As all of our readers are already aware the Pound has had a torrid year so far against all major currencies and with the present grey cloud of the Brexit hanging over Sterling’s head, it is hard not to see this trend continue. As covered in yesterday’s report this has even led to large banks starting to forecast what may happen should the outcome be for us to leave. HSBC have made it fairly clear that they expect Sterling to potentially drop by 20% against most major currencies, potentially even hitting parity against the Euro.
The current trend does remind me of Sterling’s dip throughout the European debt crisis whereby Sterling did come close to parity however this particular situation is slightly different.
We need to remember that the U.K economy is in a much, much better situation than it was back then and although we are not in line to be raising interest rates anytime soon, our employment levels are solid, growth figures are ticking along and inflation is starting to climb slowly but surely.
I personally feel that more often than not exchange rates do tend to swim against the tide and we need to remember that back in November most major ‘analysts’ were predicting that the Sterling/Euro rate would cruise through 1.50 in the first quarter of this year... Could they possibly have got it any more wrong?!
It may be a little against the grain and a lot of the trading floor here may disagree, but I actually feel that Sterling exchange rates may rise in the next few weeks and not drop away.
There has been a flurry of money moving into safe haven currencies of late due to the issues with China, oil prices, Brexit talks and general market sentiment; however I feel that markets may calm down as we enter spring.
Economic data has been held back this year due to the terrible flooding that we have witnessed, so I do not feel that the true picture of the economic situation has yet been painted and that March may be a better month for data. The markets will settle a little as the initial Brexit knee jerk reaction starts to calm and we may even see further QE (Quantitative Easing) bought in by the European Central Bank on March 10th which would likely lead to a flow of money out of the Euro, making it weaker. We also have the Australian Dollar interest rate decision on Tuesday evening which also has the capacity to weaken the AUD.
I predict that in March we will see Sterling Euro back through 1.30, up to 1.42 against the Dollar and approaching, if not through 2 against the Australian Dollar. If you wish to try and achieve these levels then why not take advantage of a limit order contract. Feel free to email me on firstname.lastname@example.org if you would like more information on this handy market tool.
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