GBP/EUR rates have rallied over recent days, with the pair hitting 1.2908 at this morning’s high. Despite rate slipping back under that threshold, there has been a marked improvement in Sterling support since US President Barack Obama’s comments regarding a possible Brexit and the negative implications this could have on the UK economy. Whilst this has strengthened the opinion that a YES vote to leave the EU will harm Britain’s long-term economic prosperity and certainly negatively affect Sterling’s value in the short-term, it has angered leave campaigners who feel that he has no to get involved or try and influence the British public.
Either way investors have seen it as a vote of confidence and GBP is benefiting as a result. I do expect this support to carry GBP/EUR through 1.30 under current market conditions, although any sharp downturn in Eurozone data or problems surfacing with Greece, or other fragile Eurozone economies could change this scenario. What is clear is that the EUR improvement seen since the turn of the year should be taken advantage of by anyone in a position to do so. I think it will now be difficult for the single currency to break back through 1.25, unless the perception regarding a potential Brexit indicates we are more likely to leave than stay.
Looking ahead and we have UK Gross Domestic Product (GDP) figures out tomorrow and with the predicted figure of 0.4% growth under the previous reading of 0.6%, we could see Sterling recent rally come to an end.
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