Pound Sterling Forecast

Recently the pound has been posting some excellent gains against a host of major currencies reaching close to an 18 month high against the Euro, a four month high against the Australian dollar and seen a near 7 cent gain against the US dollar in the last couple of months. But what now for the pound? Is this run likely to continue? These are questions a number of my clients are asking me and in many ways the I do not think anyone can hold their hand up with confidence and predict what direction the market will take next, however lets explore the potential outcomes and what data sets are coming up that may affect the pound against a number of commonly traded currencies.

GBP/EUR

Many Euro buyers have been waiting for the market to breach the 1.20 mark before dipping their toe in the market and now we have breached 1.21 level many have decided they are waiting for levels to creep towards the 1.25 mark, to me this could be a risky strategy and I have seen this happen on many occasions with people getting their fingers burnt. I do not feel this is necessarily the peak of the GBP/EUR range and I would not be surprised to see continued strength in the short term for the pound (mainly caused by the increased uncertainty in Europe and in particular the concerns within Spain) however I do feel many are forgetting and some ways dismissing the continued underlying problems in the UK. The situation in Europe is a European problem and not just that of the Euro zone, many forget that the UK too is massively exposed to the debt problems being the 3rd or 4th most heavily exposed nation to the debt. We therefore will also have huge problems should any of the Euro zone countries default and this is something that is likely to curb sterling from making any further significant gains against the Euro (in my opinion) and therefore a near 18 month high at current levels surely represents a good opportunity? Should you wish to discuss your thoughts or have an upcoming transfer then email Michael at mgv@currencies.co.uk

Data watch – for short term Euro buyers or sellers keep an German Consumer Price Index data tomorrow morning at 07:00. Expectations are for inflation figures to fall month on month from 0.7% to 0.3% – with inflationary pressure potentially falling within Europe this may give the European Central Bank more scope to cut interest rates in the coming months. For this reason I think GBP/EUR will remain within the 1.21/22 range but feel may struggle to actually breach the 1.22 level.

GBP/USD

As with GBP/EUR the pound has had a good recent run against the greenback breaching 1.60 last week for the first time in a number of months. The dollar has fought back slightly, however weaker employment figures from the US last week have lead to moves back towards the the 1.60 level. The dollar is a hard currency to predict as it is used as a global barometer for investors and often you find that the dollar moves in the opposite direction to what the data releases would normally suggest. In times of global economic uncertainty, however, one thing is usually certain and that is the fact the dollar will usually perform well and I feel the euro debacle will ultimately only benefit the dollar int he longer term. I would expect a move back towards the 1.55 mark in the coming months I would therefore view the current buy levels as attractive.

Data watch – US consumer price index tomorrow at 13:30. Figures expected to fall month on month from 0.4% to 0.2%, these figures are unlikely to influence the federal reserve with regards monetary policy and you would therefore expect interest rates to remain on hold for the foreseeable.

GBP/AUD

Recent gains againt the Australian dollar have been strong moving nearly 6% in the last few weeks alone. With growth forcasts down in China tomorrows GDP figures should be viewed with interest. Levels are expected to fall from 8.9% to 8.3% – this may have been priced in already and can be seen in the recent moves for the Aussie. With so much of Australian’s vast mining sector being exported to China the recent boom conditions in China has helped Australia no end, and although the growth figures in China are still comparatively strong  compared with much of the rest of the world, the fact they are showing signs of a slow down could hamper the AUD further.

To disuss the market conditions in further detail and to run through the various contracts we can offer as one of the UK’s largest independent currency brokers please email me at mgv@currencies.co.uk