EDITOR’S NOTE: “The merry-go-round of uncertainty just keeps on spinning and the pound is finding it hard to get off this unenviable ride” writes Foreign currency exchange specialist Luke Trevail, who looks at the factors driving exchange rates, and what the future might hold.
This last month has seen some of the worst rates in over year when buying the euros but also signs that Sterling may have some life left in it. That is until Boris speaks of course.
At the start of 2016 Sterling to Euro rate was trending in the region of €1.36. However, over the last six weeks, disappointing UK data and growing fears of a Brexit has sent the pound reeling.
Earlier this week we sank to a 17-month low of €1.26, a fifteen cent collapse from the end of November. This is partly due to Boris Johnson’s comments in support of the ‘Leave’ campaign which has grabbed public interest in the upcoming EU referendum.
The volatility that we’re seeing currently is likely to remain this side of 23rd June when the public vote on whether we stay or go. The arguments on each side do seem to make sense and it will be up to the great British public to determine the outcome. I hope that The Clash were not foreseeing woes for the economic recovery when they sang; ‘If I go there will be trouble, and if I stay it will be double’. But only time will tell.
Glimmers of light for a better rate for those of you praying that the pound may find its way back above €1.30 were shining last week when the European central bank cut the main benchmark interest rate and added a further €20 Billion per month to their monetary easing package. This quantitative easing was largely factored in however so we moved from €1.30+ immediately after the announcement to €1.2750 later in the session. Sterling has been trading near these multi-month lows ever since.
Planning for your buying of euros is always a difficult thing, but preparing yourselves for turbulent ride over coming months is well advised. Many people have been placing forward contracts at the current rates as they prepare for Sterling to continue to slump nearer to the referendum.
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