Could the UK and Eurozone both be as bad as each other? GBP/EUR volatility (Alistair Ryan)

Pound to Dollar Rate Pushed Higher by Falling Covid Cases and Weak Dollar

We have seen GBP/EUR rates drifting up today, in fact we have seen over a one cent movement over the last 24 hours with a high of 1.1778 and a low of 1.1663. There is no doubt that the market is very volatile at the moment with so much uncertainty in both the UK and the eurozone and I can’t see this changing any time soon.

The UK is waiting to see whether we can avoid a very undesirable Triple Dip recession, which we will find out at the end of April. Estimates at present are showing that it is going to be very tight. The last Gross Domestic Product (GDP) estimate that was released was at -0.1%, when the official GDP figures are released in April we need this to be at 0% or higher to avoid going back in to a recession. With it being so tight it is creating a lot of uncertainty with Sterling and I can see this continuing until we have an outcome to this matter. If we do go in to a recession I would expect Sterling to weaken significantly off of the back of this but alternatively if we manage to avoid it then rates could go the opposite direction.

In my opinion the other main topic driving GBP/EUR rates is the crisis in Cyprus. Cyprus must come up with a plan to raise €5.8 billion in order to qualify for a €10 billion international bail out. The EU and IMF have demanded that an adequate plan is put together before Monday otherwise they will halt any special funding for Cypriot banks. Cyprus may only be a small member in the eurozone but this crisis could be the sign of things to come and that, I believe, is the reason it has created such a stir on the markets.

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