Sterling has been going nowhere against the euro for four months now. Looking at the longer term graph it’s hard to recall such a long period in the past few years without a clear movement one way or another.
There is nothing inherently stable about the global economy now and although the current government is operating without the dramas of recent years I don’t think we can put the recent lack of movement down to that. Moreover, the pound has been moving against the US dollar, strengthening by two or three percent since the start of the year.
Hence the lack of movement for GBP/EUR is down to a balance of forces between the two. That was reflected last week with almost identical purchasing managers’ index (PMI) readings for the UK and the biggest European economies. PMI surveys the optimism and plans of a range of business leaders, and anything above 50 indicates optimism and below 50 is negative. The UK, Germany, France and the eurozone as a whole showed a negative result for manufacturing PMI (46.6 in the UK) but a very positive for services (54.9).
This balance will not last for ever, and it is impossible to know which economies – and which currencies – will pull ahead. According to the major bank predictions in our new Quarterly Forecast, it will be the euro. Predictions go as low as €1.06 for sterling by the summer – although that is just educated guesswork.
Still, if sterling losing as much as 7% would put wreck your plans to buy a property abroad, It would be worth locking in your rate now or at least calling your trader to discuss your options, on 020 8108 5163.
