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Sterling Value Sees a Five Month Low

Sterling Value Sees a Five Month Low

In the wake of a report that housing prices fell by almost 4 per cent last month, the pound slumped to a five month low compared to the euro.  The pound has since rallied a bit, around one half of a per cent, on news that the Central Bank made no changes to the current rate of Quantitative Easing or the base rate.

The report on falling house prices adds to the possibility that the Bank of England may consider additional stimulus measures.  This move is being discussed in the days just prior to the government enacting massive public sector spending cuts.

Andy Scott, foreign exchange dealer at foreign currency exchange specialists HiFX, commented on looking at currency values as a big picture, saying: "This apparent weakness in Sterling doesn't tell the whole story though, as you have to look at the overall picture between different currencies. Many people have been surprised by the movement of Sterling against the Euro given the ongoing fiscal stresses affecting peripheral countries in Europe. Essentially the market is only concerned with one thing at the moment and that is central bank policy."

With recovery efforts faltering around the world, pressure on currencies is at an all-time high.  Central Banks are having to take a very proactive approach to implementing monetary policy which will spurn economic growth.

Scott continued to remark on the Sterling versus the pound and euro, saying: "The momentum is certainly for a weaker Sterling and an attack on the lows of the year around the 1.10 level. However at the same time with GBP/EUR having dropped by nearly 7% in a month, this also needs to be seen as a favorable opportunity for Euro sellers.”
 

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