This morning sterling has hit its highest rate against the euro for nearly a year.
Whether this is down to any inherent strength in the pound, or just weakness in the euro, will be a moot point for most clients with a large currency transaction upcoming. They might find it more useful to just get on the phone to their trader on 020 7898 0541 and lock in the best rate for a year with a forward contract.
Strength for the pound has come from several directions. Partly it is down to yesterday’s improved public finances, which hinted at the possibility of the British chancellor cutting taxes in his Autumn Statement.
Alternatively, it could be fears that the eurozone’s economy is on the skids. There is evidence of that this morning, with early (“flash”) results for the Purchasing Managers’ Index (PMI) coming through all day. PMI is a monthly survey of the optimism of business leaders in the services, manufacturing and construction sectors. Anything below 50 indicates overall pessimism.
So far, France’s services industry is looking shaky at 46.7, less than market expectations, but while its manufacturing is just 46.4, that is better than expected. In Germany, where manufacturing is more important, it is at a lamentable 39.1, but this is still better than last month. However, Germany’s service industries have dropped below the 50 line to just 47.3 – far below expectations.
Needless to say, relying for the pound’s strength on data that can indicate something completely different the following day, is inherently risky. So please don’t assume that this rate will stick around for long or make any commitments based on it, without locking it in.
The UK’s result will be out at 9.30am and the US’s at 2.45pm.
Anyone booking a holiday in the eurozone today will get a little more for their money. You could also be in for chance of getting £500 off an Airbnb booking (accommodation or experience) if you refer a friend before now and the end of October. More details here.
