Sterling exchange rates have have rallied 2.5% in less than a week bring the pound to its highest level against the single currency in nearly 6 months. This drive towards the pound has created, in my opinion, some very strong buy opportunities for those looking to secure euros. To highlight how this move can impact anyone buying euros, the cost today for a €300k international money transfer would be £6.5k cheaper than this time last week.
What has caused the pound to rally?
As my colleague Alastair alluded to in his post yesterday the pound found support following an article released in the Sunday Times suggesting that a Brexit deal was close. This all sounds a little bit like the ‘boy who cried wolf’ at the moment with continued rumours creating significant shifts for the pound. Just last week an article was released by the Times late Wednesday night, report from the Times newspaper suggesting that London had agreed negotiations with Brussels to give UK financial services firm continued access to the Euro Zone. This report was unsubstantiated and following a strong start on Thursday morning the pound devalued sharply.
My point here is that if this report is to be true, then we should see the pound gain momentum and push towards 1.20, however I have my doubts. We seem to have been down this road on numerous occasions and each time, when a deal looks likely, the deal did not come to fruition and as a result the gains made for the pound were short lived. You can see by the graph below that the pound has found support on 4 separate occasions since August, worryingly each time the pound has rallied exchange rates have sharply declined within a matter of days. I for one hope we are on the right track for Brexit buit I have my dowbts and I believe the GBP/EUR seesaw is set to continue.
What else could impact the pound this week?
Of ocurse the main drive for the pound will continue to be Brexit negotiations. Rumours were suggesting the cabinet were due to meet this week however that no longer seems to be the case, so whether the Sunday Times article is correct remains to be seen. Brexit aside the main focus for the pound this week will be Friday with data heavily weighted to the UK. Look out for UK GDP data along with industrial and manufacturing data, all scheduled for 09:30. For anyone looking at the US dollar then the Fed interest rate decision on Thursday is also one to look out for.
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