Since the turn of the year the pound has had a torrid time and makes for some pretty poor reading. Below I have given the figures against a number of commonly traded currencies to see the difference this makes on a £200k money transfer over the last 30 days:
GBP/EUR – high/low change – 4.65% – €13,920 difference on £200k money transfer
GBP/USD – high/low change – 3.95% – $12,800 difference on a £200k money transfer
GBP/AUD – high/low change – 4.4% – AUD 13,180 difference on a £200k money transfer
GBP/NZD – high/low change – 4.55% – NZD 17,040 difference on a £200k money transfer
GBP/CHF – high/low change – 3.1% – CHF 8,960 difference on a £200k money transfer
As you can see it has been a poor start to the year but will it continue?
To me it is all a little surprising how far the Euro has moved, if you look at the fundamentals behind the UK and our European counterparts, surely we are still in a better position than Europe? One could argue that Mervyn King (head of the Bank of England) its getting his way as he has been open in calling for a weaker pound to improve the UK’s exports, he is also notorious for talking down the UK’s chances of short term recovery whereas Mr Draghi (his counterpart at the European Central Bank) is often far more bullish when it comes to European finances. For me this is somewhat of a facade and I for one feel this pair is due a correction heading back towards the 1.20 territory. Should you be selling Euros, for this reason, and whilst levels are not far from a 14 month high, it may well be worth considering your options – this may include the use of a forward contract allowing you to guarantee your position even if you do not have full availability of your funds.
As for the USD, AUD, NZD and CHF – the moves for these might be dependent on investor confidence. Currently investors seem to have found comments from many of the central banks as positive and hence we appear to have seen a drive towards riskier currencies such as the AUD and NZD. To me this trend may continue in the short term but I also feel the current sell prices should be attractive. To me it is inevitable problems in Europe will re-surface and this is likely to knock investor confidence, this may also be compounded as the extended US debt ceiling deadline draws closer in May. This could cause the USD to move back towards 1.60, and likewise a move away from the AUD and NZD. I also feel the Reserve Bank of Australia will continue with their monetary easing and this could also pile pressure on the AUD and NZD – I can see these moving back towards 1.55 and 1.93 respectively.
The major benefactor of falling confidence could be the CHF, and I see this staying strong for the foreseeable future.
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