A changing of the guard at the Bank of England in July did little to revive the pound, with Mark Carney stepping into the shoes of the departed Sir Mervyn King and immediately issuing ‘forward guidance’, a new strategy designed to provide clarity about the near term picture of the ailing economy.
By Luke Trevail of TorFX
The tone of this release, which immediately followed the Bank of England policy meeting, didn’t really tell us anything that we didn’t already know, but did suggest the economic recovery will be a long drawn out process that won’t be easy to navigate.
As a result the pound fell throughout July and early August versus a host of currencies, performing particularly badly against the euro as we touched €1.14 from the €1.18 highs in June.
The Euro Zone continues to defy logic as more countries feel the economic pinch but the single currency seems to carry on regardless. This is predicted to come to an abrupt end at some point, but the question is when.
The ECB has given the market some confidence in its own ability to rise from the ashes, which the market has taken at face value, somewhat naively in my opinion.
I would advise anyone who is still holding Euros to change into Sterling now, as I believe a reversal in the market direction is only round the corner. Those who are waiting for the high teens of €1.18+ may be rewarded if these predictions are correct, but in any event keep close to the market and your currency broker, who can give you the latest exchange rates in this very volatile market.
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