GBP Touches 1.25 Against the EUR but Loses Ground on the USD (Matthew Vassallo)

‘Death Cross’ Could Indicate a Major Sell-Off Which Threatens the US Dollar

Sterling continued to make inroads against the euro during Friday’s trading as the Interbank touched on 1.25 for the first time in weeks. Fears remain over the economic stability of many of the eurozone’s nations and their ability to pull themsleves out of recession. The markets have reacted negatively to the on-going saga and even European Central Bank (ECB) president Mario Draghi’s commitment to the future welfare of the region, has done little to alay investors concerns.

Economic problems within the eurozone are nothing new. How often do we turn on the evening news to hear of further unrest? With public protests in Spain, Greece or Italy almost a weekly occurrence, it is sometimes difficult to see any light at the end of a very long dark tunnel.

During times like this it is easy to forget that only twelve months ago the world’s top analysts were predicting parity between GBP and the EUR. Now we have the same analysts convinced that we will see 1.30 on GBP/EUR before 2013. These statistics to me are key as they prove long-term predictions are, in this current market, quite frankly useless. Yes they can provide investors with some type of strategy but when they are disproved more often than not, this strategy will inevitably become flawed. Personally I believe we will see GBP/EUR rates range-bound between 1.2370 – 1.2540 until we see either a consistent stream of positive UK data or a further fallout in the eurozone.

GBP/USD rates tubled today as the greenback made its first significant move againt the the Pound in almost 3 months. Rates moved from 1.6132 at the high to 1.6024 at the low following the release of US Non Farm Payroll data, which came in better than expected. I always felt Sterling was over-valued against the USD and I believe we will see a move back towards 1.55 over the coming months, as the politcal uncertainty created by the upcoming elections is removed along with an upturn in economic data.

What I am currently telling my clients is that we need to be reactive to the markets without having a knee jerk reaction. We need to be in tune with market trends and even potentially realign any targets because of this but what we do not want to do is decide to throw these targets out of the window because the markets move against us for a couple of days.

This market uncertainty can be difficult to digest, especially if you have an upcoming property purchase or sale and are looking to transfer funds but are worried that market movements will ultimately leave you short changed. Here at Foreign Currency Direct plc we have multiple contract types all tailored specifically towards our client’s needs. One of our most popular types is our forward contract, which allows you to lock in an exchange rate even if you do not have the full funds available. This is perfect for anyone looking to eliminate risk from the market but still take advantage of our award winning rates. If you would like more information please contact me directly at or on 01494 787 478.