EDITOR’S NOTE: Market fears of a Brexit in the UK’s June referendum, plus weak economic data at home, have pushed the pound to its lowest level against the Euro in almost two years. Foreign currency exchange specialist Luke Trevail explains.
In the pursuit of clarity over the future of the UK economy, we’ve become encased in a foggy cloud of uncertainty causing the pound to lose what little momentum it had and crashing to a new low this week.
GBP-EUR touched €1.2310 on Wednesday the lowest since June 2014 as the EU referendum, continues to influence the market.
Manufacturing output in the UK has fallen 1.1% from January and figures released today show that we’re down 1.8% from this time last year in the sector.
The steel giant Tata stating their decision to close their Port Talbot plant has led in part to this manufacturing slump so figures although not good, aren’t a surprise. Worryingly, global steel prices and the uncertainty of Tata’s position in the UK market isn’t the only thing causing bad news in this key area of the economy. Orders may start drying up the closer to the referendum that we get as the outcome is uncertain and prices may not be able to be fixed.
The housing market, another obsession of homeowners in the UK, and a certainty in the last 3 years to continue moving up month on month, is also not immune to the fears of Brexit. Halifax have said that ‘worsening sentiment’ could lead to a softening in this market in the short-term, and perhaps longer depending on the outcome of June 23rd.
Sterling is a benefactor of prosperity but is also often a victim of its own success and remains on the back foot as we can see. We’re still a long way from any definitives of course and there seems to be good arguments for both the stay and go camps for whether to stay in Europe or leave. We’d expect this to increase over the coming weeks no doubt but the uncertainty still remains. Accordingly, if you have a requirement to buy euros then you are extremely well placed to stop the rot and step into the market now before the cloud descends even lower.