Hearing the news yesterday, and the yawning gulf between how the EU and UK see a trade deal, you might have been surprised to see the pound strengthen against the euro yesterday.
The UK wants a trade deal similar to that enjoyed between the EU and Canada or South Korea, to be truly independent and not a rule-taker. “It’s the point of the whole project,” said the UK’s chief negotiator. The EU appears to have looked at a map and decided that Britain is a lot closer to the EU than Canada and doesn’t want us competing under different rules.
This is going to be the greatest risk to sterling through the early part of this year, and anyone with a major purchase abroad this spring and summer should be acting to neutralise the threat. You can do that with a forward contract.
Do please call your trader on 020 8108 5337 to have a strategy in place.
But why is today’s GBP/EUR exchange rate so strong? Firstly, there was some good economic data on jobs. As one analyst pointed out, there are currently 1.6 unemployed people per vacancy in the UK, compared to 6 during the financial crisis. This, in turn, should lead to higher wages, which could lead to higher interest rates. Which means that people buy sterling.
There were also warnings that the coronavirus fallout will affect the Eurozone economy.
But the pound’s success could all fall apart very easily. That’s why we urge clients to focus on what they need to do, rather than how the pound might perform.
That number again, 020 8108 5337.
