Should I Buy or Sell GBP At The Moment?

GBP EUR Exchange Rate: Weekly Review July 16  

The answer as ever rests with which currency you are holding but if you do need to buy or sell currency for transfer abroad or back to the UK then the following is my generic overview of trends I expect to see in the currency market.

GBP – Sterling has rallied notably against Euro rising to a near 4 year high however much of this has been down to turmoil in Europe rather than real sterling strength as can be seen when you cross reference GBP rates with most currencies outside Europe.  With another £50bn of QE added by the Bank of England, and Governor Mervyn King admitting the UK wasn’t even halfway through its own economic problems, I would expect sterling to remain vulnerable as there is still a very outside chance of an interest rate cut in the UK if QE doesn’t work.  If you are holding most non European currencies then current levels to buy GBP are pretty good, however with the recent spike against the Euro (and CHF, PLN, and HUF) then it may be a good time to buy them- sterling has rallied nearly 3% in about 2 weeks so even if
you only need a £5k transfer for spending over the summer it would still save
you £150!

EURWith a number of countries having been bailout out the single currency is still
under fire as no solution on how to tackle the debt problem can yet be reached
between Germany and the rest.  This has created massive Euro weakness and provided a great buying opportunity from both the US Dollar and sterling.  I do not think
the crisis will likely end any time soon and I think the Dollar will likely remain robust as a safe haven but I do fear sterling may be slightly overvalued at present against the single currency until we see the UK economy turning around.

CHF – Given the Swiss National Bank decision to keep a base peg of 1.20 to the Euro it has meant the CHF has lost its safe haven status, and pretty much as the Euro has weakened so has the CHF.  Pretty much for any trade involving Swiss read Euro until the SNB change tack.

USD – Job creation figures in the US have been positive but a lot weaker than expected.  This is likely to be a key election debate between Republicans and Democrats this year and how to tackle the economic slump- this will be key as once again the US national debt will come up for
debate in the run up to November which could weaken the Dollar as politicians
bring the US with brinkmanship to further their own policies.  The other big threat to the Dollar is the possibility of “QE3” stateside and an extension of “Operation Twist”.  However whilst crisis reigns in Europe, investors will need a safe haven which will be the Dollar.  As such expect USD to remain strong against both GBP and EUR.

AUD mining still dominates the Aussie as China still hoovers up huge amounts of its natural
resources.  Wobbles in Chinese growth have seen the Aussie see-saw between 1.50 and just over 1.60 in the last couple of months and despite a fairly recent rate cut Down Under which temporarily weakened the currency I expect to see the Aussie strong against GBP unless the
RBA cut rates much further.

If you do want to transfer funds and want to see how a broker can help then please feel free to e-mail Colm at [email protected] for an overview of where I think your currency may head and a good exchange rate.