A good week for Sterling but for how long
21 October, 2016
This week Sterling has been given a much-needed boost to recover from the disastrous few weeks it has had in the currency market, since Brexit has been given a firm date in March for when the UK will leave the EU, and with expected interest rate hikes in the US and a cut in the UK ahead of us, the Pound has continued on this seemingly unstoppable downward trend. To make things worse for Sterling the “Flash-Crash” that happened in the early hours on the 6th of October during Asian trading sent the Pound into oblivion consequently handing the Pound 32 year lows against the dollar and lows against the Euro since the Recession in 2008. However with somewhat positive data coming out from UK with inflation improving and unemployment figures staying the same Sterling clawed back some losses, albeit only 2 cents but still a significant improvement for a property purchase. This should be seen as a simple correction in the market from the significant losses over the past few weeks but it may not be around for long which brings a great opportunity to take advantage of the spike whilst it is still here.
Yesterday morning UK retail sales come in lower than expectation which weakened Sterling slightly in the morning. The afternoon saw the ECB president Mario Draghi hold a press conference in relation to interest rate decision in the Eurozone, Interest rates are to remain the same which strengthened the Euro for a short period of time, however whilst Mr Draghi was taking questions from the press, a reporter asked about their QE programme which is due to end in March 2017 and whether they will extend it further once this expired. Mario was fairly coy and batted off the question explaining that the ECB had not discussed the issue, expect this issue to be addressed in the December meeting which will align with the FED rate decision. This reserved stance from Mario on the QE programme brought rates back up by the time the press conference was over in the afternoon. With the Euro weakening slightly yesterday this can be a great buying opportunity if you have a requirement to purchase Euros, with only one week left of the month and the interest rate decisions in the UK due on November 3rd, this spike in Sterling could be short lived and as predicted by market analysts send Sterling closer toward parity against the Euro should they ease monetary policy as expected.
With this current spike for Sterling it may be a good idea to have a snatch and grab attitude so you don’t miss out on these 3 weeks highs before it’s too late, as always stay in contact with your account manager here at Currency Index for expert information and friendly guidance.
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