Political uncertainty and the continuing deterioration of the Eurozone will see the pound reach its highest level for over three years.
Sterling has been increasing for three months in a row and is showing no signs of slowing. It is currently trading at 1.242 with some observers suggesting that if the Greeks cannot form a government and have to resort to going back to the polls in June then the pound could reach ever higher heights. The news is good for anyone wanting to visit the continent for a holiday, or to make an investment.
Sterling’s continuing growth could be short lived however if the euro zones problems spread and debt contagion strikes the UK economy. The UK is in a relatively vulnerable position being in a double dip recession and is open to any further bad economic performances from Europe. The concern that the Bank of England (BoE) may issue further quantitative easing measures could also apply the brakes to the pounds run. The BoE is expected to keep interest rates on hold and the quantitative easing total at 325 billion when it meets later this week. Although the UK is in recession, the risks associated with inflation are expected to prevent the banks easing policy further for now.
The Euro is currently trading at 80pence to the pound and is expected to drop further over the next 12 months. If the Eurozone political situation remains unstable then it is expected to drop to 77pence over the next year. Thanks to the Greek elections results at the weekend it has seen its stock markets close at a 20 year low.
Elsewhere the pound is at a six month high against the Australian dollar thanks the Australian reserve bank cutting its economic growth figures and setting an all time low interest rate. The Euro has weakened against the Dollar thanks to the uncertainty of the Eurozone and the expectation that the European central bank is close to giving a large monetary bailout to Spain.
The longer the uncertainty remains over Europe’s future the faster the single currency will weaken.
The Pound to Euro exchange rate is currently trading at 1.242
The Pound to US Dollar exchange rate is currently trading at 1.613
The Pound to Australian Dollar exchange rate is currently trading at 1.599
The Euro to US Dollar exchange rate is currently trading at 1.298
The Euro to Pound exchange rate is currently trading at 0.804