Sterling’s Value Continues to Fall (Matthew Vassallo)

Pound to Dollar Rate Supported by UK GDP Data

Sterling’s value has fallen this week against almost every major currency and it now looks like we have seen the end of the recent GBP momentum. Only a couple of weeks ago the Pound hit a fresh 8 year high against the EUR, sitting at over 1.42 on the exchange. However, a poor run of economic data, including weak Manufacturing and worse than expected unemployment figures, has halted the Pound’s rise and pushed GBP/EUR rates down by over 6 cents from the recent high.

Whilst I always felt that a realignment was likely, this week’s move has been extremely aggressive and proves how fickle the currency markets can be. It is likely that the recent talks between Greek Prime Minister Alexis Tsipras & German Chancellor Angela Merkel have helped ease pressure on the EUR, with both now agreeing the Greece needs structural reforms if it going to continue as part of the single union.

We also need to remember the Bank of England’s (BoE) stance on the matter, as they have become concerned about how the Pound’s rising value would negatively affect UK exports. These fears were confirmed recently with UK factory orders falling to a 2 year low. The central bank have already indicated we will not be seeing a UK interest rate hike any time soon and I now feel it is unlikely that GBP/EUR rates will move back through 1.40 in the short-term.

Looking ahead and UK Retail Sales figures are released tomorrow and are expected to show an improvement. This could help the Pound find some support, although if figures are worse than expected then I anticipate the Pound’s slide to continue.

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