Momentum builds against the Pound

17 October, 2012

Tom Arnold

After a couple of fairly static weeks with both GBPEUR and GBPUSD operating within very small ranges, it seems the markets have finally decided on a route forward – sentiment has definitely moved in the Euro’s favour. There is still the question of when/if the Spanish government will take their bailout, with many Spanish ministers seemingly unconvinced it is necessary, but with the remainder of Europe convinced it is. Will it have much effect? Probably. Once the bailout is taken we would likely expect the Euro to weaken for a time, before then resuming its recent strengthening. However when this might happen is anybody’s guess.

In the short term, Sterling is weak, the Dollar is even weaker and the Euro is resurgent. Today, eyes will be on the BoE’s minutes from this month’s meeting and the UK unemployment figure – both due out at 9.30am. Unemployment has been the surprise package of UK data recently, bucking the GDP position and improving month on month. This month expectations are for no change. If we do see a change either way, then expect the markets to move significantly. Further improvement could see the Pound rally, whereas a rise in the claimant count could see the Pound drop off, even against the Dollar. The BoE’s minutes will all be about expectations of further QE – no one expects anything to happen with interest rates anytime soon. Recent comments from various policy makers have implied we may see more QE fairly soon, which can only serve to weaken the Pound further. So all in all, bar an unexpectedly positive unemployment change, this morning’s data seems likely to dent Sterling’s position further.

Get in touch with your CI account manager if you have an upcoming requirement as time is potentially short. Don’t forget currency can be secured for months or years ahead if necessary, to avoid missing out on rates not too far from recent highs.