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If you’ve ever sent money between the UK and Europe, you’ve likely noticed fluctuations between the GBP and Euro. While the Pound was strong when the Euro launched in 1999, it’s been having a bit of a tough time recently.
So, why do Pound to Euro fluctuations happen? What actually causes them? Well, our recent guide to exchange rate fluctuations can provide many of those answers.
But for now, let’s look closely at the Pound to Euro conversion rate—from a brief history of the Euro to reasons behind the recent volatility.
A brief history
When the Euro launched in 1999, investors didn’t know whether it would be a short-lived experiment or not. As a result, the Euro performed poorly in relation to the Pound for a while. In fact, the highest ever Pound to Euro rate was €1.752 on 3rd May 2000.
Over the years, though, the Euro has proved its credibility and gained much strength as a result. In its full 20-year history, the Pound to Euro rate has averaged €1.33. The lowest Pound to Euro rate ever was €1.02 on 30 December 2008 right after the global crash. And today, at the time of writing in June 2021, the Pound to Euro rate is €1.16.
These fluctuations aren’t accidental. From the global financial crash to Brexit, there are many factors that have contributed to GBP/EUR volatility. But more on that below…
The Brexit effect
Political certainty (or lack thereof) can have a momentous effect on exchange rates. And since the UK voted to leave the European Union in 2016, the pound has been struggling. Cast your mind back to pre-pandemic and you might remember that both the UK and Europe didn’t know if the UK would be leaving with or without a deal. This went on for four whole years. Four!
As a result, the uncertainty wreaked havoc on UK exchange rates, and the Pound to Euro conversion rate suffered a lot of volatility. On top of Brexit, in the last half-decade, we’ve also seen two UK general elections and an international Covid-19 pandemic. Phew! And since traders increasingly favour political over economic data, the Pound—despite a slight recovery in late 2019—hasn’t had the strength it once had.
Similar volatility happened in 2008 after the financial crash. While European officials believed the majority of the impact would be felt in the US, Europe suffered big time. They recovered briefly between 2010-11 but didn’t properly recover until 2015, after a four-year-long second dip.
So to quickly sum up… Political uncertainty = exchange rate volatility. Because of the tumultuous last decade, the average GBP/EUR rate is now €1.20.
Will the Pound ever properly recover?
Well, it all depends on how the UK performs in the next few years, post Brexit. If the UK experiences economic growth and strong international trade operations post Brexit, then the Pound will likely recover over time.
However, if uncertainty continues or the UK appears worse off as a result of separating from the EU, the Pound probably still has some tough years ahead. It all depends on economic growth and international trade. But of course, economic uncertainty caused by the ongoing Covid-19 pandemic isn’t helping things.
How does TransferGo set the Pound to Euro exchange rate?
Here at TransferGo, we’re 100% transparent about our low fees and (very) competitive Pound to Euro exchange rates. And so, if you choose to transfer with us (wise move), you don’t need to worry about the Pound to Euro rate fluctuating. This is because our exchange rates are fixed—put simply, the amount you see when you’re about to send your money is exactly what will arrive.
We also include all of our fees in the final amount so you won’t have to worry about hidden costs either. Happy days!
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