How Currency Exchange Rates Affect EPL Transfers

How Currency Exchange Rates Affect EPL Transfers

The exchange rates GBP/EUR

The GBP/EUR exchange rates represent the cross between the two biggest economies in Europe: the Eurozone and the United Kingdom. These areas are particularly sensitive to changes in monetary policy between the Bank of England and the European Central Bank.

The confidence in the economy of the euro-area has grown for the fourth consecutive month in March and has reached its highest level since July 2011, according to data from a monthly survey by the European Commission. This is another sign that the weak euro and lower fuel prices contribute to accelerating economic growth in the region.

Transfer GBP Euro

How does the strong pound influence the TRANSFERS?

The strength of the pound means that it’s a bargain for British clubs to spend their money on foreign footballers this transfer window. The European talents must be the type of player managers should seek, and not only because of the quality Europe tends to produce, and I’ll explain why.

Here is a table with the exchange rates between GBP/EUR for the last five years around two months after the transfer window opens.

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As per recent reports, Gareth Bale’s buyout clause is set to be €1 billion (which is just speculation from my point of view). But let’s cover his transfer in at the end of August 2013.

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From this table, showing the rates from 2010 till now, the exchange rate for August 30th, 2013 is 1,17. The English press reported £85,30m (€ 100,00m), while the Spanish press reported £77,00m (€91,00m). I tend to believe the Spanish, but will use the data provided by the English (e.g., £85,30m).

But this was two years ago; it’s shocking how the situation looks now. At the current exchange rates (as of April 1st, 2015 GBP/EUR is 1,376), the amount paid by Real Madrid now should be £85,30m /1,376, or £62,00m. Or, in other words, if Spurs want to buy him, they could simply state that they have loaned him to Real Madrid for about £23-30m for two years.

Spurs may not do it, but Manchester United is willing to give that amount of money and even more. For example: the sum of €120,00m, which circulates in the Beijing polluted internet network, equals to only £86,40m. Di Maria was worth *only* £66,00m last year.

How does the strong pound influence the PREMIER LEAGUE?

According to Deloitte:

Premier League clubs set new record of £835m spent in transfer window

Player transfer spending by Premier League clubs in the summer 2014 transfer window reached a new record, according to analysis by the business advisory firm Deloitte. Gross spending totalled £835m, over 30% up on the previous record of £630m set last summer.

(Quote: Deloitte, official website)

Transform this to the current exchange rate and this equals 1.148 billion. The power in the hands of the Premier League is endless now. Add this to the multi-billion broadcast deal in Britain. I bet the wages of £100,000 per week demanded by the players will surely not be click-news posts but rather the cruel reality.

How does the strong pound influence TRANSFERS OF ENGLISH FOOTBALLERS in Europe?

In contrast to the sea of talent that play in leagues within European stadiums, English players appear to be 20-23% more expensive. An example is the Liverpool’s winger Raheem Sterling, who is supposed to have a market value of around £40m. The price tag any European giant must pay to use his services outside the island will be (£40,00m x 1,376), or around €55m. My prediction will be that only English players will be switched only amongst the inland, not Europe, because the rise of the cost, and this is an exception to Real Madrid, Barcelona, Bayern Munich and PSG.

THE BACKGROUND Picture of the GBP/EUR rate

The fact that the euro may be renewing its downtrend against the British Pound, the political situation, and the upcoming elections in May no doubt will have a great effect on the pound. Usually political instability and uncertainty damages currencies, and a fresh example of that is how during the Scottish referendum the pound lost almost 4%.

Exchange Rate Forecasts

The below table tells a story that the overvalued pound ultimately reflects the improving fundamental picture in the United Kingdom. We can see that the pound may drop from around 1,378 (April, 1st 2015) to around 1,278 in three months, which is in the height of the summer and the transfer window. If we believe the forecast, the pound is expected to lose around 7%.

Table of the future exchange rates as per April 1st, 2015

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However, the forecast values of the GBP/EUR rates are almost the same as per the summer of 2014, namely 1,278, and, at the same time, 11% higher than the rate was in the summer of 2013. If we assume that the forecast is correct with a 95% probability of happening, the situation with Liverpool’s Raheem Sterling will end up with his price at (£40,00m x 1,278) around €51,12m.

What to expect in the FUTURE?

The emphasis has fallen on the fact that the English Premier League will be the most influential tournament, and the most attractive in terms of money, but not for talents in full. Transfer failures are expected to happen much more often because of the expected race to buy, but the English players in the English Premier League will surely also diminish. The English teams certainly benefit from this, but not English football as a whole, which is undergoing constant failure in the Euro and World Cup tournaments. Surely we can expect another unpredictable summer transfer window!

  • Special thanks to @Nazdagama, he knows why.

(1.)   Premier League clubs set new record £835m spend in transfer window

http://www2.deloitte.com/ie/en/pages/consumer-business/articles/premier-league-clubs-set-new-record-835m-spend.html#

(2.) XE Currency Converter

http://www.xe.com/currencyconverter/convert/?Amount=1&From=GBP&To=EUR

(3.)   Lloyds Lower Pound to Euro Exchange Rate Forecasts for 2015

https://www.poundsterlinglive.com/gbp-live-today/1756-lloyds-lowers-forecasts-for-gbp-vs-eur-and-usd-445435

(4.) 2015 Major Bank Forecasts – GBR/EUR

https://www.poundsterlinglive.com/images/graphs/pound-euro-exchange-rate-forecast-2015.jpg