GBPEUR hits fresh 10 month low

Tuesday’s trading was extremely quiet on the data front with no key releases for any of the major currencies. The morning session was therefore very quiet until the busiest session of the market began around midday which then saw the pound continued to be pushed lower losing around a cent against the USD, and dropping to a fresh 10 month low against the Euro.

Sterling continues to underperform as data has been gradually worsening in recent months. Wages and average earnings are not keeping up with rising inflation and people’s pockets are beginning to feel this with Retail Sales underperforming hugely over the last quarter. With people spending less, growth is gradually slowing each quarter as the UK now finds itself with the slowest growth in the G7. Monetary policy is set to remain the same well into 2018 with any chance of a near term rate hike now seemingly off the cards, and as such the UK is very much out of favour with investors, particularly with the huge uncertain backdrop of Brexit and its potential outcomes.

Last year when we hit 1.10 against the Euro after the referendum, we saw a period of sideways trading along this support level before any bigger changes. The same behaviour is very likely in the coming weeks before we approach the uncertainty of the German elections in September, so anyone holding on for a change in this trend could be waiting years rather than weeks. Many banks and analysts are forecasting parity next year and unless something changes, all conditions are currently in place for this downward move against the Euro to continue.

Today is another quiet day of data, and as such is likely to offer any big changes in these struggling rates. Mark Carney will sit for a hearing on last week’s Inflation Report at 11am however it is unlikely to provide any new information in addition to what was given in the BoE report last Thursday. For those with an interest in the Kiwi Dollar, 10pm tonight is the latest interest rate decision in New Zealand although markets expect another months hold at base rate of 1.75%.