Will the Pound dive
31 July, 2012
Yesterday’s trading saw a similar pattern to what we have seen over the past few months as European debt concerns continue to dictate which way the markets swing. The pound was down against the broadly stronger dollar as investors remain on the fence as to whether or not the ECB will actually, as many hope, support the faltering euro before it gets too late.
On the data front, mortgage approvals were down on the UK but this did little to dampen the GBP/EUR rate and many investors feel that until the eurozone crisis gets closer to a resolution the pound will continue to be used as a safe haven. However with the ECB potentially to re-start their bond purchasing this week we could well see a resurgence in the strength of the 12 bloc currency.
“It’s getting tougher for sterling It’s holding up well against the euro, but things become a lot less certain towards the end of the week with quite a weight of expectations around the ECB,” Simon Smith, head of research at FxPro.
“If they do something more aggressive or bolder than before, that has potential to improve the euro at sterling’s expense.”
Therefore the week ahead is all geared to the BoE’s and ECB’s policy meetings which conclude on Thursday. If the ECB announce they are to resume their bond purchasing, don’t be surprised to see a euro rally and although we are unlikely to see any surprises from the BoE with a worsening UK economy a further rate cut or more quantitative easing could be seen later in the year.
On a more positive note to GB acquired their first team medal in the men’s gymnastics for 100 years which brought joy following Tom Daley’s disappointment. Not a 100 year high but just short of a 3½ year high still means we are at great levels to buy euros and waiting too long could see the pound dive if the ECB takes action and just like Tom Daley it may not be able to recover!!
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