Obama boosts the Pound

So far this week we have seen very little in the way of key data to move the currency markets and as a result the market has been moving on trend and following the major news pieces instead. As a result the surprise big winner has been the Pound.

Our regular readers will know that the uncertainty that has been circulating as a result of the upcoming EU referendum has weighed very heavily on Sterling with rates dropping by as much as 20 cents against the Euro since the turn of the year. This trend was halted in the last few days and in fact quite significantly reversed as a result of a change in the referendum polls and President Obama.

The President, on a visit to London, gave a couple of very in depth speeches that unequivocally backed the IN campaign and gave the view that a UK outside of the EU is “at the back of the queue” for any US trade deals and that as a result, those trade deals could take as long as 10 years to agree. These speeches coupled with general swings in campaign momentum caused the various polls to all move in the IN campaign’s favour and we learned that the markets definitely prefer the certainty of a prospective IN vote as the Pound recorded muti-cent gains across the board, but most notably against the Euro and the Dollar. Rates are now 5 cents higher than just two weeks ago for Euro and Dollar buyers.

Today sees a bit of a change in the pace for the week with plenty of ecostats due out. Most notably in the form of UK GDP and US trade balance and home sales, and the Fed’s monthly policy statement. UK GDP is expected to have slightly contracted, which given the global economic position is not a surprise, so only a real surprise here is likely to have much impact, but most focus will be given to the Fed this evening to see what the tone of their announcement is and whether any hints are given as to the chance of future interest rate hikes. The Dollar has been on the back foot since the Fed made it clear they aren’t planning to raise too many more times this year so watch this space to see if this changes.

The change in rates in the last few days has given a brilliant buying opportunity for those with Sterling in hand, and really the only question is “will it continue to improve or will it drop again?”. With the referendum still some way away there will be shifts in momentum and as soon as the OUT campaign gains any traction the Pound will likely weaken. With such large gains there is also always the chance of a natural correction too, so in short it is likely this opportunity might be short lived.

Stay in close contact with your CI account manager to be kept informed of exctly what is happening and what your options are, even if you do not need your currency straight away.