GBP has found some market support over the past 24 hours, despite the on-going market concerns surround a possible “Brexit” from the EU. This positive spike for the Pound has materialised despite UK Manufacturing data coming in under expectation. This sector has been a of cause of concern for the Bank of England (BoE) and investors, due to the slowdown we’ve seen over the past few months. This downturn has been attributed, in part, to the Strength of Sterling for much of last year. The Pound’s high value meant it alienated our trade partners inside the struggling Eurozone, which in turn caused the export of our goods & services to fall and Manufacturing figures to drop. This has increased our trade deficit and put pressure on the BoE to act, to ensure this negative downturn doesn’t increase and/or spill over into other facets of our recovery.
Looking at the Eurozone and there has no doubt been an improvement in their economic output since the turn of the year. European Central Bank (ECB) President Mario Draghi remains as committed as ever to ensuring the future of the EU and the single currency and continually uses phrases such as ‘protect at all costs’ during his public addresses. This commitment and confidence in the current monetary stimulus (QE) programme has boosted investor confidence in the EUR and due to the problems facing the UK, the Pound’s value is also being dragged down. However, the Eurozone economy is far from fixed and today’s Sterling strength indicates that we may have seen the end of the aggressive EUR strength. This becomes even more poignant when you consider that Eurozone unemployment figures came in better than expected this morning at 10.3%. It may be that we have now seen the end of the aggressive spike for the single currency, as quite often the markets will realign themselves after an overcorrection. If I had EUR to sell I would take advantage of the huge improvement we’ve seen since the turn of the year and not gamble on an economy that quite frankly still has a number of major issues to contend with.
Looking at GBP/USD rates and again the Pound has found some support under 1.40 and looks as if it may recover back above to this threshold. It was particularly concerning for clients with Sterling positions considering we very rarely see Cable exchange rates dip below this level and I was firmly of the opinion that anyone selling USD should take advantage of this rare opportunity. With the media focus now switching to ‘Super Tuesday’ in the US, where a number of primaries will take place across the country. This could have a huge say in deciding the outcome of both the Democratic & Republican candidates, for this year’s US Presidential elections. Any major political event can affect currency exchange rates, so it will be interesting to see whether, as predicted Hilary Clinton & Donald Trump solidify their position as front runners for their party and if so what affect this will have on Cable rates over the coming days. Personally I expect a move back above 1.40 before long, although with the US economic recovery over shadowing that of the UK, I do not anticipate GBP/USD rates to head back above 1.45 anytime soon.
If you have an upcoming currency requirement and would like to be kept up to date with all the latest market movements, or simply wish to compare our award winning exchange rates with your current provider, then please feel free to contact me on 0044 1494 787 478 and ask one of the team for Matt. Alternatively, I can be emailed directly on [email protected]