US helping hand for Euro buyers

27 March, 2015

Tom Arnold

This week has mainly been a week of negatives for the Pound with fears of political instability coming into the market in full force ahead of the general election, coupled with interest rate hike expectations being put firmly onto the back foot by fast dropping inflation.

There has been a bit of a turnaround in the last 24 hours for those of you buying Euros however. The Pound had dropped seven cents against the Euro in recent days – the quickest and largest drop since 2008 – but this has reversed slightly in the last day, thanks to the US Dollar.

This is a great example of the knock on effects that can move currencies, due to worldwide economic conditions, rather than anything specific locally. US PMI figures posted the best figure for 6 months yesterday, and the Dollar strengthened as a result of this surprising announcement. Recent US Dollar negativity was reversed instantly, and large scale investors jumped back onto the Greenback, leaving recently invested Euro positions. Result = weak Euro against all currencies including the previously struggling Pound. This obviously provides a great opportunity for anyone with a Euro requirement who had been pulling their hair out at the Pound’s recent tumble.

However – the governor of the Bank of England and one of his colleagues are speaking today, and whenever they speak recently, be it about longer term expectations for interest rate hikes, or deflation or even directly about a strong Pound compromising the UK economy, the Pound tends to weaken, so this opportunity could be short lived.

The day ahead is a relatively quiet one on the markets, with those Bank of England speeches and some minor industrial data from Europe the only things on this side of the pond and US GDP and a speech from Fed Chair Janet Yellen all that is coming from the other side. GDP is always an important one and Janet Yellen has been a bit more controversial recently, so expect some movement this afternoon, and remember movements elsewhere are fully capable of impacting things at home as we have seen in the last 24 hours.

As ever stay in close contact with your CI currency specialist to be kept informed of exactly what is happening and how it is likely to impact your upcoming purchase.