Sterling rallies to a 9 month high against Euro
26 March, 2018
Last week was a rare positive week for the pound with a string of events all going in its favour. The week began with some positive updates from Brexit negotiations with regards to a near deal on a transition period for businesses. This was swiftly followed by better than forecast unemployment data with the headline rate dropping back down to 4.3% from 4.4%, and with average earnings also creeping higher. Thursday then saw strong Retail Sales figures for the UK which boosted the pound further ahead of the Bank of England meeting. At this point the pound was up by 2 cents against both the Euro and the USD and trading at a 9 month high against Euro.
The Bank of England threw up a surprise with 2 MPC members voting for a rate hike, despite inflation levels dropping earlier in the week. This has led to speculation that the BoE could be ready to increase the base rate as early as May however any immediate gains were capped by technical resistance that continues to hold strong. The pound finished the week only a cent up against the Euro, a relatively small amount given all the better news and data. It is also important to recognise that only 2 weeks ago GBP/EUR was trading at the lowest rates for 3 months, so recent gains have ultimately recovered the losses seen last month. The pound remains flat and is likely to do so until a more concrete resolution is found in the current round of Brexit negotiations, and this could very easily take a number of months. This is best illustrated with GBP/EUR that has been trading in a clearly defined channel for over 6 months now, with no signs of breaking out of this any time soon. (see chart below)
Sterling now finds itself trading high against Euro at the top of the current range providing an excellent opportunity for Euro buyers in the coming months. On Thursday a €250k property would have cots £7k less than it did just 2 weeks ago, and although the market is already dropping from this peak, rates are still within 0.5% of the best buying rates since June 2017.
The week ahead is very quiet for data as we head into the month end and a bank holiday weekend for Easter. We only have revised GDP data for the UK on Thursday but this is low impact, leaving the pound exposed to profit taking and a correction from the recent rally. Contact your foreign currency payment specialist at Currency Index today to discuss how you can fix the current rates for up to 2 years in advance using our Forward Contracts and lock into a rate this high against Euro.
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