Sterling’s decline has continued today, falling briefly into the €1.25’s before settling around the €1.26 level. I thought it was unlikely the rise to €1.29 would be sustained and that’s proved to be the case.
Why has the Pound fallen?
There are several reasons for the fall in the value of the Pound. This week we’ve seen a new ‘Brexit’ opinion poll by ICM, which has shown a slight swing towards the leave campaign. It was close though, with the result showing 45% voting leave, 44% voting remain, and the remaining currently undecided. This demonstrates how quickly things can change, and as the vote seems to tight it’s going to continue to affect currency prices.
We’ve also seen some negative UK data this week. Yesterday UK manufacturing figures showed a contraction for the first time in 3 years, showing growing unease in this sector. This morning, UK construction figures were also worse than expected, which started today’s slide for the Pound against other major currencies. Furthermore, a slowdown in US economic growth seems to have given investors the jitters, causing them to seek safer currencies and move away from riskier assets such as Sterling. These factors combined have caused the rate to drop from €1.29 last week, and threaten to drop into the €1.25’s before long.
With the EU referendum approaching, those that are simply watching the rate and hoping things will move in their favour, could end up losing out significantly. A more prudent approach would be to get in touch with for a free consultation on the foreign exchange services we offer. We have a range of contract types to protect against adverse exchange rate movements, and provide rates of exchange that are up to 5% better than your bank or existing broker may offer.
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