Ongoing uncertainty in the currency markets
The last few weeks have been very busy here at Smart Currency Exchange, thanks to the ongoing uncertainty about the position of Greece, and indeed the UK, in Europe.
As you are aware, 2015 has been a good one for sterling so far, thanks in the most part to a weakening euro and negative sentiment coming from the continent – and despite the British economy toying with negative inflation in April. For more information on these external factors, and how they affected sterling between January and May, check out our latest Forbes blog.
The currency markets in June have been almost unilaterally focussed on sentiment surrounding the talks between Greece and its creditors. As the month began, the possibility that Greece was close to a deal encouraged the single currency to gain almost 4% against sterling in the first four days of the month – although sterling was also affected by the talks surrounding the European Union (EU) Referendum; GBP/EUR slipped from 1.3981 on 29th May to 1.3608 by 5th June, meaning the price of a €300,000 property in pounds increased by almost £6,000 in just a week.
This theme has continued this month, with the strength of the GBP/EUR rate largely depending on the feeling coming from Greece – for example, when the first payment of the month was delayed, the euro began to weaken again, giving sterling the chance to steam ahead. The exception to this, of course, was seen on Tuesday 23rd June – market commentators became convinced that a deal was close to allow Greece to avoid defaulting, and the euro responded by weakening almost 2 cents against sterling; the exact opposite of what you would presume, and allowing sterling to hit close to an eight year high. This just goes to show how impossible it is to predict currency markets – even for the experts.
The other big talking point for sterling continues to be the position of the UK in the EU. It’s understandable that the possibility of UK leaving the EU would be in the minds of those moving to the continent, but experts believe that any worries are, thus far, unfounded. It remains unclear which way the British people will vote, and we believe that an ‘Out’ vote is unlikely. Market experts are not factoring an exit as a possibility into any thoughts at the current time, especially as we know Cameron wishes to continue negotiations to ensure we stay in, and leading members of both the European Commission and the European Council have stated their intention to address this. This makes it far too soon to even think about the effect that an exit could have on your transfers. If you are worried, please be sure to give us a call today – but we will be sure to keep all clients updated as the situation unfolds and assess any implications on your transfers.