Euro continues to strengthen- UK Elections- U.S interest rates

It has been yet another eventful week on the markets- Many of you have been in contact with me and managed to take advantage of the Euro Dollar going back to 1.10 (See last week’s forecast) and many of you managing to purchase GBPUSD above 1.49 last week as well!

As we approach the end of the financial year many of you may have noticed sudden drops in exchange rates as the week ended- we usually find that on the last Friday before the end of the financial year many traders are pulling out of positions on the market and there is a scarcity of liquidity for a short term period.

Throughout March we have seen GBPEUR hit highs of 1.42, EURUSD hit lows of 1.04 and GBPUSD be as low as 1.47- with varying reasons from QE in Europe, Greek debt problems, UK inflation and U.S weakening their currency. Last week, UK inflation was measured at 0% which was the lowest ever recorded, which weakened the Pound significantly.

The Pound is an extremely volatile currency, and at the moment most of the volatility is coming from uncertainty- The Bank of England keeps giving us mixed responses on when interest rates will go up, and how low inflation will be tackled. My personal opinion is that low inflation will drive the economy as energy and food prices are lower, if the public are spending less on this, they can save more money to purchase other goods which will in turn drive the economy. In essence, low inflation will start to drive supply and demand again, which will boost the economy within 24 months.

April will also be a volatile month with UK Elections coming up, historically the Pound always weakens leading up to elections in the UK or referendums, so for clients who are selling this currency throughout April I would look to start hedging yourself sooner rather than later.

On Tuesday, the UK will publish its GDP data, this will be a market mover depending on if the outcome is stronger or weaker than expected.

If you have a transaction to make over the next month then please contact me for a tailor made solution to help you mitigate your exposure.