Pound Sterling Forecast

“With interest rates kept on hold both in the UK and Europe
and with no indications of further Quantitative Easing, the short-term future
of GBP/EUR is becoming increasingly clouded

As we look ahead, towards what is sure to be another turbulent year for the UK and Eurozone economies, many of the negative economic indicators faced in 2012 remain prevalent. The overriding factors, in my opinion, continue to be the Eurozone debt crisis and the very real threat of a ‘triple dip’ recession in the UK and both will have serious implications on GBP/EUR exchange rates, as we move through 2013.

The UK and European economies remain stagnant, with the prospect of sustained growth remaining elusive. Progress is patchy and only the most optimistic investor believes that 2013 will bring an end to the global financial crisis. UK and Eurozone growth forecasts have been consistently cut and despite bullish statements on many different occasions, Mario Draghi’s press conference on Thursday being a prime example, the UK and Eurozone economies have been subject to a continuing cycle of relatively positive news being followed by further discouraging forecasts.

The EUR has made positive strides against Sterling and now could be the perfect time to execute your currency transfer, as a 200,000 EUR/GBP exchange could gain you an additional £1500 compared to this time yesterday and as we know the EUR has a habit of relinquishing such positions.

Greek unemployment has reached a record high with 26.8% of the population out of work, now marginally worse than Spain at 26.6%. The country remains deep in recession, with the number of people unemployed in Greece tripling over the past three years.

Greece to me signifies the start of the Eurozone debt crisis and for this reason it is difficult to share Mario Draghi’s confidence about the prospects for the region.

The USD has gained some momentum against GBP this week and at its high had been putting pressure on the 1.60 level. The US economy has struggled amid political and economic uncertainty, with the US elections and the now infamous ‘fiscal cliff’ story dominating the headlines for months.

I do believe it was this uncertainty that was keeping GBP/USD exchange rates at their current levels and despite the growing political tensions in the US, historically it is rare that rates stay above 1.60 for this long. I think we will see rates head back down towards 1.55 during Q1, as the global uncertainty, which is sure to continue into 2014, will force investors to seek refuge in the ‘safe haven’ that is the USD.

The Canadian economy received a boost with news that unemployment figures had hit a new four year low in December (40,000 jobs were created). The CAD has strengtened against GBP over the past month and this news, coupled with a growing fear of a ‘triple dip’ recession in the UK, could push rates towards the 1.56 level, as we move through Q1.

With the recent announcement that Bank of Canada Governor Mark Carney will be replacing  Sir Mervyn King, as Bank of England (BoE) Governor in the summer, it  will be interesting to see how the relative economies fare following the appointment and the market reactions to it. Personally, I think we will see GBP/CAD rates ranging between 1.55-1.60 for the first two quarters of 2013, but I do believe the CAD has the opportunity to move past this level, as its growth forecasts are stronger than those of the UK for 2013.

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of our award winning exchange rates or need to be kept up to date with all the latest market movements then please call us today on 0044 1494 787 478, or contact me directly at mtv@currencies.co.uk.