Buying Opportunity?

10 August, 2018

Tom Arnold

This week has been very quiet on the eco stats side of things and as a result, Brexit has been the main source of movement for the Pound. As a result, Sterling has struggled. Reports that the chance of a “No Deal Brexit” is now up to 60% caused great concern and the Pound dropped to levels not seen against the Euro and Dollar for around a year.

For those of you with a currency requirement and Sterling in hand, this might cause you to think it is worth hanging fire to wait for the inevitable Sterling recovery… But with Brexit deadlines fast approaching and no sign of any kind of breakthrough on negotiations, you have to ask yourself where the recovery could come from? One of the most positive things that can happen for a currency’s outlook is rising interest rates, and despite the Bank of England doing exactly that just a few days ago the Pound has still managed to find no support. A year ago, when negotiations were last in these kinds of doldrums, the Pound dropped a further four cents from where we are now – that’s almost £7,000 more for a €200,000 purchase – can you afford to take that kind of gamble, by hanging on?

Today brings a little respite for those of you with a Euro requirement because ECB concerns over European bank’s exposure to Turkey’s financial problems have caused the Euro to itself weaken off by around half a percent.

There is also a significant amount of data due out this morning – UK GDP, industrial production, manufacturing production and trade balance figures are all due at 9.30. With a mixed bag of expectations and a data-starved market, we can expect the special focus to be placed on these releases, with GDP, in particular, a potential massive mover for Sterling. A small improvement is expected for growth, but many other recent eco stats have indicated this could be optimistic, and if GDP fails to meet expectations we could see this morning’s Euro weakness offset by a further bout of Sterling weakness.

Given the backdrop, this morning looks like it could be a good opportunity to consider securing your currency, particularly if it is Euros you are buying. Make sure to get in touch with your CI account manager to discuss your options.