The pound to euro rate is one of the more tricky currency pairs this year since both are subject to their own political pressures. Thankfully we can split up these different events and can present some potential trends which might manifest which clients looking to buy or sell Euros for pounds should be taking stock of. Ultimately there remains the possibility for some unexpected turns of events to shape the rate and cause something you hadn’t planned for!
The pound has been trading stronger on the back of better economic data and expectations of a softer Brexit. This will all become much clearer in the coming weeks as the Supreme Court makes their decision on the UK government’s right to trigger Article 50 using prerogative powers. This could be due any day now and it appears much of the news is priced into sterling. This means markets seem to expect that the result will favour the previous decision. The risk therefore is that the decision goes in favour instead of the government – this would see sterling slide as investors backtrack on the more previous positive views over the pound and the future of the UK. At this time GBPEUR could be trading between 1.12-1.20 depending on the outcome. As you can see much of the good news is priced in.
Once this event passes attention will then I believe turn back to the harsh realities of Brexit. As the resignation of the UK’s Ambassador to the EU shows there are some serious hurdles ahead for the UK politically. These will not translate into GBP strength as the complexities of the negotiations become apparent. Plus there is the hidden dangers in the economy with many economists predicting some form of slowdown in the coming months and weeks. Once the economic data starts to reflect poor figures so too will the performance of the pound start to slide.
January will certainly feature mainly sterling news but of course in the Eurozone politics will be high on the agenda too. With French elections due in April, February and March will I believe start to see the Euro coming under pressure as investors fears over a Marine Le Pen Presidency take shape. I expect GBPEUR to be trading at this time anywhere between 1.10 and 1.20 depending on what has happened with the latest Brexit news. The end of March sees the time when the UK will according to Theresa May enact and trigger Article 50 which will put real pressure on the pound. The removal of any uncertainty that Brexit might not happen should see sterling slip. Plus any deterioration in UK economic data will not help sterling, particularly against a stronger Euro. Rates trading closer to 1.10 once again seem more likely to me as there appears to be more issues weighing against the UK than the Eurozone.
Three key flash points to watch out for this quarter are the:
– UK Supreme court decision
– French election
– Triggering of Article 50
If you are buying or selling Euros then I would expect you have two main goals. If you are buying Euros you probably want to get above 1.20, if you are selling Euros you are probably hoping to get 1.10 or as close to it as possible. To help you secure your optimum exchange rate of exchange we offer a range of tools to help you trade at desired levels and monitor market direction. I can offer a personal service to help explain exactly what is happening in the market and to try and help you target a desired exchange rate. For further information please speak to me Jonny by emailing firstname.lastname@example.org. I would be most interested to hear from you and offer some assistance in what will clearly be an exciting year for GBPEUR exchanges.