Strong Pound – How far can it go

In recent weeks whilst the pound has made gains against many of its counterparts it has notably struggled against the Euro which has been in part bolstered by the struggling Dollar as investors move money across the Atlantic from the flagging US economy and into Europe.

However, it has been a particularly good week for the British Pound reaching nearly year highs against the Euro and now almost year-long highs against the dollar also.

Interestingly while Wednesdays trading looked to be short of data of real note it seems a strong US retail sales figure shifted the USD/EUR balance and investor confidence returned to the greenback and as a result the pound was able to rally against the Euro which had lost some of its support. The pound gained over a cent against the Euro in the days trading alone, and over half a cent against the dollar, whilst the dollar benefited from gaining nearly a cent and a half against the Euro – only demonstrating the underlying effect of the USD on the GBP/EUR mix.

Certainly it would seem that at least in the short term the pound has truly started to fight back and is for the moment the strongest pick of the three, and indeed elsewhere the pound is demonstrating this with a range of rates increasing recently including AED, ZAR, and SEK to name but a few whilst AUD is at a 39 month high!

With a relatively quiet day in the way of data today other than Canadian CPI it is likely that the majority of majors will remain relatively range bound. Certainly CAD could continue the small rally seen yesterday with a positive CPI figure. Despite the lack of major data it is possible we could see movement in GBP pairings as it may struggle to maintain the current highs it is experiencing against a number of other currencies.
Without doubt at present the burning question on everyones lips is will the pound gains last and if so how far can it go?

Unfortunately there is no crystal ball and the currency markets landscape is a constantly changing one. With a busy week for data next week and the US debt situation playing a behind the scenes role without doubt we will see continued volatility, particularly in EUR and USD rates.

With rates for buying USD and EUR particularly good at the moment you may be well advised to consider a forward contract to avoid disappointment. For those who are selling EUR or USD, fear not! Currency Index are able to offer a range of solutions on how you can secure your currency, so speak to your Currency Index broker today for some friendly and professional guidance on our various contract options to ensure you can make the most out of your transfer.

We can help you stay well informed and well ahead of the markets.