Cyprus vote today, UK data tomorrow

In the FX markets there are 3 main contributing factors that have an effect on the strength of an individual currency. Economic data releases, natural disasters and political uncertainty all play a major role in the confidence investors have in a particular currency and therefore the strength of the said currency. Developments over the weekend have brought into play 2 of these factors and therefore the euro is struggling.

The Cypriot banking crisis is already creating a considerable amount of concern for the economy in Cyprus but the sheer fact that its seen as a combination of the ECB and Cypriot government have conspired to shock all those with money tied up in Cypriot banks is likely to bring a great deal of political uncertainty within the country itself. A vote is due to take place today regarding the levy on all bank deposits and in all honesty I can’t see there being any kind of positive outcome. A ‘no’ vote means that they are going to have to come up with another solution and a ‘yes’ votes is going to leave the country and banks with a lot of disgruntled people.

Back on the UK side of things we have a number of data release out this morning which are likely to add more fuel to the fire in terms of the ‘will they won’t they’ situation that the BoE find themselves in regarding extending QE. It is likely that whilst the Cypriot situation remains unresolved the pound can continue to rally but don’t be surprised if a string of poor UK data releases pushes the pound back to the low levels we have seen throughout the year.

Keep in touch with your account manager here at Currency Index to ensure you know of any strong market movements that may affect your currency requirement.