While sterling has remained reasonably strong against the euro over the past year, against the US dollar it has fallen to around its lowest for most of our lifetimes.
The reasons for that are many and varied, and not just due to developments in the UK such as Brexit, although sterling has never recovered the 10 to 15% it lost in June 2016. But the question must be asked whether GBP/EUR could go the same way.
Recently the GBP/EUR graph has been showing much more volatility. What were relatively gentle rises and falls have been replaced by rapid movements up and down which, if they were seen on a seismogram, would make anyone in a high-rise building run for the stairs.
The pound has been “testing” new lows, such as last month’s dip below €1.15 and Friday’s sudden drop. Both subsequently recovered but there is no guarantee of that happening next time.
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Things to watch out for this week include PMI data tomorrow. We’re a month away from another interest rate decision, but there is plenty elsewhere in the news that can still move the market.
