CURRENCY EXCHANGE: Euro stumbles over worries about turbulent 2017

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

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A quiet week on the markets tells the story of what little influence the fundamental data that traders normally look out for has in the current climate.

The pound started well before losing around 3 cents in the latest wave of Brexit uncertainty. After Parliament voted to approve Article 50 being triggered as per the PM’s scheduled end of March time frame we recovered some ground. Sterling is currently trying to break above the €1.1750 level, €1.18 not being seen since before Christmas so it’s really up towards the best for a long while.

The reason? Arguably the uncertainty that Brexit brought to the UK’s table that drove the pound heavily down until The end of 2016 was helped by Theresa May steadying the ship in her speech in January. Although this confirmed many people’s worst fears over a ‘Hard’ Brexit and the fact that we will leave the single European market, it did underline the fact that she and her fledgling government have at least got some plan moving forward and that they weren’t just down the river without a paddle. Our preliminary agreements with the likes of New Zealand, Japan and of course Mr Trump who welcomes Brexit and has bumped us from the back of the queue towards the front have helped the market and gave a little more comfort about the future too.

The ever present fact for analysts and traders alike is that the Eurozone with or without the UK are in for a turbulent 2017. France and Germany we know have general elections. Italy have major issues particularly with their financial system and this has the legs to develop into a very different beast in the coming weeks. Greece, who kicked it all off a year or two ago have this week emerged from the woodwork. If there was ever a story to develop into something bigger, then it’s this one.

If you remember Greece WAS virtually bankrupt and needed to be bailed out by the International Monetary Fund, which needed the Eurozone’s approval. The IMF have said that Greece needs more leeway to pay its huge debts before further rescue funds can be released. The Eurozone is reluctant to do much more than it has though, else they run the risk of picking up the tab if Greece renege on the arrangement. Tensions are mounting, and euro governments are haggling how to handle the country’s bailout. We know from previous occasions that this has the scope to evolve and could easily weaken the single currency moving forward.

For the immediate term, those of you looking to move funds are in a good position to cover yourself and be happy with where things are. If you have a little more time and are brave then who knows, you could be in the midst of a decent move. Hold firm, and fingers crossed.

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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