Sterling - Struggling to Recover

GBP: Back in black

The Pound was given a boost yesterday as the government announced its first budget surplus in 16 years.

However, gains in the Pound were limited as the good news was offset by concerns elsewhere. A CBI Survey showed UK business sentiment had turned negative and the press also reported some trouble in Brexit negotiations as Brussels is making it difficult for the UK to get a bespoke deal on its all-important financial sector.

The Pound has lost its upward momentum over the last week and is lacking the catalysts to regain its footing.

EUR: Declining demand could dent the Euro

The European Central Bank (ECB) convenes for a two-day policy meeting on Wednesday and Thursday.

The question is how they will respond to the recent slowdown in the EU economic activity. Investors have been expecting the ECB to cut back on quantitative easing in Q3 of this year. A change a policy could weaken the Euro.

The other pressing issue facing the Euro is the resurgence of the Dollar. The Euro has undoubtedly benefited from the Dollar’s weakness, but with Dollar buyers returning, the Euro may face declining demand.

USD: Dominant Dollar

The US dollar has continued its comeback this week, pushing to a 3-month high against a basket of currencies.

The big story has been in the US bond markets, where the interest rate on the 10-year Treasury (government debt) has broken above 3% for the first time in 4 years. This is a signal that investors think US inflation is rising.

While many investors have suspected the US government has endorsed a weaker Dollar, markets tend to get their way in the end. And with the US economy in better shape than most, it’s hard to keep the Dollar down.

Thanks For Reading, What Next?

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Have a great day,

Geoff Lambourne - Direct Dial me on 0044 (0)1872 487 470.

Current rates:

Wednesday 25th April 2018 at 15:20

£1.00 GBP = 1.1439 EURO

£1.00 GBP = 1.3938 USD

£1.00 GBP = 1.8435 AUD

£1.00 GBP = 1.9721 NZD

£1.00 GBP = 1.7947 CAD

£1.00 GBP = 17.3725 ZAR

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