Thursday, 11 February 2016

Sterling exchange rates remain volatile

The Pound fell to a new 15 month low against other currencies today, and GBP/EUR in particular has been very volatile, swinging between highs of €1.29 and lows of €1.2660 as you can see from the chart below:


Global growth is slowing and this is driving investors towards safe haven currencies like the Euro, and as a result the Pound continues to lose ground. There is also talk of the Bank of England possibly having to cut interest rates, and this is also weakening Sterling.  The latest prediction for rates starting to go up in the UK is now 2020. The rate has been at 0.5% since 2009, but if a cut is indeed on the cards, then expect the Pound to continue falling.

The other issue at the moment is bank stocks falling in the UK and also in Europe. Britain has a huge financial services and banking sector, and any downside risks to this sector pulls the Pound lower.

The 'Brexit' issue is also still centre stage. The Pound has fallen more than 10% so far this year against the Euro, and due to the uncertainty about the result of the EU vote, the Pound will remain volatile until the summer.

Protect against exchange rates moving the wrong way


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