The pound has been a very difficult currency to predict lately with all manner of movements triggering volatility that has made forecasts more uncertain than usual. Often, there can be some indications or trends to identify with but lately the GBPEUR as well as other pairings have been oscillating in some familiar ranges.
My personal assessment on this is that we are seeing real mixed messages, and conflicting signals which is almost cancelling out any significant move in either direction for the GBPEUR rate. Plus, August is a typically sleepy month in many spheres of life as it is the holiday season. There hasn’t really been any significant events to really move the markets so far. But that is all looking very likely change in the coming weeks as we have a series of events that could increase the market volatility.
GBPEUR interbank rates have moved between 1.0946 and 1.1180 this month which at just over two cents is not really much movement in the grand scheme of things. GBPUSD exchange rates have been a little more exciting between 1.2656 and 1.3262 on the interbank rate but this is largely due to the US dollar’s behaviour as opposed to the pound.
On the Canadian dollar and Australian dollar we have had around 6/7 cents movements between the high and the low too, which whilst not tiny, isn’t reflective of the sometimes more excessive moves we can see for the GBPEUR and GBPUAD
Will Brexit and Coronavirus Keep Providing Mixed Messages for the Pound?
The pound has as I say been trapped in some familiar bands on many currencies, and this can in part be attributed to the lack of concrete news to push the levels firmly in one direction or the other. Two main topics we can identify here are the Coronavirus and also Brexit.
For Brexit, investors are waiting to hear if it will be a deal or a no-deal scenario ahead. The general wisdom is that a no-deal Brexit would see the pound lower whilst any signs of a deal could see the pound stronger.
However, there some who think the opposite. The point is that with such an important topic to be decided still, investors are waiting to find out what will happen to make important decisions on the pound. September and October could be vital as whilst talks are ongoing, there is at present no urgency and we are the October EU Summit being discussed as a key part of the timeline.
Whilst the current transitional phase will last until December 31st, it has been said that any deal must be agreed in October to really provide enough time for it to be scrutinised and ratified by each individual EU member.
The lack of clarity on the direction is leaving sterling unsettled but not suffering from any big swings as the market cannot discount either a deal, or a no-deal. This issue will surely be rising in importance ahead, if you are looking to make a transfer involving the pound before the end of the year, or into 2021 we can monitor movements for you. Please contact me to learn more.
Regarding Coronavirus, we have many mixed signals too, since whilst there has been a reduction in the number of cases and deaths overall, plus signs that a vaccine is making headway, we are still seeing lockdowns in part of the country. There are also many fears that a second stronger wave is likely to occur, and that the winter flu season will provide a fresh breeding ground for the virus to spread further yet once again.
On the topic of Coronavirus therefore, there are still many directions events could take. Investors will often need some clear news to be sure they truly understand where events will be headed next. For now, we don’t seem to have that clarity and whilst there are piecemeal stories on Coronavirus, the British economy and Brexit shaping direction, it might be that we are waiting for something more substantial ahead to really drive the market.
September and October may provide some further news on Brexit, and we could be in for some more tumultuous times ahead for the pound. Often when the rates have not been particularly volatile it is because there is nothing of significance to move the levels. Sooner or later we usually get there however, so for any clients interested or tracking the pound it will surely only be a matter of time before we see that bigger news and movement.
The Coronavirus has made the currency markets even more unpredictable and volatile in many respects, and we can help share with you the latest news and provide tools to help provide you make an informed decision and strategy on your transfer.
If you would like to discuss the markets in more detail, please do contact me directly using the form below.