How to Get the Best GBP Exchange Rates (Matthew Vassallo)

Sterling has performed well over the past couple of weeks, showing improvement against the EUR, USD and AUD amongst others. This upturn in fortunes has coincided with a run of positive economic data releases and if it hadn’t been for last weeks Eurozone Gross Domestic Product (GDP) figures, which came in much better than expected, I believe GBP would be even closer to the 1.20 level.

As it stands it could be argued that Sterling is undervalued against the EUR but in order for rates to test or break 1.20, we will need to see further evidence that the UK is now fully on the road to economic recover. Moreover, this may still not be sufficient evidence for investors and the chances are that the Bank of England (BoE) will continue to talk GBP down if we see rates spike towards this level. A strong Pound whilst beneficial for you and I, will not help our export industry and a wide trade deficit will continue to hamper our long term economic recovery.

GBP/USD levels are also creeping up, with pressure being put on 1.57 earlier today. Cable rates are always difficult to predict due to the fact the USD is still considered the currency of choice by investors during unstable times. For this reason market spikes are not always obvious or in line with economic data but I still wouldn’t be surprised to see rates move towards 1.60 before the end of 2013.

GBP/AUD rates are still floating near a three year high and this improvement from the low back in February has coincided with the recent upturn in UK economic data and two interest rate cuts by the Reserve Bank of Australia (RBA). There has also been a slowdown in China’s demand for Australia’s raw materials and market sentiment has certainly soured compared to the feel good factor that surrounded the AUD over the first two quarters of this year. GBP/AUD rates have now broken 1.71 and if I was buying AUD I would be very tempted around the current levels, as the RBA have already indicated that it is unlikely we will see further rate cuts this year.

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