Euro strength sends pound down

6 December, 2016

Ashley Finill

On the backlash of last weekend’s political events we have already seen a volatile start to the month and certainly to the week. Yesterday Sterling dropped over 2 cents against Euro returning back to levels we were at the close of business on Friday last week. All eyes were firmly fixed on the Eurozone over the weekend With the Austrian election not delivering a shock result, whilst the Italians voted No in the referendum for constitutional reform. This brought room for a Sterling jump late on Sunday evening, however with the opening of the markets yesterday morning the Pounds gains were short lived. This could be seen as the Euro being oversold in the lead up to the Italian referendum and the Austrian election thus the Euro clawing back some ground against the major currencies. Now with Sterling once again on the back foot this could be a reboot to a falling pound. For example the UK posted positive Marking Manufacturing Figures in the morning yesterday and what would be expected to strengthen Sterling simply did not with the Euro continuing to pile on the pressure posting its own positive data with retails sales coming in over 1% better than the last reading and above expectation.

Later in the afternoon the US released Markit services data which further aided the Euros rally with figures coming in 0.1% lower than expected. Today could create more room for potential Euro gains as Eurozone GDP is expected to post a positive figure with the outcome to be announced at 10.00am. Later in the day from across the pond the US will release Trade Balance figures and is expected to post a lower figure than last month. Should this be the case expect the Euro to react positively and gain more ground against the major currencies. With the Brexit hearing still ongoing in the supreme court Sterling is in a somewhat vulnerable state. With Brexit still set to go ahead any news categorically confirming this could send Sterling into a sharp fall. Whilst we are still currently trading at over 2 months highs it may be worth considering biting the bullet to secure your currency requirement. As we have seen in the past any news surrounding a pro-Brexit outcome the markets are unforgiving when it comes to a Sterling fall and could hand you a nasty shock in your budget.

As always stay in close contact with you account manager here at Currency Index for friendly guidance and information.