Have Brexit fears taken hold of GBP rates already
16 March, 2016
Yesterday was a bad day for GBP with it losing ground across the majority of the board, giving a real concern that perhaps the fear over a “Brexit” and the surrounding uncertainties may have taken hold quickly after last week’s ECB announcement. Throughout the day’s trading and amidst little data of note from Europe GBP >EUR rates dropped by nearly a cent and a half. This would suggest that sentiment is largely with the Euro and following last week’s bullish announcement from Draghi and the ECB this could spell concern, particularly with the referendum fast approaching.
It was a similar story for GBP>USD which also saw a drop of 1.25 cents in the buying rates, helped slightly in the afternoon as the US posted a improved retails sales figure of -0.1% from a predicted -0.2% (although still an overall contraction. USD/EUR rates traded up and down within a tight 50 pip range but closed close to the days open – again a stark warning sign that it is now GBP which is on the back foot of the three major currencies.
Certainly those of you with upcoming requirements to buy currencies from GBP may like to take this as an early warning sign as many have warned of what could be a huge drop in rates as we approach the June referendum date. With the Bank of England’s hands tied in terms of action/ stimulus, and much of the market uncertain of the outcome GBP has little ground to mount any stable defence against the currently strong single currency and safe-haven currency that is the greenback. Given the drop we have seen in the last few weeks, and those yesterday amidst no data with EUR/USD stable it would suggest the pound is on the back foot and further losses could be imminent.
Today could be another critical day for GBP as it is Europe and the US that dominate the Ecostat releases whilst the UK sees George Osborne deliver the budget. In the morning we have the ECB non-monetary policy committee meeting, and in the afternoon focus moves across the Atlantic to the FOMC minutes and FED interest rate decision. Whilst many of you will be watching the budget to see how it affects your pocket and day to day spend, with a pension reshuffle and top rate tax cuts suggested, it is unlikely to have a huge effect on the currency market. And with the ECB and FED taking a bullish approach to monetary policy in recent weeks we could well see them make further gains, with GBP offering little defence to their advance.
So unless you want to take a gamble and like betting on wide odds, speak to us today for some friendly guidance on how to avoid being caught out by a further drop in rates and the resulting increase in cost to your purchase overseas or invoice you may need to pay.
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