message that's worked in the last year is: "watch the trend". Once values of shares / pound /property etc stopped rising, then fluctuated, then fell, the message was clear. Ditto the first messages that bank guarantees might actually matter. What followed was shown clearly by the past trend. So what does the trend tell you now?

Sure there has to be a bottom but that probably won't be overnight - it'll be a levelling off, fluctuations, gradual rise etc - that you can see being established.

I have just been offered a rate to transfer GBP to Euro from my GB Bank First Direct, of 1.148!

*speechless*

Who knows these days? That might look like a swinging rate in about one week from now!! It is certainly strange old times.

I rather like the 1 Year Dollar/Sterling graph - you could snowboard off this one:



It is proper bonkers actually. US interest rates at 1% and 450,000 per week being made unemployed over there...and it's super attractive compared to Sterling or even €uros.

@JE

I take it that u mean the smart thing to do is to sell dollars and buy sterling since the former currency is horribly overvalued?

Nope. I have already made an arse of my predictions by purchasing oil at $80, therefore all my investment advice is to be wholly ignored!!

Actually it does suck a bit cos I purchase stock in $'s and 40% of company income is in Sterling, but shit happens. In other ways the €/£ is good so its all bollox really. As long as we can all still get to the pub for a pint.

Shame , I think that would have been rather good advice.

Anyone got any good UK stock picks? Please back up with rationale.

I agree. The housing market is quite different in Germany from the UK. In Germany people buy ONE house for life. The Property Ladder just doesn not exist. We had a house in north Baden-Wuerttemburg and though it was a nice house it took over a year to sell, and then at a big loss. YOu just don't have the movemebt in Germany that you do in the UK, and you could end up stuck.

The weak GBP could be good for UK business if they were exporting but the UK doesn't make anything any more.

Why bother with manufacturing when we have the financial services industry that is going to keep spitting out more and more money and could never crash becasue Gordon Brown says he has abolished boom and bust...

I don't understand this. If the Euro is strong against the poud why would it be bad to send them to the UK? (We live in the UK but my husband's pension is in Germany, in Euros, and thats what we live from)

It would be better to hold onto your Euros IF you think the GBP is going to get even weaker.
But that would really make it a junk currency. Oder?

It might be politically toxic - but we must join the euro now (Guardian)