What is happening to EUR/USD? What does this mean for your payments to Europe?
Last year EUR/USD was at all-time lows. Now we have started to see the reversals we have been forecasting.
Don’t worry; you have options. We are here to help you manage the cost of your future payments.
The main driver of this is inflation and interest rates in the US and Europe.
Last year the Fed aggressively increased interest rates to tackle inflation. Now inflation is starting to come down naturally, as confirmed on Thursday by US inflation data. There is now less need for aggressive hikes.
Meanwhile, the European Central Bank are not overly concerned about a recession. Gas prices have now started to come down, and we are now at similar prices since before Russia’s invasion of Ukraine.
There is growing confidence that the widely-anticipated slowdown in the Eurozone may not be as severe as first feared. The re-opening of China’s borders for the first time in three years has helped fuel this optimism. China is a key export market for many companies in Europe.
The ECB’s primary focus is to lower inflation. To do this, we will see them aggressively raising interest rates which will follow a similar trajectory to the Fed and the US Dollar.
Short term
We are more likely to see 1.10 than 1.04.
If you have an upcoming payment - it may be worthwhile to consider doing it sooner rather than later.
What to watch out for?
In the longer term, if we continue to see the trend we have seen over the last few weeks, we may see EUR/USD hit 1.12/1.14. More Euro strength could be a real possibility for anyone with longer lead times.
The Ukraine/Russia war is still being fought in the background of interest rates, inflation and recessions. Should we see any end to the war, this would ultimately be positive for the Euro and still one to watch.
What are my options?
Option 1 - Buy your Euros in advance
There is no minimum, and Spartan FX can hold your funds on account free of charge.
Option 2 - Fix the rate with a 10% deposit
Fix the rate for a payment that needs to be made in the future.
Option 3 - Split your transfers
For example, buy €200,000 and split your payments in half.
- Half at 1.10, and if the rate moves against you, half at 1.20. The average is 1.15.
- Half at 1.10, and if the rate moves against you, half at parity. The average is 1.05.
Splitting your payments means that if the rate moves against you, the average rate at which you will have bought your Euros will be better.
Find out what these changes mean for you. Contact Spartan FX today.
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