CURRENCY EXCHANGE: Pound dips on profit taking

EDITOR’S NOTE: 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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When Brexit news is quiet, the pound seems to emerge from the ashes. Before the phoenix can spread its wings too wide, however, something else always seems to come along and and extinguish any hopes of it flying high.

That seems to have been the case this week. After Article 50 was triggered the pound enjoyed a surprising boost, peaking at €1.18 on Friday evening of the previous week. It maintained a handsome level for the majority of last week as British politics were focussing elsewhere, and the Europeans enjoying a period of apparent calm before the French elections storm pass through later in the month.

As we got closer to the end of the week, the Friday afternoon squeeze took sterling a little lower across the board as traders appeared to unwind their positions.

Clients that I’ve been speaking with have asked how The US’s decision to target a Syrian air base in retaliation airstrikes to the heinous gassing attack seen on Tuesday will affect the market. Often with these types of events, it’s very difficult to give a definitive view on what may happen moving forward. Any recourse from the Syrians, particularly on US soil will be market moving. The dollar tends to strengthen in times of uncertainty, due to its safe haven status. This could devalue the euro as investors become more risk averse. A weakening of the euro isn’t guaranteed of course, but wouldn’t be as surprise.

As we know, the wind can change direction at any time and bring Brexit-shaped clouds to us very quickly. Negotiations will start soon, and although the schedule of events aren’t clear to us, the market will react accordingly.

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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