EDITOR’S NOTE: The pound has staged a relief rally in recent days, as traders begin to think Sterling may have been oversold. Foreign currency exchange specialist Luke Trevail explains.
The see-saw effect of the financial markets can create joy and despair all at the same time and Sterling’s apparent ability to rise from the ashes last week has had many people punching the air as others hold their heads in their hands. This rollercoaster seems likely to rumble on over the coming weeks with the twists and turns of the EU referendum campaigns no doubt creating an increase to the already volatile market.
The pound has been showing signs of resilience over the last five days however, holding onto gains that we saw the week before, this despite numerous economic data failing to impress most notably retails sales and UK unemployment. Sterling has peaked up at €1.27, a big swing up from the 2-year low of €1.22 that we saw earlier in April.
Looking ahead those people on the rollercoaster are likely to garner more information from the opinion polls about Brexit to determine their market position. One recent poll suggested that a stronger lead for the UK to stay, and that the probability of an exit dropping to as low as 20% has turned the pound round to some more respectability.
This relief rally does seem to be potentially here to stay after news that traders have anticipated a wider correction after dumping the pound perhaps too excessively in the weeks gone by. Those of you looking to secure rates of exchange for selling the pound and buying the euro are extremely well placed to take advantage of the move in your favour. As we know anything can happen around the time of an election, or in this case a referendum so don’t’ be caught out and miss it. Yes, the market may go higher but all it takes is another poll to suggest that there is a greater chance of us leaving than staying and we’ll no doubt see an erratic drop again.