Sterling has gained ground against the euro following positive inflation data. Inflation is a big worry following the vote to leave the EU due to the weak value of the pound it will be far more expensive to buy goods from abroad, this will be passed on to consumers. I estimate food may be hit hardest and we could see an increase of up to 5% in Q1 of 2017.
I think in order for Sterling to have a significant rally we will need to see article 50 triggered and decisive action taken in regards to trade negotiations. Theresa May has indicated article 50 will be invoked before the end of March 2017.
There is hope for the pound, however. There may well be opportunities for Euro buyers short term if you monitor the market and move on a spike. It is important to also keep in mind the Eurozone is not exactly in the best state. Italian banks have €360bn in bad loans, Greece is debt crisis continues, Inflation is shocking and there is the threat of further referendums. Draghi has done very well at sweeping this under the carpet. I think it is a case of keeping the music playing, but when the music stops there won’t be enough chairs.
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