Sterling recent volatility – but where next?

Luke Walden, Business Development Manager at OSTCFX, provides his views on the currency market.

Since the New Year, President Trump has been inaugurated in to the White House and despite his best efforts to unsettle the markets, it does seem that traders and investors alike have come to the conclusion that unless something is said that is fundamentally outrageous, they are relatively happy to sit on their hands and watch in wonder. That said, we are still seeing quite a bit of see-saw action within the markets, and particularly for Sterling.

Since the huge moves post-Brexit, it seems that a 1% or 2% move in markets are being dismissed by some, but let’s not forget that for businesses that are dealing in huge sums of foreign exchange transactions, these moves can still impact them significantly. This will only become more apparent as we start to hear more details about the upcoming Brexit negotiations towards the end of the month at which point volatility will inevitably increase further. Theresa May certainly calmed many with her unnerving visit to see Trump earlier last month. Whether you believe she is right or not to work with the President is irrelevant. She had to show the world that she was a respectable politician who, under extremely pressurised conditions, was willing to steady the ship and at last clarify her upcoming agenda with the US and tackling Brexit and beyond more closer to home.

Sterling has slipped around 2.5% against its major counterparts since the end of February, where £1 currently buys you €1.1535 and $1.2200. The Euro in particular is still engulfed with many stormy clouds that are yet to clear. I firmly believe there is still a lot of turmoil yet to unravel for the currency. Greece is still in a pickle and its implications are causing further headaches for its larger European neighbours. Italian Banks are still on their knees and surely more problems will come from that issue as the Italian government work out how to best limit the damage already caused.

Outweighing both of those for the Euro are the upcoming European elections. This month, and just in time before Brexit, are the Dutch general elections. Anti-Islam Geert Wilder and his far-right PFF party look set to win according to the latest polls which would be another huge blow for the EU’s big wigs after Brexit and Trump. They would likely have to form a coalition government if that was the case which would throw up further uncertainty for the currency. Following on from that are French Presidential elections in April and May, and later in the year, Germany’s federal election in September. All will be watched closely, but the Dutch elections will certainly set a barometer.

At Godi we are urging clients to limit their exposure to currency markets as much as they can. There are a range of simple strategies that can be employed to do this and we are more than happy to discuss them with you. Eliminating the concern of ‘where will it be…?’ should be a key priority especially now as we head in to uncharted waters from a political standpoint.

It’s vitally important for great businesses to concentrate on what they are great at, and if foreign exchange is a cost to your business model, we are happy to talk and try to help you manage this going forward.

The bumpy ride isn’t over just yet; in fact it’s probably just beginning. But we can provide a fully padded cushion and encourage you to make yourself comfortable

Send Luke Walden a message.

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