Sterling Prosper’s as UK Economy Continues to Improve (Matthew Vassallo)

GBP EUR Exchange Rate: The Week Ahead August 15th

There is no doubt that the UK economy has certainly improved over the past few months and yesterday UK Chancellor George Osborne reaffirmed this belief during an address in London. He alluded to the fact the UK had ‘turned a corner’ but despite a recent run of positive economic data, he remained keen to play down any high expectations. The Pound has benefitted from an upturn in UK economic data and has spiked against most major currencies, in particular the EUR, USD and AUD.

GBP/EUR reached its  highest level in 6 months last week, breaking 1.19 and providing some of the best buying opportunities of 2013. We have seen similar positive moves against the USD and AUD and the question now being asked is whether GBP will move any higher? Particular reference has been made as to whether we will see 1.20 on GBP/EUR and 1.60 on GBP/USD. Personally I wouldn’t just assume that GBP’s recent run will continue and even George Osborne was keen to play down any high expectations during yesterday’s speech.

Whilst GBP/EUR levels have been on the up for the past couple of weeks Eurozone economic data has also started to improve, with recent German and French Gross Domestic Product (GDP) figures coming in better than expected. We also have an on-going concern in the UK over our widening trade deficit and until Eurozone productivity improves, we may find that the Bank of England will try to control Sterling’s value. It would not be beneficial for the UK economy if the Pound gains strength but the Eurozone are unable to trade because of the soaring cost and it is essential to our long-term recovery that we keep our most affluent trade arm active.

GBP/USD levels are still holding above 1.57 and had touched 1.58 at the high last week. With on-going concerns over Syria it is reasonable to assume that investors may turn to the USD as a ‘safe haven’ should military action commence and this will no doubt strengthen the USD’s position. There is also the question of when the FED may start to ‘taper’ their Quantitative Easing programme, as this is also likely to cause fluctuations to the USD.

Personally I would be tempted to consider my position around the current  rates, as I fear we may see GBP/USD levels fall back towards 1.55 in the short-term.

If you do have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or just want an exchange rate comparison with your current provider, then please feel free to contact me directly at [email protected] or call one of our experienced brokers on 0044 1494 787 478 today.