Pound ends 2015 with a whimper

After performing strongly throughout 2015 against many currencies, sterling is seeing out the year on the back foot, particularly against the Euro and US Dollar.

There was no important currency news yesterday, and today we have only the ECB meeting at 1230 on the calendar, before the long weekend.

Looking back at the year however, the Pound has finished in a better position than it started, against most major currencies; the notable exception being the US Dollar. A Pound now buys you a significant amount more than a year ago against the Euro, where a €200,000 property purchase is around £8,000 cheaper than a year ago for example.

                                Jan 1^st    Dec 31^st                Change

GBP-EUR             1.2877   1.3553                   +5.2%

GBP-USD             1.5580   1.4823                   -4.9%

GBP-AUD            1.9069   2.0336                   +6.6%

GBP-NZD             1.9981   2.1602                   +8.1%

GBP-CAD             1.8098   2.0665                   +14.1%

GBP-THB              51.212   53.393                   +4.3%

GBP-ZAR              18.003   23.086                   +28.2%

 

The US Dollar has been different as the first major economy to increase interest rates after the global financial crisis of 2007-8, making its currency more attractive to investors, and we would expect to see this continue into 2016 until there is some talk of UK interest rates going up – if that happens at all next year. For the Euro of course the Greek debt crisis was the major theme of 2015 and that helped the single currency to its cheapest levels since the recession, before things settled down in recent months, and GBP-EUR started to fall back. Again unless there is any further need for bailouts and breakups in 2016, perhaps a Euro buying level in the 1.3s rather than the 1.4s should be considered good value in 2016.

 

The other potential banana skin for the Pound next year will be the UK’s in/out referendum on EU membership, which may happen towards the end of the year. Whether exchange rates will be affected positively or negatively is impossible to predict, but we are almost certain to see significant movements around the time of the referendum – although that of course may not happen until 2017.

 

A happy new year to all our clients and readers and we look forward to helping with all your currency needs through 2016 and beyond.