Good Morning. Sterling fell yet again yesterday as risk waned and overall sentiment towards the pound remained uncertain, leaving the focus back on structural and political weaknesses affecting the UK economy. Rates @ 08:30am are as follows:
- GBP/EUR 1.1015
- GBP/USD 1.5009
- GBP/AUD 1.6461
- GBP/NZD 2.1421
- GBP/CAD 1.5408
- GBP/CHF 1.6115
- GBP/ZAR 11.084
- GBP/JPY 135.14
- EUR/USD 1.3623
Commenting on the current weakness of the pound, Jane Foley at forex.com said "Risk appetite has waned and sterling has come back down versus the dollar. There is much uncertainty about where power would go in a hung parliament and together with the need to tackle the budget deficit, sterling can weaken further over the coming months."
The consensus is that Sterling is the weakest of the major currencies, and the only thing keeping rates up against the Euro is the ongoing debt problems of Greece. This may be ending though, as the Euro strengthened against both Sterling and the US Dollar yesterday as Greek debt fears eased.
France has offered support to Greece, and you can read a detailed report about that here on the BBC site. What it means for currency, is that the situation is becoming more under control, and the weakness it had been causing in the Euro is now receeding. The means the Euro is gaining strength, and I wouldn't be surprised to see rates tumble below €1.10 in the coming weeks.
It's a quiet week for UK data, and so I expect that the budget this month will be the main driver for where Sterling goes next. If the chancellor outlines robust plans on how to repay the deficit then this may give investors more confidence in the long term. However, whatever happens with the election and debt measures, it's likely that things will get worse before they get better.
It's only Euro weakness that's keeping GBP/EUR rates above parity, and so if you need to buy Euros in the coming months, consider the risk and make an informed choice on the options available to protect yourself. Clients that do not wish to gamble on markets rising and risk losing money may wish to secure a Forward contract, or place Stop and Limit orders.
Contact us today to discuss how these can help protect from adverse market movements.
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