2015 has certainly been a volatile busy year in the currency markets. The exchange rate moves have been quite erratic, and this has led to not only good currency buying opportunity, but also the ability to hedge exposure forward at favorable rates.
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This volatility has basically come about from many market events. Economic figures in all the key zones have not been consistent, and were often surprisingly beyond the norm. In addition, long difficult struggles by the U.S., Europe and the U.K. to get their economies back on track continue to affect day-to-day rates. These factors have made 2015 one of the most interesting years in the market for a while!
While, of course, the EUR and the USD have had major roles, Sterling has been a big benefactor. We have seen highs of nearly 1.44 against the EUR and because of this, demand for Euro-based goods, such as property purchases or other large items have been significant. Even when the Pound seems to fall back, it will only retrace a few percent, which again helps currency buyers a great deal.
Will this trend continue into 2016? Naturally the answer to that question is not easy; but there is no doubt that the UK is doing very well in its economic recovery. There is a possibility of an interest rate rise in early 2016 and this will again buoy the Pound.
To us, 1.50 still seems a long way away, but if we can hold the recent highs, we believe it is an achievable level that could be reached in the next year and maybe into 2017. There are things that could derail this. The U.S. will also be raising interest rates and if the strong Dollar continues, then it’s possible that Sterling will drop against the USD.
Europe is certainly struggling. There is always resilience with the overall Eurozone economy, in that it seems to take to bad news fairly well and the currency recovers quickly. We have not seen that of late and the European Central Bank are not hesitating to pump money into the economy. Whether this will be enough to get the economy back on track, we will have to see.
So, for 2016 we don’t predict much change. The markets will not be easy and they will be volatile. Overall, if you are a Euro buyer against the Pound, we think we may see slightly better levels, but not too much. The markets certainly won’t let you be greedy !!!
For more information and personalised advice, contact Premier FX on +34 971 57 67 24.
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This article was written on the 9th of December, 2015.