By Luke Dyson
For the week to date we have seen sterling hold its strength across the board against both euro and dollar. With where GBP/EUR is tracking at the moment among the current situations across the world it seems to be outperforming many major currencies except the safe haven US dollar.
Since the beginning of the week we have seen Russia begin to pick up their advances on the take over of Ukraine, with attacks now taking place in the Donbas region. The current situation in Ukraine is significantly helping the performance of the pound against the euro.
This is mainly down to the following three factors – the UK is drastically less dependent on Russian energy, The UK’s proximity to the war compared to the rest of the EU and also the UK’s interest rate hikes so far in reflection to the EU’s.
With the war currently being the major driving factor for sterling’s gains against the euro, it is not the sole influencer. China is now beginning to have a significant impact on euro strength as they are now in a strict 400m covid lock down in an attempt to get the virus under control, however this has left the EU’s exports seriously damaged with the economy now starting to lose its power.
Although for the short term it seems GBP/EUR is on the rise, this could potentially be very short lived and drastically change following any major announcements regarding the current war in Ukraine. As this is the current largest driving factor at present it could do some serious damage to the currency pair if any changes were to happen.
So consider taking advantage of the current market conditions; the war is very unpredictable and could end up costing you more if left till an update emerges.
For Sterling-Dollar we have seen quite a bit of stability over the last few weeks, however a typically slow decline has been in place as sterling now begins to struggle to hold its current support level. This is as a result of the Federal Reserve bank president James Bullard announcing the US central bank need to raise interest rates to 3.5% in an attempt to tackle current inflation. This could do some serious damage to the currency pair as this is potentially a large basis point hike scheduled across the course of the year resulting in the dollar strengthening further.
Where the current rates are for Euro and Dollar, they are both in a good buying opportunity at present, with what’s going on in the background for this sterling strength we are currently seeing could be very short lived depending on various decisions that are made in the near future. Please get in touch with your currency consultant today to discuss a strategy to take advantage of the current rates and limit your currency exposure ahead of an upcoming property purchase.