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Eurozone troubles thicken

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Pound Sterling

The Pound hit a two-week high against the Euro on Friday due to the German Central Bank cutting the German economy’s growth forecast. Concerns over the Italian election have also dragged on the Euro.

Against the Dollar the Pound fell as the ‘Greenback’ was supported by better-than-expected employment growth data and increasing bets that the US Federal Reserve will opt for a smaller stimulus package this week.

US Dollar

The ‘Greenback’ has retreated slightly after last week’s gains. The ongoing negotiations over the ‘fiscal cliff’ have caused the currency to weaken against the majority of its peers.

This week, Dollar traders should be aware of some important data releases, with the most important being Wednesday’s press conference by the Federal Reserve. This week also sees the latest data releases for Trade balance, PPI, Retail sales and Core CPI.

The Euro

The Euro has fallen to a two-week low against the Dollar and remains weak against the Pound due to concerns over Italy’s political landscape. The concerns stem from the current Prime Minister Mario Montis announcement that he wants to resign. Such a move would cause instability in the nation and could pave the way for a return of former leader Silvio Berlusconi. The Euro has also dropped for a third-day against the Yen as European Union leaders prepare to meet on the 13th to debate an overhaul of the Euro area.

This week, Euro traders will want to pay attention to several German indicators. Decreased economic growth forecasts for Germany helped contribute to the Euro's bearish movement last week. If tomorrow's ZEW Economic Sentiment or Friday's Flash Manufacturing PMI come in below their expected levels, investors may shift their funds to safe-haven assets, which is likely to result in the Euro taking additional losses.

Australian Dollar

The ‘Aussie’ has fallen from its two-month high against the Dollar after Chinese exports and imports failed to meet economist forecasts, impacting Australia’s trade prospects. The currency was also weakened by disappointing housing data. Against the Euro the ‘Aussie’ reached its highest level in three-weeks after former Italian Prime Minister Silvio Berlusconi announced his decision to take part in the upcoming Italian elections.

New Zealand Dollar

The ‘Kiwi’ has made gains due to the rising price of dairy goods and increasing confidence that China is recovering well. New Zealand’s largest dairy company Fonterra predicts it will see higher growth as extreme weather conditions around the world cut the supply of wheat and grain, which it expects will lead to higher dairy prices.

Canadian Dollar

The ‘Loonie’ has lost some ground against the US Dollar due to concerns about the US ‘fiscal cliff’. Last Friday the currency had been trading at a one-month high against its US counterpart, after both economies added more jobs than expected in November. Government data showed 59,300 new positions were created last month, the biggest number of jobs created in eight months. The jobless rate fell to 7.2%, its lowest level since June and down from 7.4%.

South African Rand

The Rand is expected to hold steady this week and hold onto the gains it made last Friday. However, economists are predicting that any unpleasant surprises from end of year data will weigh on the currency.

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