Fresh Brexit fears drive currency down to 15 month lows
This week has seen GBP backed into the currency corner with most major currencies strengthening against it despite the Brussels attacks on Tuesday. The major concern for investors now appears to be focused around ‘Brexit’ statistics with figures showing a split vote between ‘Stay’ or ‘Leave’.
Any terrorist event, especially targeted within the EU will be seen as a major blow to the ‘Stay’ vote, with the likes of Nigel Farage using it as a perfect opportunity to promote the agenda of a ‘Leave’ vote, linking the attacks in Brussels to a migration issue.
His comments sparked a drop in GBP investment and saw investors moving towards safe-haven currencies such as the US Dollar. An emergency meeting today will take place in Brussels to discuss Tuesday’s events, an opportunity to boost morale and bring EU nations together.
Given that GBPEUR has been trading within a range of 1.26 -1.30 for some weeks now, any news releases that could boost GBP would be welcomed by those purchasing Euros with Sterling, as the trading levels in the 1.40s at the back end of last year now look highly unlikely to be achievable again for some time. At the time of writing, GBPEUR rates appear to have bounced back to normal ranges in the 1.27’s. Earlier today Retail Sales Figures came in better than expected; this coupled with poor expectations around the ECB’s lending potentials have given GBP a decent perk prior to the Easter period.
UBS claim Euro gains ‘undeserved’
Swiss bank UBS claim investors are misjudging the ‘Brexit’ impact, claiming that EUR will be just as worse off without the UK. They claim the consequences of a ‘Brexit’ will be just as negative for the rest of Europe. These claims do appear to have some truth behind them, given that the UK are the second biggest contributor to the EU.
The question does remain however; will the UK survive outside of the EU, and what will be the further implications for GBP against other major currencies such as USD?
The calm before the Storm for EUR
Very little economic data is due to be published over the Easter holidays but eyes are now glued to next Thursday’s major event, the Consumer Price Index followed by the ECB’s Monetary policy. This aims to provide a holistic representation of the Financial market, as well as economic developments. Mario Draghi has maintained a Hawkish approach to Interest rates recently, a negative financial outlook for the Euro would see a huge dip in confidence for Euro investors, potentially strengthening Sterling.
For anyone looking to buy Euro’s with Sterling, waiting for the results of Thursday’s Monetary policy may be wise.