The pound surged against the euro yesterday, and although the gains were not huge, they take GBP/EUR back to around 1% better than the start of the month and within touching distance of those two-year highs we got so excited about recently.
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Why did the pound rebound when there is no real economic data to speak of this week? Sometimes a currency movement can come from nowhere. Yesterday sterling was the winner from that, but it could just as easily have gone the other way, maybe just when you have a major transaction coming up.
The apparently most innocuous matters can take an exchange rate in a radically new direction. One of the most interesting was in February 2020 when the appointment of a new chancellor, a newcomer called Rishi Sunak, saw the pound gain 2.5% almost overnight. How he might wish he could return to those happy days. It’s more common for the pound to rise slowly and sink fast, such as when Covid hit a month later and the pound lost 14% over the course of one month.
Barring a new event like that, it’s all about the politics right now. While the UK general election might be looking more and more predictable, the French and US elections are anything but. Both have pivotal moments this week, with the first round of the French election and the first debate in the US.
In this highly volatile state for politics, economics and currencies, why not lock in some certainty and grab today’s strong rate for sterling?
