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Pound Still Holding On To Gains

Sebastien Coignac-Smith - Pound Still Holding On To GainsWritten by
Sebastien Coignac-Smith
Currency Broker
T: +44 (0) 1442 892063

Yesterday’s trading session was watched with keen eyes following the movement we had seen in the first half of the week. The question on everyone’s mind was whether the pound was going to be able to continue to hold onto the gains it made on Tuesday against our 2 most commonly traded currency pairs of GBP/EUR and GBP/USD (cable).

Against the euro we did witness a drop from an opening price of 1.1958 to around 1.1925, which in itself is a relatively small movement. However when we look at the session as a whole you can see that rates dropped as low as 1.1885 in the afternoon, which goes to demonstrate the volatility that remains in the market as factors surrounding Brexit, French elections, and now UK elections continue.

GBP/EUR exchange rate graph

GBP/EUR exchange rate graph

To give some perspective to how this movement would affect a typical transaction to purchase a property in Europe we can calculate that on a €300,000 trade the difference at its largest would have been £1,540. Perhaps not a huge amount in the context of €300,000 but enough to be on the way to that new kitchen or furniture suite.

Against the USD it was different profile rates opening and closing near enough 1.2840, having fluctuated half a cent down and back throughout the session.

GBP/USD exchange rate graph

GBP/USD exchange rate graph

Where are rates heading next?

Personally I can’t see the GBP/EUR rate managing to break through the 1.20 mark in the near term. With Brexit uncertainty weighing on the pound, it would take a significant piece of news to strengthen sterling enough to break the obvious resistance levels in the market. Therefore the only likely driver which would lead to rates hitting these levels are the French election results. It is widely expected that Marine Le Pen will succeed in getting through the first round at the weekend, to then lose in the second round on the 7th May. However should this not be the case, and polls begin to suggest a lead for Le Pen in then all bets are off and I wouldn’t be surprised to see the market run up into the €1.25 region.

Update: As France once again awakens in the wake of a terrorist incident, many will be keen to see how this may impact the results in Sundays vote. With Le Pen and Fillon campaigning on security and immigration, there is an argument that these tragic incidents may support their cause. However as today is the last day that polling is legal before the vote, we won’t be gaining any incite until the event itself.

Get in contact

With so many political uncertainties around the globe to try and keep track of, the potential for market volatility, and large rate swings is rife. To keep track of all these factors is almost impossible, and sudden movements are likely to be short lived. For these reasons it has almost never been as imperative to have some support in your corner, and that is exactly what we are here for. Once you have made contact with Foremost Currency Group, you will be assigned a dedicated account manager to assist you through the entire process. Your contact will take the time to understand your requirements, your time frame, and your appetite for risk, to then discuss the range of contract types available before suggesting a bespoke strategy tailored to your individual needs.

Today’s data

There are a few data points to keep an eye on throughout today. The first from Germany this morning at 0830 in the form of Composite, Services, and Manufacturing PMI. Data from Germany always has the potential to impact Euro rates as it is the bloc’s largest economy. 30 minutes later we will have the same data points for the Eurozone as a whole. Another 30 minutes later and its UK retail sales data that will be released, this has been turbulent in recent times, and with an expected figure of -0.2%, there is definitely scope to move markets.

Throughout the afternoon there will be a number of releases from the US, with the highlights being the same range of PMI data as from Europe in the morning.

Sebastien Coignac-Smith
Currency Broker
T: +44 (0) 1442 892063

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