Why British Pound is Stronger Than The Euro
This year, apart from the pandemic, it was the foreign exchange news that shocked people. On the foreign exchange market, there are ups and downs every day. Every single currency pair is affected by fluctuations in exchange rates.
Thus, the GBP/EUR currency pair is also one of the most discussed topics in this market-open financial sector. Traders ask themselves why the British pound is stronger than the euro? Forex experts are always there to answer this question.
But do not let it confuse you too much. Today we will explain how to spot currency pairs and currency conversions. Some world currencies like the British pound and the euro can be beneficial if traded intelligently. Let us find out the reasons for the strength of the British Pound compared to the Euro (EUR).
Reasons Why Pound Is Stronger Than The Euro
There are numerous reasons why the pound is stronger than the euro. But before you set out to exchange euros for pounds, let us tell you that it does not matter what the exchange rate value of a currency is.
If exchange rate value matters, why is the Japanese yen the most traded currency after the USD? So here are some reasons why the pound has a higher value than the euro and the USD.
Reason 1: Currency Volume
The volume of the currency is an important reason for this. Many people, and sometimes currency traders, do not even know what role the volume of currency in circulation plays. The more a currency is in circulation, the more the value of the exchange rate is divided. So the euro has more money in circulation than the British pound.
For this reason, one pound is equal to 1.09 euros. In reality, this means that the British pound has less money in circulation than the euro. The same thing happens when we compare the GBP with the USD. This reason is in stark contrast to the statement that the pound is stronger than the euro.
Reason 2: Economical Changes Like Interest Rates
A complete combination of different financial measures taken by a country leads to changes in its base currency. The GBP is the national currency of the United Kingdom, so economic measures there actually affect the national currency.
High-interest rates, economic stability, currency rates, the futures market, the dollar exchange rate, etc. can cause fluctuations in foreign currencies. In addition, currency units, the health of the Treasury and many other factors affect the currency.
Reason 4: Metal Linked
In the past, all currencies were tied to metals. You will find that all these currencies were tied to the metals, and then such numerical values of the currencies occurred.
It is said that the UK had 7.3 grammes of gold for 1 pound sterling, while the US had 1.5 grammes of gold for 1 dollar. That is why the numerical values have changed, but that does not mean that the pound is stronger than the euro. Because it gets weaker every year.
Pound To Euro Forecast For Next Few Years
We all know how the British pound is doing against the euro. But we need to consider where the value of the pound will be in the next few years. Some financial market analysts are analysing things for the coming decades. But we will only give an annual forecast for the next few years. Currently, the exchange rate is 0.85 euros per dollar.
Similarly, it is at 0.77 pounds per dollar. So you can see that these two currencies are stronger than the United States dollar. If we compare these currencies, we get 1.09 euros per pound. So let us take a look at the forecasts for this currency pair to see if the pound is stronger than the euro in the future?
GBP/EUR Forecast for 2021
Sterling is expected to rise by up to 3% by the end of 2021. In the first quarter of 2021, the British pound will suddenly experience a huge rise and after a few months, it will experience a downturn.
Exchange rate forecasts say that sterling will experience a negative depreciation against the euro in 2021. If we currently convert the pound into euros, we get 1.09 EUR. By the end of 2021, with a growth of more than 3 per cent, this value will rise to 1.137 EUR.
GBP/EUR Forecast for 2022
In 2022, the British pound will also experience a huge boost in the first quarter. It will gain up to 4% in the first quarter, but it will experience a downturn in the middle of the year.
It will even fall into negative territory. Do not worry about whether or not the pound will be stronger than the euro in 2022. Because it will somehow manage it and by the end of 2022 the pound will be up by up to 1.9%.
GBP/EUR Forecast for 2023
There is not too much growth for the GBP against the EUR in 2023, yet the British will confidently say that the pound is stronger than the euro in 2023. Currency prices for the GBP will rise by about 1.1% this year. There will not be many fluctuations at the beginning of the year.
GBP/EUR Forecast for 2024
This year the value of the GBP in the international market will change dramatically. International exchange rates for the GBP in 2024 will be negative. Yes, experts with a currency calculator in hand have predicted that the GBP will not grow this year. Obviously, it will be a bad time for the GBP. But still, there will be statements claiming that the pound is stronger than the euro.
Is Pound The Strongest Currency In The World?
There are 1.10 euros and 1.29 dollars per pound, but what does that mean? Does it mean that the pound is the strongest currency in the world? There are so many myths and opinions about this question. But the answer is very clear: the pound is not the strongest currency in the world.
Yes, it is the strongest currency, but if we value currencies by international market value, then the pound is expensive among all other currencies.
But if we value it by the growth rate in the foreign exchange market, then it is not so strong. Measured by the growth of foreign exchange rates, it is not stronger than the US dollar. If you evaluate currencies only by their exchange rate value, you can say that the pound is stronger than the euro.
Conclusion - Pound stronger than the Euro
Forex trading is not about gambling with large amounts of money, but about analysis. Thus, the numerical value assigned to a foreign currency does not mean that it is stronger than all other currencies.
Currencies are valued according to their performance in the foreign exchange market.
Some currencies such as the Swiss franc, the New Zealand dollar (NZD), the Chinese yuan, the Indian rupee (INR), the Australian dollar (AUD), the Canadian dollar (CAD), the dirham and the Singapore dollar underperform the USD but still outperform other currencies.
Central banks also play an important role in the valuation of currencies. A currency converter is not the only tool for valuing currencies. A currency becomes stronger when it is the main currency for central banks.
We hope this post has helped you understand why the pound is stronger than the euro.
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