Sterling set for a Strong Week (Tom Holian)

Pound to Euro Reaches 2-Month High

With Sterling Euro exchange rates trading very close to 1.23 and a 16 month high last week I think we’ll see another strengthening for the Pound against the single currency over the next few days. We have seen UK unemployment reach its best figures in 5 years as the number of people out of work in the UK fell by 133,000 in the first quarter.

With the worryingly low figures for inflation in Europe the ECB may have little choice but intervene with monetary policy at June’s meeting. With interest rates on the continent at an historic low of just 0.25% there is a very good chance that they may use Quantitative Easing to try and combat inflation falling further. Typically, if QE is used as a tool to stimulate the economy if often tends to weaken the currency involved.

Also, members of the ECB have not said that they will interfere with the exchange rates but if we wind the clock back to early 2013 GBPEUR rates shot up in a very short period of time and it could be argued with Sterling’s weakness back then that we had an export led recovery which sae the end of a prolonged period of recession for the UK.

There was a brief setback for Sterling last week following the comments by Bank of England governor Mar Carney but this was only short lived which highlights the weakness of the Euro at the moment. With the Bank of England minutes due on Wednesday and GDP data also out we could see further Sterling gains as I would expect both data sets to be strong for the UK and therefore the Pound.

Tuesday sees the UK’s own inflation data at 930am and with wage inflation outstripping inflation I think consumer confidence is likely to remain strong and with that consumer spending will ultimately rise. With the UK growth forecasts having been raised last week I think the Pound will see fresh highs this week.

If you have a currency transfer to make and want to save money on exchange rates compared to using your bank then contact me for a free quote Tom Holian [email protected]