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.
The pound continues to surprise. We’ve been as high as €1.19 in the last 24 hours and the prospects of reaching these levels again are real.
A combination of the pound showing resilient signs of strength and the euro looking ahead and seeing the pitfall laden future are the driving factors behind the move. The single currency weakening and the pound finding some comfort can easily shape the future of the market activity, but of course we shouldn’t get too ahead of ourselves yet.
The effect of the referendum outcome is starting to resonate with the bigger businesses now, and towards the end of the tax year it wouldn’t be a surprise to see more household names blaming poor figures on Brexit-related tension. Airline group AIG, which own British Airways has reported a rise in profits but estimates that they are nearly €500 million lighter than where they would be if the pound were stronger. How this will affect smaller business remains to be seen. The decline in the pound since last summer clearly will have knock on impacts, which could derail the resilient pound.
For the immediate short-term those of you wanting to move funds across to Spain will get the highest rates that we’ve seen since before Christmas.
Article 50 is on the horizon of course and market analysts are hedging what entering into formal negotiations with the EU will mean to the rates. Some believe we’ll have a slump towards €1.10 or lower as the process in leaving becomes real. Others suggest that the market is prepared for the event and believe that the hard work has already been done. All that’s left now is to thrash out the complexities of the arrangement and start afresh.
The reality is we don’t know, but will do soon enough. If you’re brave and want to wait then it could work in your favour. If not, then acting now will get you some of the best rates this year, so don’t delay!
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.