Sterling falls further on global risk aversion

Sterling has continued to fall sharply today, and GBP/EUR rates have now fallen by 3 cents in a little over 24 hours:

Why is the Pound falling?

It’s partly due to the latest polls I mentioned in yesterday’s post, showing the the UK may well vote to leave the EU. The continued fall today is due to reduced demand for riskier assets, such as Sterling.

Today we have seen stock markets falling, along with the price of oil. There has also been manufacturing data from China showing that their economy is still struggling. There is a global deflationary trend emerging, and this has spooked investors to seek safer havens, and dumped riskier assets. There is also the fact that the US will soon raise interest rates, pushing up demand for the US Dollar and pushing Sterling lower.

I’ve been saying for a while that we’re likely to see increased volatility in the run up to the EU referendum, and this is what we’re starting to see. A 3 cent drop in the GBP/EUR rate is a large move in a very short space of time.

The current market will present opportunities for both those buying Euros, and those selling Euros. For example a client that needs to convert €300,0000.00 back into Sterling, will today get over £5000 more than yesterday morning, which really illustrates how quickly things can change. Of course this also means that a client buying Euros will now need to pay more.

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