Foreign Exchange - UK Daily Update - Written by jeremy on Thursday, August 13, 2009 10:17 - 1 Comment
World First Special Report 13 August 2009 – GBP/EUR Could Break Lower Soon
The past week has been a fairly hectic one for GBP. MPC rate decisions, Farm Payrolls from the US and yesterday’s Inflation report have all seen the value of the pound whipsaw violently. The main focus has been on the GBP/USD rate as the percentage increases and decreases have been that much more aggressive than against the euro.
We are worried about the euro however. The Bank of England are in a process of stimulating the export market, a good piece of comment on it can be found Here , via a weak pound. Given that anywhere between 40% and 50% of the UK’s exports as a whole go to the EU the GBP/EUR rate is likely to be the main focus.
The graph below is the EUR/GBP chart since 2005 showing the years of relative security and stability at around 0.6756 (1.48 in GBP/EUR terms) and the subsequent move to all time lows. Trend line A, annotated in red, shows a long term trend line for the decline of the pound against the euro since the beginning of the credit crunch 24 months ago. We tested it once in mid October 2008 only to be weakened as UK GDP figures finally tripped negative and from then on the massacre continued.
All in all GBP has had a good year against the euro however this could be likely to change in the near future. The area I have circled is the warning. First we have the trend line to break through, secondly the yearly high (1.1914) and thirdly a massive Fibonacci retracement area. I won’t go into the Fibonacci theory now but suffice to say that any further gains for GBP against the European single currency will have to be very hard thought even without influence from Threadneedle or Downing St.
In conclusion, the trend at the moment is very much against sterling vs the euro and we would not be surprised were we to find ourselves back towards the 1.12 level soon
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Please feel free to contact me (jeremy.cook@worldfirst.com) if you have any questions or thoughts regarding these updates or if you are interested in a particular event in the calendar. If you would like to discuss your foreign exchange requirements, please contact our: Corporate Foreign Exchange Team on 020 7801 9050 or our Private Client Currency Exchange Team on 020 7801 9080. To view any past or present currency blogs please click on the following link www.worldfirst.com/blog. |
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Disclaimer: The above comments are only our views and should not be construed as advice. You should act using your own information and judgement. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgement as of the date of the briefing and are subject to change without notice. Any rates given are “interbank” i.e. for amounts of £5million and thus are not indicative of rates offered by World First for smaller amounts. E&OE. Definitions of jargon/market terms can be found in our Glossary of Foreign Exchange Terms. |
[...] I wrote a piece on the prospects of GBPEUR yesterday which can be found here. [...]