After the ups and downs of last week – mainly the downs, it has to be said – sterling has had a stable start to the week against both the US dollar and euro.
Opening the graphs out to look at the bigger picture and you can see how, in comparison to the overall post-referendum picture, GBP/EUR is remaining remarkably resilient while GBP/USD is floundering.
However, against the euro it’s hard to see an upside for sterling right now. The latest threat is a potential trade war with Brussels over Northern Ireland. The Foreign Secretary seems to be squaring up for a fight, while the EU has warned that a response to the UK breaching the agreement could be tariffs on UK exports.
All this against a background of the governor of the Bank of England warning last week of a “very sharp slowdown”, with inflation hitting 10% and unemployment picking up sharply as the country goes close to, if not into the technical definition of a recession.
The effect on sterling if that happens is unknown, but GBP/EUR could easily follow the trajectory of GBP/USD. Against the US dollar, sterling is currently (apart from the immediate pandemic crash) at its weakest since the financial crisis.
The risk therefore is of seeing your property budget in euros being cut dramatically, or your pension income converted from pounds to euros falling sharply. Or possibly having to find a lot more sterling when you have already committed to a very large transaction in euros. Having seen so many people’s plans ruined when crises have struck before, I really wouldn’t like to see it again.
To avoid that risk, talk to your trader about locking in your GBP/EUR rate with a forward contract. Your trader will be read to talk you through your options on 020 8003 4915.
