Event risk will move the exchange rate…
There are quite a few pieces of news this week that could add to exchange rate volatility and determine the short-term direction of the rates. We have had the first stage of the French elections, and await social and economic reaction. Ahead, we have first quarter US GDP figures and President Trump’s outline for tax plans. Looking at that lot, it could well be the Euro and the US Dollar that will be the main movers.
English & Spanish
Naturally, the Pound will move on the back of these; and, after a week where we went above 1.19 in the interbank market, the next train of thought is can it continue higher against the US Dollar and the Euro? The election news from the UK sparked the market into life last week. This will continue all the way through as there will be a great deal of uncertainty ahead and how the UK government will deal with Brexit.
Opinion will be divided all the way to the polls, and already the Government are rumoured to have had their so-called “predicted majority” cut. All these things will not help the Pound too much. In fact, nothing changes for Sterling. The election really is not a game changer to move Sterling away from its overall weak feel.
So, on to the short term. We could well break back down a bit towards 1.18. A lot will depend on the fallout and the vote from the French election first round results. If the market perceives a weak Euro then we may even touch 1.20. These are false moves in our view, and only gives a good opportunity to sell the Pound and buy currency.
It’s going to be an interesting week ahead and, of course, volatile. We have a feeling that is one thing that will remain constant!
Good luck this week …
The Premier FX Team.
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This article was updated on the 24th of April, 2017.