Thursday, 3 March 2016

GBPEUR nudges €1.30 before sliding lower again

There has been a little improvement for the Pound in recent days, touching €1.30 yesterday before trailing back off again today. There was no apparent reason for the gains in the rate, and actually the latest economic figures released for the UK suggest that growth is slowing.



So why did the Pound gain?  


It's more to do with the fact it had lost so much ground last week due to fears of a 'Brexit'. Sterling had been sold off and the Pound had lost lots of ground against other currencies due to the uncertainty the EU vote is creating. Things are a little calmer now, and investors seem to have been buying the Pound again. This is probably because the latest polls suggest a narrow advantage for staying in the EU, and the stability this will create will be Sterling positive.  I don't think this is the start of a recovery for the Pound however, and I expect exchange rates to remain under pressure for the next few months.

Next week could present an opportunity for clients looking to buy Euros however. Next Thursday I think the European Central Bank will announce further stimulus measures, which they need to do in order to tackle their negative inflation numbers. If they do announce further stimulus, this could weaken the Euro a little and present a window of opportunity for those that need to exchange Pounds for Euros. Other than that, expect continued uncertainty over the 'Brexit' to keep Sterling under pressure.

EU Membership, stay or go?


For me, which way to vote in the referendum is very hard to call. Personally I'm completely undecided which way to vote. The arguments for and against are not clear and are not being well made. We have large multinationals like HSBC, Goldman Sachs and BMW giving their support to stay in the EU, but of course this is probably self serving. The government are conducting a 'fear of the unknown' campaign without actually providing much concrete information. For the 'average joe' on the street, or even UK SME's, it's really not clear what the pros and cons are. I don't know which way I'm going to vote yet, and it's a similar story for millions of other British people. While this uncertainty remains on which way the vote will go, the markets will likely continue to give the Pound a hammering.

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