Pound Sterling Strengthens as GBP finds itself in High Demand

June 28, 2016 - Written by James Fuller

STORY LINK Pound Sterling Strengthens as GBP finds itself in High Demand

Sterling has been a safe option against its rivals for a second day in a row, thanks to high support from investors.

The Pound has made major gains against most of its peers lately, thanks to safe-haven interest dropping off.

Pound Sterling (GBP) Exchange Rates Continue to Suffer from Brexit Fallout

The post-Brexit vote shift out of the Pound Sterling (currency : GBP) continued during yesterday’s session, with investors continuing to dump the UK unit in favour of safe haven currencies including the Japanese Yen (currency : JPY), the US Dollar (currency : USD) and the Swiss Franc (currency : CHF). Most notably, the Sterling US Dollar exchange rate sank to its lowest level since 1985.

Meanwhile, despite analysts agreeing that the forthcoming British break from the European Union is bad news for the euro (currency : EUR), the Pound euro exchange slid below the 1.2000 GBP EUR threshold for the first time since March 2014.

There now appears little technical resistance for GBP EUR between where it currently trades and the band of support between the 1.1450 and 1.1500 which the pair tested several times in the first half of 2013 and then again in July of the same year.

The ultimate downside target for GBP EUR comes in the 1.0200s – a level which the Pound sank to against the shared currency during the final days of 2008.

Chancellor George Osborne Unable to Stabilise Volatile Markets

The losses for Sterling came in spite of a pre-market opening valedictory speech by current Chancellor of the Exchequer George Osborne who reminded listeners of his government’s record in stabilising the UK Plc’s finances following the last financial crisis of 2007-09. Osborne pointed out that he had, ‘said we had to fix the roof so we were prepared for whatever the future held and thank goodness we did.’

Investors largely ignored these words and instead focussed on a report from leading credit ratings agency Moody’s, published a report just before the weekend market shutdown delivering a UK credit outlook downgrade to ‘negative’.

The conclusion of the report found that, ‘the negative effect from lower economic growth will outweigh the fiscal savings from the UK no longer having to contribute to the EU budget,’ and reminded market participants that the British economy has one of the largest deficits of all advanced financial systems. The Pound is forecast to trade on a heavily negative footing in the short to medium term.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: American Dollar Forecasts Pound Dollar Forecasts Pound Sterling Forecasts