Very recently, the GBP has been raising against the Euro. I understand this has to do with the EU injecting €1.1 trillion until Sep 2016 and the elections in Greece.

My question is: when is this going to stop? I am uncertain as I don't know if the result of the EUR being much lower than GBP is also the result of speculation and, for that reason, it might not go beyond that.

Just today, I was reading about a specialist saying now was the best time, but that specialist was also a seller pushing for a long-term contract to buy EUR (currency.co.uk) so I am uncertain about his opinion. He mentioned 1.32 was great, but later 1.3465 was achieved!

What to expect then?

  • $\begingroup$ There is no definitive answer for this question. Small things could change this pairing drastically. What if everyone dumping the Euro decided to buy into the GBP and caused a demand spike such that the GDB increased even while the Euro dropped? We would see a bigger gap between the currencies here than if, for instance, people leaving the Euro bought more heavily into the dollar of kroner etc. I would be skeptical of any person who claimed confidence in any pairing rate. $\endgroup$
    – 123
    Jan 23 '15 at 13:48
  • $\begingroup$ Thanks for your comment. If everyone started dumping the Euro, there would be a cause for it. What I mean by my question: What are the factors and why should we look at them? Not looking for a black and white answer, but I'm pretty sure guidance in this subject is possible. $\endgroup$ Jan 23 '15 at 16:36
  • 2
    $\begingroup$ I think the people that are willing to pay for expert answers to this question have done so, and you can see the average of their answers in the current exchange rate. I don't think you can expect to easily find any better answer. $\endgroup$
    – bdsl
    Jan 23 '15 at 22:37
  • $\begingroup$ The expert advice I got was biased as there was a motive for selling currency or perhaps loose the sale. I'm not sure I understand your point. I came to this site to get guidance on how to evaluate the situation. The user answering the question may not have a black/white answer, but there may points worth mentioning that I can consider when evaluating. What's so unreasonable about this? $\endgroup$ Jan 23 '15 at 22:58

What bdsl's comment means is this:

Suppose there was a way for "experts" (here or anywhere else) to predict when the pound would start depreciating against the euro, and that this method predicted that it would begin to do so tomorrow. What would the experts do with this information? They would start selling pounds today in order to get out of the market at the top. But this rush of selling activity would cause the value of the pound to fall (via the usual principle of supply and demand) today—a day earlier than forecast! This simple story illustrates the broader idea that a method for forecasting financial markets is self-defeating. As soon as anyone has information about the future direction of an asset price (be it currency exchange rates, stock prices, etc.), their buying or selling activity will, by itself, move the price in that direction. Thus, any information available to the public will be "built-in" to the market price you see quoted. Moreover, given the amounts of money at stake, large market actors have a huge incentive to act on new information very quickly so that information gets built into the price almost immediately.

This general principle—that it is impossible to use publicly available information to beat the market—is known as the efficient market hypothesis. So-called specialists who claim they can predict what the market will do usually fail to do better than a random guess. Such people usually earn their money from commissions or advisory fees rather than from profits on successful trades.


Not the answer you're looking for? Browse other questions tagged or ask your own question.