Pound exchange rates have struggled since the start of the year against most majors bar the US dollar, the burning question for many is will this continue? For me I am a little surprised at some of the moves, in particular the heavy losses we have seen against the Euro.
I for one am still confident the Pound will have a better year against the single currency but early indications suggest any gains may be some way off. Moves have come about due to a couple of factors. Last week Mario Draghi (head of the European Central Bank) decided to keep the base interest rate for the Euro zone on hold at 0.75% – this was not wholly unexpected, however many analysts and market commentators (myself included) had expected a likely rate cut to assist the ailing European economy in the next few months. Following Draghi’s press conference this seems increasingly unlikely and as a result demand for the Euro has increased and hence so to the value. To compound this figures from the NIESR (National Institute for Economic and Social Research) a well respected think tank have predicted -0.3% growth for Q4 2012, making the dreaded triple dip recession very much a reality. This will be confirmed on the 25th January – a date that should be firmly in your mind if you are dealing with Sterling in the coming weeks. Of course if the figures are better than expected the pound may be grossly undervalued and a correction seen.
Keep in contact with your broker to for up to date analysis of the current trading conditions. To discuss my view and to run through the currency service we provide then please contact the office on 01494 787478 or email Mike at [email protected]