Are we Seeing the Start of a EUR Fightback? (Matthew Vassallo)

The EUR has improved since that start of the trading week, particularly against Sterling. GBP/EUR rates have dropped by almost 4 cents from the high on Monday morning, to the low of today. Due to the consistent momentum seen in Sterling exchange rates over the past couple of months, the Pound has almost become a victim of its own success.

UK factory orders released yesterday showed a drop to their lowest figure in 2 years and this has reinforced fears that UK exports have been suffering due to the rising value of the Pound.  Our Eurozone trade partners are being priced out of the market, a scenario which was always likely given the movement on the exchange rates.

I believe we are now seeing the start of a realignment for the EUR but of course much will depend on economic developments inside key Eurozone economies, including a longer-term solution to the on-going issues surrounding Greece’s debt crisis. Personally I feel the Pound will struggle to break back through 1.40, certainly in the short-term and it is more likely the EUR will start to put pressure on 1.35 before long, if the current trend continues.

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