Author, Mike Smith
Euro to Pound forecasts are used by businesses and individuals to make better decisions on the timing of international transfers.
A EUR to GBP forecast is essentially an expectation of the exchange rate at a future date using past, present and anticipated data.
Will the Euro go up in 2021?
The Euro has fallen in value against the British Pound so far this year.
In the first 6 months of 2021, the Euro declined 4.6% against the Pound.
The main reasons behind the Euros relative underperformance of the Pound are:
- The slower rollout of COVID vaccinations
- EU expected to lag the UK in economic recovery
- ECB less likely to tighten policy than Bank of England
- Risks of Brexit have subsided
At present, the UK has a higher percentage of its population vaccinated than any of the major European countries.
This is expected to result in the UK having better economic growth than the EU in 2021.
The IMF projects the UK will grow 7% in 2021 compared to only 4.6% for the Euro Area.
This is likely to lead to the Bank of England acting sooner to tighten monetary policy than the European Central Bank (ECB) – which is also supportive of Pound Sterling strength.
Brexit has taken a back seat to COVID since 2020.
While there are still outstanding issues with Brexit, the biggest economic risks concerning trade have abated.
The above factors are largely known and therefore partly priced in already. However broad themes often take a long time to fully play out – benefiting the prevailing trend.
Looking forward, if Europe were to substantially close the gap on the vaccine rollout and the ECB were to signal a policy shift, this could strengthen the Euro to Pound rate in the latter half of 2021.
Another possibility for Euro strength is if Brexit remerges as a sticky issue.
While both the UK and EU would likely suffer from a fallout (which lessens the odds of it happening), the Pound would take a greater hit than the Euro.
Even if both sides just exchange heated words (a more likely scenario), that can be enough to damage sentiment and trigger an appreciation in the EUR/GBP rate.
As a broader point, it’s also worth bearing in mind that no forecast will incorporate unknown and unforeseeable events.
All EUR/GBP forecasts represent a ‘base case’ prediction and will be amended should a major event unfold.
Examples of major events include: war, terrorism, natural disasters, political crises, a financial or credit collapse – please refer to the history of humanity for more information. Unfortunately, peace, love and harmony don’t seem to carry the same weight when it comes to exchange rates.
Forecasting exchange rates is ultimately about making an informed judgement based on probability and using that to your advantage.
If you would like to find out our latest EUR/GBP rates or be kept abreast of market trends and upcoming news and events, request a quote below.
EUR to GBP forecast poll (1 week, 1 month, 1 quarter)
Some of the leading FX websites regularly carry out polls of exchange rate forecasts among various experts and analysts.
This is a good way to get an overview of the consensus view over different intervals.
One of the better forecast polls is produced by FX Street.
You can view their latest EUR to GBP poll here.
To be clear, I have no affiliation with them.
I just like the straightforward presentation of information, and you get to see the views of over 20 analysts in 1 week, 1 month and 1 quarter timeframes.
You don’t have to go through each and every view (how boring).
At the top of the page is a nice little summary of the overall sentiment showing the percentage with a bullish, bearish or sideways bias.
In the case of EUR/GBP, bullish would indicate the Euro is expected to rise; bearish would indicate an expected fall and sideways would indicate those sitting firmly on the fence.
The point of all this is not to reach a place of certainty. You will only ever have certainty in hindsight (we’re all guilty of that sometimes).
However, a poll can be a good way of capturing forward-looking data and give you a feel for the strength of conviction among analysts.
EUR to GBP forecast weekly – my approach
There’s only a small number of things that can affect a weekly EUR-to-GBP forecast.
A weekly timeframe is so small that you can really narrow down your focus.
I do some simple checks using both fundamental and technical analysis.
Fundamental analysis involves evaluating news, events and economic data that influence currency markets.
To get a quick snapshot of what is scheduled for release in the coming week, I suggest you look at the DailyFX economic calendar.
There are plenty of free economic calendars online. Still, I like this one because the layout is easy to understand, and it assigns each piece of economic data with a low, medium, or high level of importance.
I concentrate on high impact events as they are historically proven to cause far greater market volatility.
A calendar is a helpful way of managing risk.
If you are cautious by nature and you can’t afford for the rate to move against you, then it makes sense to convert your Euro to Sterling prior to the release of a high importance event.
If you are more comfortable taking on the risk, you may prefer to rely on technical analysis.
Technical analysis involves the use of market data and historical charts to identify trends and predict price movements.
There are so many websites that offer free EUR/GBP charts, but a lot don’t add any technical analysis.
Investing.com has a good free source of technical analysis of the Euro to Pound rate.
Just select the timeframe you want (in orange), and it will give you a summary of whether it’s a Buy (Euro to strengthen) or a Sell (Euro to weaken) based on market momentum and technical indicators.
I appreciate doing this kind of analysis won’t be everyone’s cup of tea.
If you would rather speak to someone more familiar with foreign exchange markets, it can be beneficial to get in touch with a money transfer specialist.
While most money transfer companies these days are really online apps, others, such as ourselves, are happy to discuss and understand your personal requirements and help guide you on exchange rate trends, forecasts and market news.
EUR/GBP forecast long-term – some practical advice
Longer time periods call for a different approach.
Time brings the opportunity for larger moves – good or bad.
While a 1% swing would be considered a big move in the EUR/GBP rate in a week, over 6 months, it’s not unusual to see swings of 5% or more.
It’s because broader macroeconomic themes have time to play out over longer periods of time. There is also a greater likelihood that an unexpected, significant event could unfold.
While time gives you flexibility, it can also lead to procrastination.
This is a common thing I hear:
- It’s not the right time. The Euro is going up; I’m going to wait for it to go up some more.
- It’s not the right time. The Euro is going down; I’ll going to wait for it to come back up.
Because the Euro is always going either up or down, you may fall into the trap of thinking it is never the perfect time to exchange your money.
It is human nature to always want a better rate, no matter what the actual rate is.
I’m not suggesting you accept whatever rate is put in front of you.
But I am suggesting you think through what rate you would be satisfied with or would allow you to fulfil your life plans (which is the real objective here).
As a former stockbroker, I am reminded of what my old boss used to love saying. It’s a quote from a comic strip character, Pogo “We have met the enemy, and he is us.”
Human emotions can easily get in the way of logic, particularly when it comes to financial decisions.
My practical advice for longer-term EUR/GBP forecasting is simply to use historical reference points as a guide to your decision.
Start by looking at the EUR/GBP chart using different timeframes. I tend to look at 1 month, 6 months, 1 year, and 5 years.
I’m seeking to identify areas of support (troughs) and resistance (peaks).
As a Euro seller, you want to sell near a peak to maximise your position. It’s often a case of being vigilant and not too greedy.
You might find it useful to speak to a professional who is watching rates continuously throughout the day.
You may have neither the time nor the inclination to watch the exchange rates all day yourself and so may miss the best opportunities.
It’s something we offer are part of our money transfer service.
Need guidance on exchange rates?
These days most money transfer companies just give you access to a platform or app and leave you to do everything yourself.
The way we operate is fundamentally different.
We work with our clients to achieve a better rate and take advantage of favourable moves.
At Key Currency, we give you a one-to-one service. We will understand the amount of money you wish to exchange and the timescale you have.
We can then discuss and monitor the rate for you, keeping you up-to-date and letting you know if the exchange rate moves in your favour.
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