Where next for the struggling pound? (Alistair Ryan)

GBP EUR Slumps After Stronger Euro Growth

It is no secret that Sterling has been suffering against most major currencies recently, especially the euro. With a lot of negative data coming out of the UK and increased confidence across the Eurozone, GBP/EUR rates have been on a downward trend. In the past month we have seen over an 8 cent slip in GBP/EUR rates with a high of 1.2331 and a low of 1.1487.

Sterling started to make a small fight back against the single currency yesterday but it seemed to be short lived showing that this was more of a spike in the market rather than a comeback from the pound. Yesterday saw the release of UK PMI data for the service sector. The figure came out at 51.5, rising from 48.9 in December. Any figure above 50 represents growth within the economy and as the service sector accounts for around three quarters of the UK’s economic output this data release was seen as very positive for the UK economy. Eurozone PMI data was also released yesterday which came out at 48.6, showing a contraction for the 12th consecutive month. Although this figure came out as negative it is still an improvement on December’s reading of 47.8.

Although we have had this positive data for the pound in my opinion I can’t see a strong fight back yet. I think there is too much
negativity surrounding the UK and Sterling making investors very wary of going anywhere near the currency. That said I do think that in the long term we will start to see some more euro weakness and could see rates start to push back up. The Eurozone is being heavily supported by Germany at the moment with France, Spain and Italy all seeing contracting economies. In my opinion if we see any hint of negativity come from Germany the euro could really start to suffer.

If you have a currency requirement and would like to talk about how market movements may affect your currency transfer please contact me direct on [email protected]