It’s hard to spot any clear direction of travel for sterling right now against the euro. One hundred days into the Ukraine war, the single currency has stabilised.
However, economic data from the eurozone has been generally better than the UK’s. For example, last week’s S&P services PMI was 51.8 for the UK but 56.3 for Germany and the eurozone as a whole. The Ifo Business Climate Indicator for Germany rose to a three-month high, well above last month and expectations.
Against the US dollar the picture for GBP looks better, at first glance. The pound has regained some of its losses against the US dollar since early February, gaining around 3% in the past two weeks. However, the same is true of the euro against the dollar, so it’s not caused by any innate strength in sterling.
Therefore, given the economic backdrop, where will the power come from to support sterling in the near future?
Given the multiple risks – and the fact that sterling remains against the euro well above last year and some 6% above this time two years ago – I would argue that the most prudent course for anyone with a major transaction this year would be to lock it in with a forward contract.
You can do that with a call to your trader on 020 8108 5163.
