GBP/EUR – There is every chance that September could prove to be a defining month for the Euro and may provide us with a clearer indication of the next significant move for this currency pair.
With the Spanish banking system in need of potential further bailouts, it is the handling of this situation and the repercussions of any further monetary assistance, that could prove pivotal to one of the EU’s largest economies keeping its head above water. We also have Greece coming under the spotlight once again and any decision on an extension to their debt programme or elimination from the Euro may have a significant impact on GBP/EUR exchange rates and could provide a spike for the Pound Euro pairing and another buying opportunity, if not handled with the upmost caution by EU leaders.
I do however feel Sterling could still drop a little further against the euro due to the on-going EU debt crisis, as our own economy is at best stagnating. The warning signs have been there for months, as PMI data has been consistently poor and the Bank of England cut growth forecasts on what seemed like a monthly basis. We have seen multiple rounds of Quantitative Easing to try and boost lending but
with our banking sector causing more problems than they are solving, it seems to have made little difference. Add to this continuing high unemployment and the widest trade deficit since records began and I can see the pound coming under increasing pressure over the coming months unless our economic data releases start to improve, and the wettest summer in years has certainly not helped trade.
In the current climate I feel that anyone that is due to buy Euros and waiting for the 1.30 level may be left disappointed, unless there is a shift in public perception on the UK economy and/or further fallout in the EU. I feel the EUR will find resistance at 1.25, whilst any move up to the higher 1.20’s may be dependent on the outcome of further reports from Spain and Greece.
GBP/USD – Despite the negative economic outlook for the UK as highlighted above, we have seen consistent GBP strength against the USD over the past couple of months. The USD has always been seen as a safe haven currency due to the fact it holds value better than others during times of crisis but with the upcoming election and string of poor economic data and the fact that the head of the ECB has managed to bring back a little appetite to risk on the markets the greenback is not moving towards the 1.50 level many analysts had predicted but instead is edging closer towards and has been slightly above 1.60. The threat of further Quantitative Easing is also on investors mind and whilst the political uncertainty remains, I think the USD could continue to struggle, even with the poor economic sate of the UK economy.
GBP/AUD – Sterling has rallied somewhat of late against the AUD moving up through 1.55 and away from the 30 year lows back in February. This is following reports that Australia’s economy is at risk of
recession in 2013. Commodity prices are rising and the demand in China for Australia’s raw materials is starting to slow. There is also a general feeling growing that Australia’s policy makers are becoming “complacent” but despite these negative reports I still believe the AUD leads the way, as one of the world’s strongest currencies and for that reason it may be wise to consider your options soon.
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