GBP/EUR Price: Key to Understanding GBP/EUR Fluctuations in 2024

▶ What is happening with the GBP/EUR price now?

In mid-January 2023, the GBP/EUR exchange rate was trading at €1.124, marking its lowest level against the euro since September. But the story of this pair doesn’t end there. For years, the GBP/EUR pair has experienced significant fluctuations that warrant in-depth analysis.

The GBP/EUR price at the close of 02/02 was €1.120, reflecting a -1.45% decrease in the last month and -2.03% over three months. To understand whether these figures represent an opportunity or a warning, we need to look back and understand what factors have shaped this behavior.

▶ The Shadow of Brexit: How It Transformed the GBP/EUR Market

Before 2016, the GBP/EUR pair traded comfortably above 1.30€. The Brexit referendum changed everything. Immediately after the result, the British pound suffered its most dramatic fall in thirty years, a psychological blow that marked the beginning of a new era for this currency pair.

Since then, the pound has mainly fluctuated between 1.06 and 1.21 euros, a much narrower and depressed range compared to its historical levels. The all-time high of GBP/EUR was recorded in May 2000 at 1.752€, while the all-time low reached 1.02€ in December 2008 during the global financial crisis.

The steepest declines occurred in 2017 and 2019, when trade tensions between the UK and the EU intensified. Institutional investors sold pounds en masse, pushing its value to new lows against the euro and the US dollar. Persistent political uncertainty and prospects of reduced trade relations fueled this selling pressure.

▶ Factors Moving the GBP/EUR Price: Beyond Brexit

The GBP/EUR quote does not depend solely on Brexit aftermath. Macroeconomic indicators play a central role: GDP, inflation, interest rates, unemployment, and industrial activity determine the flow of capital into or out of each currency.

The Bank of England and the European Central Bank (ECB) have recently followed similar paths, raising interest rates to combat inflation. However, any future divergence in their monetary policies could dramatically alter the GBP/EUR price. If the Bank of England accelerates its hikes and the ECB moves slowly, the pound could strengthen against the euro.

Recent economic forecasts from the OECD paint a more complex picture. The UK faces projected zero growth for 2023 and recession expectations over the next five quarters. Meanwhile, the eurozone maintains slightly more optimistic prospects. This economic divergence tends to weaken the British pound, pushing the GBP/EUR price downward.

The conflict between Russia and Ukraine has also influenced the pair. Resulting inflation in both regions has complicated monetary policy decisions, adding volatility to this currency cross.

▶ Volatility and Liquidity: Opportunities in the GBP/EUR

The GBP/EUR pair is highly liquid, meaning relatively narrow spreads and quick execution. Conversely, its inverse EUR/GBP is less liquid. This liquidity difference creates deviations that widen during periods of increased market volatility.

Although GBP/EUR has shown less volatility compared to other minor currency pairs, the movements that do occur can be decisive for traders. The 52-week range (1.0786 - 1.2190€) shows the extent of fluctuations possible over short periods.

Interestingly, this relative low volatility also offers opportunities. Traders can position themselves in clear trends without the erratic jumps seen in other pairs, enabling more calculated and predictable strategies.

▶ Market Sentiment: The Psychological Factor Behind the GBP/EUR Price

The behavior of the GBP/EUR price is not just a matter of macroeconomic numbers. Market sentiment plays a decisive role. Since 2016, uncertainty surrounding trade negotiations between the UK and the EU has kept many investors nervous about assets in pounds.

At the end of 2022 and early 2023, the pound was briefly the best-performing currency, but this momentum faded just before the Christmas holidays, dropping sharply in the GBP/EUR price. This exemplifies how sentiment can change rapidly in forex.

▶ Strategies for Trading the GBP/EUR Cross

Timing is Everything

Although forex markets are open 24/5, the GBP/EUR pair shows its highest volatility during the European session, specifically between 08:00 and 17:00 London time (local time). This period accounts for 35% of the total daily forex trading volume. Trading outside these hours, especially when it is night in London, significantly reduces opportunities.

Monitoring Economic News

Every release of economic data from the UK or the eurozone can move the GBP/EUR price. Reports on employment, inflation, interest rate decisions by the Bank of England or the ECB should be on the agenda of any serious trader. Recently published employment figures in the UK, for example, could foreshadow changes in the pair’s direction.

Technical Analysis and Trends

To profitably trade the EUR/GBP cross, it is vital to identify ongoing tendencies through technical analysis. Trend indicators help visualize whether the GBP/EUR price is moving upward, downward, or sideways, allowing alignment with the market direction rather than fighting against it.

▶ Trading CFDs on the GBP/EUR Cross

Contracts for Difference (CFD) allow speculation on the GBP/EUR price without needing to hold euros or pounds physically. The mechanism is straightforward: if you believe the pound will strengthen against the euro, open a long position; if you expect it to weaken, open a short.

Profit or loss is calculated as the difference between the entry and exit prices. A profitable trade requires your final position to be higher than the initial one if going long, or lower if going short.

Basic Concepts of the GBP/EUR Pair

In this cross, the British pound is the base currency and the euro is the quote currency. This means the price reflects how many euros are needed to buy one pound at a given moment. If the GBP/EUR price is €1.120, you need exactly 1.120 euros to purchase one pound.

▶ Future Outlook: Where Is the GBP/EUR Price Heading?

The British pound has recently stabilized slightly against the euro, benefiting from a lighter European economic calendar. However, the Bank of England maintains a more cautious stance in its communications, which has limited the pound’s upward potential.

Analysts expect to closely monitor inflation expectations before the Bank of England’s rate announcements. The more solid employment figures recently published could suggest that risks are tilted to the upside for the GBP/EUR pair.

In the medium term, the UK economy is expected to remain weak, with an anemic recovery projected for 2024. Inflation could reach 11% by then, complicating any rebound in the GBP/EUR price. These factors will keep downward pressure on the British pound.

▶ Conclusion: Trading the GBP/EUR with Knowledge

The GBP/EUR price remains one of the most observed and traded crosses in the forex market. Its contained volatility, combined with high liquidity, makes it attractive for traders seeking precision without extreme surprises.

To capitalize on GBP/EUR variations, it is essential to stay updated on economic trends, monetary policy decisions, and changes in market sentiment. Brexit remains a latent factor, although its initial impact is already reflected in current prices.

Remember: there are no guarantees of profits in forex. Only invest what you can afford to lose. Currency trading is inherently risky, but with education, discipline, and a deep understanding of factors like those affecting the GBP/EUR price, your chances significantly improve in your favor.