The pound has recovered sharply this morning against the euro, gaining back the losses it made late on Friday and, indeed, returning close, but not quite, to where it was before the invasion of Ukraine.
The picture against the US dollar is different, with sterling roughly 2-3% down on this time last week, after a steep decline on Thursday to its lowest for three months.
Even for GBP/USD, however, it could be much worse. Despite the global risk right now, the pound has held its own compared to previous crises. At the start of the pandemic it dropped to below $1.15, so the current rate of over $1.335 needs to be seen in that context.
While the euro has fallen almost across the board and compared to last Monday is 1 to 2% down against most major currencies (NOK, USD, AUD, NZD and CAD), it has not fallen against sterling.
The euro’s surprising resilience against sterling could possibly be explained by the war already being priced in, the view that London’s financial services will be affected by sanctions on Russia or that business for the rest of Europe is likely to continue as normal.
A resurgence in European unity, with increased defence spending, de-platforming Russia from the SWIFT system etc, looks to have impressed the currency markets just as much as it may be dismaying the Kremlin.
It is a relatively quiet week on the data front in the UK, though there will be some interesting housing data tomorrow. Not so quiet in the eurozone, however, with inflation data midweek.
Much can change quickly, especially with so much uncertainty, so do call your trader on 020 8108 5163 to discuss locking in your rate with a forward contract. Locking in your rate remains the safest way to protect not just your overseas budget, but your future plans abroad too, as we approach the popular spring property buying and retiring abroad period.
Lastly, in a time of crisis, if you know of someone who may have need of Smart’s services, why not take a moment to refer them here? You’ll be credited with £25 if they go on to trade.
