The pound has made considerable gains in trading this week and currently sits close to a 19 month high against the Euro. Spikes like this are often short-lived, and in my opinion the pound could lose ground against the Euro next week, falling back toward the 1.17 mark.
The good news is that interbank rates are currently more than 3 cents above this level. If you are looking at buying euro’s over the course of the next month, now could be the perfect time to buy on spot, or lock into a forward contract. It is worth taking note that EU GDP figures are released at 9:30 today, this could cause market volatility, so bearing in mind the current spike , it may be worth filling in the PSF enquiry form on the right
GBPEUR 3 Month Movement up 9.2%
We have seen a number of positive data releases for the UK this week, from increasing house prices, to strong manufacturing figures. However, I expect the pound to fall away from current highs next week because we have a host of German data out.
The German Economy is outperforming the rest of Europe and I think industrial production and trade balance figures next week may shift focus from EU countries like Greece and Spain, reminding investors that some European countries are performing very well. Couple this with news that the G20 are set to agree a rescue package for the Euro today and I expect the single currency to strengthen.
On the GBP side of things, I think focus could swing from the positive data we have had this week, back to more negative issues. The UK trade balance figure is released at 09:30 on Wed 9th. As it is widely hoped that exports and capital inflows (from overseas investment) will help the UK fully recover from recession, this figure is very important.
Based on a poor trade balance last month, I would not be at all surprised to see another negative figure and this could lead currency speculators to question the UK’s ability to address its huge national debt and budget defect, and recover from recession. If this does happen I would expect sterling exchange rates to fall. So, with the possibility of a strengthening euro and weakening pound next week, current trading levels look very attractive.