Sterling On The Back Foot Again

11 April, 2016

Simon Eastman

Last week we saw the month kick off but not to the benefit of sterling as the recent downward trend continued with gusto.

As April kicked off with the usual round of data releases it was actually the euro which took centre stage as it made decent gains against the pound and the US dollar. The ECB are seemingly happy with the action they’ve taken and are supportive of the single currency, while investors have lost interest in the greenback as talk of interest rate rises have diminished, going from 4 rises to the 2 now expected, that is if the recent dovish tone of the Fed is to be continued. The gain against the dollar has been around 7 percent since the start of the year with, while the pound is down over 8 percent against the rallying euro. Bad news for anyone looking to buy that home in the sun.

The pound is under the heavy shadow of the EU Brexit referendum which is due to go to the vote at the end of June, so we should expect to see further losses for sterling as the vote draws nearer. As we saw with the Scottish independence vote, the polls up to the date only gave greater volatility for sterling as the votes were close run and this will possibly be the same. Certainly at present it seems to be a close call.

So as another week begins, one might be prudent to think the current euro string trend may carry on, so anyone looking to buy might want to take advantage of forward contracts or limit and stop loss orders to make the most of their pound. The following releases are the main ones of note over the coming week.

Tuesday – RBA interest rate meeting minutes, German ZEW economic sentiment survey.

Wednesday – German PPI, NAB Business confidence survey (overnight)

Thursday – German and EU manufacturing PMI, UK Public sector net borrowing, UK retail sales, ECB interest rate meeting and policy statement, US manufacturing and services PMI.

Friday – Bank of Canada inflation report

Not a great deal to go on and mainly euro centred so with current trends, make sure to stay in touch with the CI team to help maximise your exchange in case the euro rally gains more pace.