The spike of last week to €1.4255 appears to have been short lived, with the Pound falling during trading on both Monday and Tuesday, testing the €1.40 level before breaking below it. The drop continued today and at the time of writing the rate is a little above €1.39:
Why has the rate fallen?
It’s to do with events in Europe, the USA and the UK. Over in the EU the recent QE programme has been well accepted, and this shows confidence that the Eurozone will sort out their issues and return to growth. This view was supported with economic data released this morning, showing better than expected numbers for consumer sentiment, inflation, and employment. The better numbers have given the Euro back some strength, dragging down the GBP/EUR rate.
Over in the USA, there are nerves ahead the FED’s meeting tomorrow, halting the Dollar buying and in turn Euro selling. The Dollar has weakened a little after weaker than forecast manufacturing, industrial output and housing data.
Here in the UK, its Budget day tomorrow, and the Conservatives last chance to convince voters they are the only choice to protect the UK economy. Tomorrow is going to be a very important one for the currency markets, so let’s take a closer look at what’s on the agenda.
Wednesday a very important day for exchange rates
Tomorrow we will see much that could affect exchange rates. In the UK at 09:30am we have the latest Bank of England announcement, various unemployment numbers. Both of these could affect the Pound significantly better than expected figures could strengthen the Pound and vice versa.
Later on we have the UK Budget Statement which is of more importance than usual, given there is a UK general election in less than 2 months. There could well be some surprises in this budget to woo voters ahead of the election, and given the economy is going to be the main weapon in the Conservatives arsenal, there is every chance we could see a significant effect on exchange rates for Sterling.
Over in the United States at 6pm we have the Federal Reserve’s monthly statement. The markets are nervous ahead of this as analysts try to determine when the FED will raise interest rates. This is very important for exchange rates, as flows in and out of the Dollar can have knock on effects for the Pound, the Euro, and other major currencies.
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