Up until yesterday’s trading the Pound has performed well of late, showing improvements over the past month against the EUR, USD & AUD. However, yesterday proves why the current market is so unstable with Sterling taking a hit against the aforementioned currencies, following a poll by the Guardian which indicated that the Leave campaign had edged into a narrow lead! Despite rates falling against all of these currencies yesterday, the general trend has certainly been positive of late but I would not be sitting back and assuming that the Pound will continue on an upward curve.
Personally I did not expect the spike we saw a couple of weeks ago, especially whilst there was so much uncertainty surrounding the UK economy and the upcoming EU referendum on June 23rd. It does seem as though the market had factored in the likelihood that the UK public will vote to remain part of the EU but whilst this is not guaranteed, I am wary about putting too much faith in what are likely to be fabricated polls. This becomes even truer when you consider yesterday’s market move.
If you consider the improvement we’ve seen of late I do feel that we are unlikely to see another major spike if we do stay, as that is now the anticipated outcome. If we leave the Pound is almost certain to take a hit and based on where GBP rates were only a few weeks ago, the current levels could seem like a distant memory. I also anticipate further polls to indicate different results and if we see the leave camp continue its fightback, again it is likely to negatively affect Sterling’s value.
We also need to consider the Bank of England’s (BoE) stance, which remains extremely cautious at present. Whilst a central bank is committed to keeping their currencies value under control, then it is more than likely this will happen over an extended period of time. I feel that with the opportunity EUR buyers have been given, why gamble on such a volatile market? Take advantage of some of the best buying levels of the past 6 months and then relax whilst others panic, ahead of the most important national votes we’ve seen over the past 50 years.
Looking ahead and it’s a sparse week for UK economic data, so expect additional volatility to occur from the figures that are released. We have UK Manufacturing data on Wednesday, with an improvement expected. Thursday we have Construction figures, followed finally by Services data on Friday. These are expected to show mixed results but any deviation from the current predictions and expect further volatility for the Pound.
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