By James Tucker
Sterling has remained relatively firm against the Euro in recent weeks, but there are reasons to be cautious about the outlook in the coming weeks. GBP/EUR is trading near the upper end of its recent range, which means much of the positive UK story is likely already reflected in the price. UK interest rates, a key driver of exchange rates are not expected to change this month despite inflationary pressures from the war in the Middle East, so for Now Sterling seems to be as high as it could get without further influences.
At the same time, the Euro may have more room for positive surprises. Economic data from the Eurozone has shown signs of stabilisation, and if upcoming figures continue to improve, investors could become more constructive on the single currency. The ECB are expected to strongly consider a rise in their interest rate, which will also likely see a stronger and therefore more expensive Euro.
With GBP/EUR already near upper resistance levels, and a likely stronger Euro in the pipeline, it seems likely we could see a reversal with a move back towards lower levels.
With the GBP/USD exchange rate, the picture is also mixed. The Dollar has strengthened slightly at the start of the week, as investors sought safe-haven assets, amid geopolitical tensions and ahead of a heavy run of US economic data. GBP/USD has therefore come under some pressure, with traders focusing more on US economic resilience than on UK-specific developments.
The broader Dollar index has been trapped in a wide range recently, and this week’s data will likely determine whether the Dollar can extend gains or resumes its softer trend seen earlier in the year. Friday’s US jobs data could give a good indication on what we can expect.
As ever stay in close contact with your currency consultant to help you to make your money go further.