The story so far
Faced with a great deal of scepticism regarding the UK’s continued EU membership, David Cameron put his promise of an upcoming election at the forefront of his successful election campaign last May. Whilst appeasing the supporters of a ‘Brexit’ with this move, Sterling hasn’t received the news quite as well and since May we’ve witnessed a gradual decline of the GBP/EUR exchange rate from the high 1.30’s down to where we are now in the low 1.30’s.
Whilst the potential of an upcoming exit has had a knock on effect on the value of the Pound, it’s not the only reason we’ve seen this gradual decline. Slowing growth figures coupled with Mark Carney’s suggestion that an increase in interest rates during 2016 is unlikely, have taken their toll on the value of Sterling with the currency making national news because of its weakness.
Will Sterling exchange rates continue their decline?
Currency rates have traditionally weakened in times of political uncertainty and what we’re witnessing right now with Sterling is no different. I believe the Pound will continue to weaken against the major currencies as we approach the referendum, with some sources, the prime minister included, suggesting that it could be held as soon as possible although it was originally outlined for the end of 2017.
Additionally with the US economy showing signs of a recovery and having raised interest rates towards the end of last year with the potential for further increases this year, I find it difficult to see GBP strengthen against USD in the upcoming future. With the Chinese economy growing at its slowest rate for a quarter of a century and emerging markets generally slowing down we’ve seen the Euro gain strength as investors seek safer options for their funds, with the Eurozone generally being considered more of a safe haven by investors.