Thursday, 1 October 2015

Thursday, 1 October 2015

US and Eurozone announcements hindering Sterling

Sterling has taken a hit against a host of major currencies over the past week or so providing a great opportunity for anyone looking to purchase the pound. This movement looks as though it isn’t coming from anything that is happening in the UK but rather the talk coming out of the US and Eurozone.

GBP/EUR exchange rates

GBP/USD exchange rates

Last week saw Mario Draghi, president of the European Central Bank (ECB), state in his press conference that there was no need for the ECB to increase their €60 billion a month asset purchase program.

With inflation and growth in the Eurozone exceptionally low the markets had started pricing in an expansion to this quantitative easing program. Draghi’s comments came as a welcome surprise to the single currency helping it to surge against a basket of currencies, including the pound.

Sterling has also not been helped by all of the talk of an imminent interest rate hike over in the US. With Janet Yellen recently all but guaranteeing that there will be an interest rate hike in the US before the end of the year, the pound has nothing to fight back with.

It was looking very likely that we would see a rate rise in the UK at the beginning of next year but that has now been blown out of the water with the crisis over in China having a detrimental effect on the UK.

Andy Haldane, a member of the monetary policy committee (MPC), has even said that there is the possibility of a future cut to protect the UK economy against negative situations such as China.

Due to this it would seem that investors are taking their funds out of the struggling pound and placing them in to alternative currencies looking for a more likely short term gain. This has in turn had a major effect on the strength of Sterling and helped its major counterparts gain some ground.

Written by Alistair Ryan
Currency Broker at Foremost Currency
T: +44 (0) 1442 892061

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