The pound has started the week off well and truly on the front foot against all major currencies; sterling has seen the biggest daily jump against euro for two months, with interbank levels for pound to euro sat above 1.1250 at the time of writing.
With a market move of over 0.85% during yesterday’s trading those that have been waiting for the moment to secure a euro purchase will have had a promising day, but what could we see happen next for sterling exchange rates?
Brexit Talks Resume Today
Talks between the UK and EU resume today, and how these pan out will be a key player in where the value of the pound sits as we head through the trading week. Many analysts have predicted a great deal of volatility this week, which is quite common in scenarios such as this as investors and speculators try to second guess what the outcome may be and how well (or badly) talks are progressing.
Part of the reasoning for sterling strength yesterday has been put down to investors moving into position, should there be any positive news come out of the latest round of talks. It appears that the drop off the pound has had over the past few weeks has been partially down to no deal Brexit concerns, and so if any of these are lifted this week then sterling exchange rates may actually continue to flourish to kick off June in style.
On the flip side of that, so far it has been rare to get a lot of good news out of the Brexit talks; both sides are still playing a very tight game with neither seem willing to give a lot away, which has led to a repetitive conclusion of stalemate and very little progress, each time damaging the value of the pound.
US Riots Hurting Dollar Exchange Rates
Sterling breached the 1.25 interbank rate against the dollar in trading this morning as tensions continue to rise.
Where as previously we have seen poor economic data not impacting the dollar in a negative fashion, this political instability is starting to hurt the dollar as this is solely an in house problem and not something that is likely to happen all over the world.
Often with bad U.S data, the markets can approach with the reasoning that ‘when the U.S sneezes, the world catches a cold’ so you can from time to time see bad data from the states actually lead to dollar strength, due to its safe haven status.
On this occasion it could lead to further problems for dollar exchange rates unless something happens to dampen down the issue, and currently the aggressive approach of Donald Trump appears to only be souring investors’ taste for the dollar and weakening it further, in the midst of a pandemic that will already cause major economic problems for the US, this issue will only add fuel to the fire and potentially cause large economic and political problems as it continues to escalate.
European Central Bank Interest Rate Decision This Week
Another interesting day ahead on Thursday for those with Euros to exchange into pounds, or the need to buy Euros is the European Central Bank (ECB) interest rate decision and press conference.
The Eurozone is quite a point of focus for global markets at present and it really is hard to see how ECB president Christine Lagarde is planning to negotiate the Eurozone ship through these testing waters.
With so many different economies in a totally testing situation it will be a release that is watched with a great deal of interest, no changes to interest rates are expected but any comments on the approach to future fiscal policy changes may lead to a sudden and sharp movement for euro exchange rates against the pound.
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