What's happening to the Pound and Euro - Business Works
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What's happening to the Pound and Euro

E conomic data, the interest rate frenzy and middle-east political tensions; Sterling and Euro currency movements, it would be fair to say, are currently being influenced by these three specific factors.

Emma Wilson, Currency Solutions

Firstly, we are seeing the usual ebb and flow of currency strength from scheduled economic news and data releases. This is the area that should be most easy to predict but as ever there will always be surprises as data comes in above or under predictions. Last week’s strong UK inflation, retail figures and rising house prices all helped give Sterling some momentum into the start of this week against the Euro.

Sterling dropped on Tuesday afternoon however despite this robust data, bringing us on to the second factor – excessive hype over interest rates rises. This is a current trend reaching fever pitch due to high levels of inflation and price pressure in both Europe and the UK. With speculation running rife about when an interest rate rise might occur in either economy (which would typically send the currency higher), exchange rates are currently sensitive to movement every time the press report a policy member in either the European Central Bank or Bank of England making some kind of hawkish comment that rates will rise with Tuesday (23-Feb-2011) seeing increased speculation over European rates. Wednesday’s Bank of England minutes will be crucial in determining when markets believe a UK rate rise might come with a knock-on effect on Sterling very possible.

The third factor is the great unknown – global political and geographic events that no-one can pretend to predict. Recently, tensions in Egypt and Libya have pushed currency investors to send those currencies seen as ‘safe havens’ such as the US Dollar, Swiss Franc and Yen higher whilst the uncertainty continues with higher yielding currencies but seen as ‘riskier’ such as the Euro losing weight.

For more information contact:
Max Johnson, Corporate Broker:
e: m.johnson@currencysolutions.com

Emma Wilson, Financial writer:
e: e.wilson@currencysolutions.com


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