Pound reaches fresh levels against the Euro but will this continue?
The pound reached the highest points of the year against the Euro this week. GBPEUR rates have traded at 1.1592 highs so far today. The pound is benefitting from expectations of higher UK interest rates.
It is worth pointing out sterling has been see-sawing all year (albeit trending higher) over such expectations. Markets can be very fragile and whilst this sentiment appears established, any data could easily change this.
Interest rate expectations are key, and crucial to the strength and weakness of a currency as I have written here.
Today is the last day of May where as it is month end, we can sometimes see increased volatility. This is because traders will open and close off positions, and some larger corporate transactions will be booked.
Market volatility can increase so if you have any transactions to buy or sell currency, this is worth being aware of. You can contact me Jonathan directly by emailing [email protected]
What can we expect in June for the pound?
Next month is a whole series of new economic data releases, with Inflation bound to attract extra attention on the 21st June.
The 22nd of June is the latest Bank of England interest rate decision. This is looking like a crucial release too. You can read more about comments and decision making from the UK central bank here.
Our latest FX research shows that at current levels we are operating near the top, which could be a reason for Euro buyers with sterling to not hold on too much longer.
What do the forecasters say?
The pound has been trading very close to the higher levels we have seen in the forecasts. Looking at the averages across circa 50 different banks we have surveyed, we see an average of around 1.12. This is over the coming three-, six- and twelve-month periods.
Going back to the June outlook, the upcoming economic data will be key to assess the extent to which we can rely those forecasts.
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