Positive UK data and EU worries help Sterling despite Brexit fears

forex-26-aug-2016

Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate this week.

A quieter week on the whole has seen the pound cling onto the gains that it enjoyed last week following the positive post-Brexit data for July.

Sterling peaked at €1.1775 and before softening a little and resting just above €1.17. We did see fresh 3 ½ year lows of €1.1450 last week, so we’ll take the positives when they come considering the situation that we find ourselves in after the EU Referendum.

The doom-mongers are in full voice of course, so anyone who wants to take advantage of this move upwards are well positioned to try and do so. Analysts have given a warning that despite Sterling’s fairly good performance over the last fortnight, the full impact of Brexit could take a little more time to filter through to the wider economy and as a result Sterling remains vulnerable to further losses over the next few months.

Data this week Europe wide has been fairly light, but significantly it revealed that Germany has been hit by Britain’s vote to exit the EU. Experts have said that Germany has fallen into a ‘Summer slump’. Angela Merkel now has to deal with the predictions of weaker growth forecasts for 2017.

The single currency has sailed through the summer with little in the way of significant impact by Brexit, but this data from Germany will no doubt grow into something more and other countries cannot be immune from the pressures either you would think. Italy, the EU’s third largest economy is in dire straits and Portugal too we’re hearing is struggling to keep its head above water. All this being said, for a long time it’s been the dominance by Germany and their unwavering strength that has kept the Euro on track despite adverse conditions.

If cracks appear to show in Germany then it might just be a flurry of negativity coming from Europe which would weigh on the Euro and bring the market back up toward €1.20+

As always this is merely speculation at this point and my crystal ball still sits at the end of my desk covered in pre-referendum dust. Nothing is guaranteed as you know, so always look at the facts and the market will tell you what you need to know.

This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.

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