Friday, 1 April 2016

Pound/Euro drops into the €1.24's

The Pound is at the lowest against the Euro in nearly 18 months today, and it's not been a good start to April. This week alone, GBP/EUR has dropped from 1.2750 to 1.2486 at the time of writing:


Why has the Pound fallen so much this week?


It's a combination of things, but mainly due to pretty poor economic data from the UK, meaning Sterling is not an attractive option for investors. We've had figures showing that the UK deficit is growing. Investors worry that if the UK vote to leave the EU, it would hit investment. Reduced earnings from abroad and sovereign wealth funds pulling money out of the economy, could well mean the Pound will weaken more.

Also this morning, manufacturing figures today that show the sector is stagnating. The export market is tough given the global economic slowdown, and in turn this is likely to affect UK growth.

And this is all against the backdrop of the EU referendum, which I've talked about in detail on this blog and the risks it presents to the Pound.

Combined all of this means that Sterling is not an attractive option for investors. Oil prices are down again today, as are stock markets, and as a new month kicks off, it seems most in the market are seeking safe haven currencies such as the US Dollar, and that's why Sterling has dropped against most other currencies this morning.

Also, US jobs numbers were pretty good today, which again strengthens the US Dollar to the detriment of other currencies. Not a great start to April for Sterling.

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