Thursday 18th September 2014
Today is the day of reckoning for Scotland, and the currency markets are going to be very susceptible to the result, whichever way it goes. Let’s have a look at how Pound/Euro and Pound/Dollar rates are faring ahead of tomorrow’s result:
We’ve seen a spike in Pound/Euro rates today, and at the time of writing GBP/EUR sits at 1.2720 – this is the highest in over 2 years. in fact if you look further back at average rates, we’re within around 1 cent of the highest Pound/Euro rate in 6 years. That was back in October ’08 when the credit crunch hit destroying the value of Sterling.
Part of the spike is weakness in the single currency, but mostly it is the Pound that has been gathering strength as a ‘No’ vote for Scotland is being priced into the market.
This is the highest it’s been in well over 2 years. Today alone we have secured a record amount of Euros for clients and this is for 2 reasons. Firstly it’s the best it has been in years. Secondly, the chance of a big drop in rates if Scotland vote yes mean most clients want to fix a rate now to protect against a drop.
Even if the vote is No, it’s hard to see the Pound gaining significantly given the high it’s already at. I think the NO vote is already priced into the market for the most part, and the uncertainty which would remain even if independence is rejected will likely hold the Pound back.
If I needed Euros, I would be keen to fix a rate while it’s the best it’s been in years. For me, the downside risks for hanging on to see what happens tomorrow would be too great. Those selling Euros should have a Stop Loss in place to protect against the Pound gaining further.
If you would like to discuss which way exchange rates are moving, and get a quote to see how much we can save you on your currency, click here to send a free enquiry.
Rates have climbed for this currency pair, after falling overnight. The reason it dropped was due to comments by FED chair Janet Yellen last night. She indicated interest rates will be going up at some point in the USA, and that they will have wound up their QE stimulus programme within a month.
This strengthened the Dollar and pulled rates down as the chart above shows. However the Pound has reversed these losses due to the strengthening of the Pound today. Sterling has gained as a ‘No’ vote gets priced into the market.
As with any currency against Sterling, the risk of a big drop should they vote Yes is huge. Get in touch today to discuss your currency requirement. I can source rates up to 5% better than banks and other financial institutions can offer, and I also have various tools and contract types than can protect you against the market moving the wrong way.
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