GBP/EUR: Trading opportunities in the Pound-Euro pair and where to exchange euros to pounds more cheaply

The GBP/EUR Cross in the Current Forex Market

The Pound-Euro currency pair represents one of the most dynamic minor crosses in the Forex market. When trading at 1 pound sterling for 1.17 euros, it reflects the price relationship between two of the most important currencies in global trade. This exchange rate is especially relevant if you’re looking for where to exchange euros to pounds more cheaply, as understanding its movements allows you to identify the best times to trade.

In early February 2024, the GBP/EUR pair closed at €1.120, showing significant declines over medium-term periods: -1.45% in the last month and -2.03% in the past three months. The trading range over the last 52 weeks ranged between 1.0786 and 1.2190 €, offering interesting opportunities for those who understand the dynamics of this cross.

Factors Moving the Pound-Euro Exchange Rate

The volatility of EUR/GBP and GBP/EUR responds to multiple macroeconomic variables. Key indicators include Gross Domestic Product, inflation rates, unemployment levels, and activity in manufacturing and services sectors. However, market sentiment plays a decisive role in the fluctuations of the cross.

Since the Brexit referendum in 2016, the British pound has experienced persistent uncertainty. Before that vote, the cross traded above 1.30€; since then, it has mostly remained between 1.06 and 1.21 euros. The most severe drop occurred immediately after the referendum result, representing the worst day in 30 years for the British currency. Significant devaluations were recorded in 2017 and 2019, bringing the pound to historic lows of 1.02€ (December 2008) against the euro.

Concerns over trade frictions between the UK and its EU partners continued to pressure the quote. Greater political and commercial uncertainty led more financial institutions to sell assets in pounds, reducing its relative value against other major currencies.

Recently, in 2022, the exchange rate started the year near the upper end of the five-year range (1.21€), but since summer has moved toward the range lows. OECD estimates project zero growth for the UK in 2023, while expecting modest growth for the eurozone. This difference in economic outlooks directly influences where to exchange euros to pounds more cheaply and the trading strategies you adopt.

Monetary Policies: Bank of England vs European Central Bank

The Bank of England and the European Central Bank (BCE) have followed similar trajectories in their recent monetary policies, both progressively raising interest rates. However, any divergence in their future decisions could generate significant movements in EUR/GBP.

The Bank of England has recently adopted a more cautious approach, which has limited the pound’s upside potential. On the other hand, more favorable employment figures in the UK could reverse this pressure. For those interested in where to exchange euros to pounds more cheaply, these factors are crucial: when UK interest rates increase more than those in the eurozone, the pound tends to strengthen, improving the exchange rate for conversions.

Cross History: Long-term Perspective

Analyzing data from January 1999 to 2023, the pound has historically traded at much higher levels against the euro. The all-time high reached 1.752€ in May 2000. However, it is important to remember that very old data lose relevance today. What is truly useful is observing behavior over time windows that remain applicable to the current context.

Over the past ten years, the pound has been consistently weaker relative to the euro. This structural change reflects transformations in the British and eurozone economies, as well as the impact of Brexit on international investor confidence.

Trading Strategies with the GBP/EUR Cross

Advantages of trading this currency pair

The GBP/EUR is a highly liquid pair, facilitating quick entries and exits. Its moderate volatility compared to other crosses makes it attractive for traders seeking profitability without extreme exposure. Fluctuations in this pair generate interesting opportunities for short- and long-term speculators.

Trading via Contracts for Difference (CFD)

If you want to expose yourself to the movement of the GBP/EUR pair without physically owning pounds or euros, CFDs offer a viable alternative. With CFDs, you speculate on the future direction of the price, allowing you to benefit from both rises and falls in the exchange rate. Your profit is calculated by the difference between your entry and exit prices.

For a bullish position (go long), your closing price must be higher than the opening price. For bearish positions (go short), the opposite occurs. This mechanism provides strategic flexibility, especially useful if you are trying to identify where to exchange euros to pounds more cheaply, anticipating unfavorable movements that will then reverse.

Consider volatility in your decisions

Although the GBP/EUR has shown relatively contained fluctuations compared to other pairs, high volatility also creates opportunities. Both currencies are central to global trade: the euro in EU countries and the pound in the UK. Extreme variations in their quotes would indicate serious economic problems, disrupting global markets.

Synchronization: trade during London hours

The most volatile trading session for EUR/GBP occurs during London market hours (08:00-17:00 local time), accounting for 35% of the daily Forex volume globally. Trading during these windows increases liquidity and reduces spreads, improving conditions for entries and exits.

Monitoring economic news

Any macroeconomic report from the EU or UK can impact the exchange rate. Inflation, employment, GDP data, and monetary policy decisions require constant monitoring. The economic calendar is your ally in anticipating movements.

Technical analysis and trends

Use historical valuation analysis and technical trend indicators to identify patterns. This is especially important if you are looking for where to exchange euros to pounds more cheaply on a consistent basis, requiring visibility into medium-term trends.

Current Outlook and Projections

In January 2023, the pound had fallen to its lowest level against the euro since September (1.124€). The UK economy is expected to face recession over the next five quarters, with a sluggish recovery projected for 2024. Inflation could reach 11% by then, complicating the macroeconomic outlook.

However, the recent stabilization of the pound against the euro suggests that the market has priced in many negative news. Inflation expectations data will be crucial before the next Bank of England rate announcement, determining whether the risk leans upward or downward for GBP/EUR.

Conclusion: Navigating Pound-Euro Trading

The GBP/EUR exchange rate ranks among the most observed and traded crosses worldwide. If you plan to trade its fluctuations or look for where to exchange euros to pounds more cheaply, the key is to stay informed about economic trends, relevant news, and monetary policy decisions from both jurisdictions.

Market sentiment will continue to be fundamental. Post-Brexit uncertainty still influences perceptions of the British pound, although recent employment data suggest the risk balance could tilt back toward the pound. Of course, unpredictable events can always alter analyses and projections.

Important risk note: Forex trading does not guarantee returns or profits. Only invest capital you can afford to lose entirely, as currency trading is inherently risky activity. Consult qualified financial advisors before making significant investment decisions.