GBP has performed well of late and we have seen positive moves against both the EUR and USD. Recent market volatility has made it difficult to identify any specific market trends but it is no coincidence that Sterling has gathered momentum as UK economic data has steadily improved. For many the question remains how much further can this positive feeling take the Pound? Personally I believe we are getting towards the end of this recent spike. Whilst I do believe there is scope for GBP/EUR levels to move higher, I think we will find major resistance at 1.19. Although Eurozone data has been mixed at best and the UK economy is recovering at a quicker pace, the worrying trade deficit that is still evident is likely to dampen market sentiment. If GBP/EUR levels increased significantly from their current position then it would mean that our exports would become far too expensive for a weak Eurozone economy and needless to say this would seriously distort any UK economic recovery.
GBP/USD levels have also spiked up and today’s better than expected Markit Service PMI data has pushed levels through 1.56. Whilst Cable rates are more difficult to asses due to the stature of the USD as a global ‘safe haven’ currency, due to the fact it holds its value in times of global unrest, I do think the Pound could push higher over the coming days. This however is on the assumption that tomorrows Bank of England (BoE) interest rate decision does not halt the Pound in its tracks.
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