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Weekly Euro curency forecast from France Financial and Guide2MidiPyrenees

I was rather startled when watching channel 4 news on Wednesday evening to see that the pound had ended the day at 1.2745.  That's one hell of a move, I thought, as it had been at 1.2055 last time I looked at 3pm.  Alas, I was right and they were wrong.  It doesn't happen very often, and I'd have been quite happy to follow the normal trend on this one.

Has the bubble burst?

Worse was to come.  By close of play on Friday, the pound was down to 1.1830, so what is going on?  The answer, in short, is more of the same in that sterling and the Euro are both very weak at present, and any perceived sterling strength is really more a case of greater weakness in the Euro.  As it happens, the Euro has seen some good news this week.

There has been an easing of concern for the Euro after Germany agreed on a four-year, 80 billion euro austerity plan, committing the backbone of the Euro to cutting its budget deficit.  This news coincides with signs of a more optimistic global economic outlook that is supporting the Euro, which has strengthened somewhat as investors return, and this has effectively put the skids under sterling.

Where to now?

Bon question, vieux fruit.  This isn't all one-way traffic.  Sterling actually has some things going for it at the moment.  The recent austerity budget has, on the whole, been well received by the markets.  The severe measures announced to raise taxes and cut spending in order to reduce the deficit went down well, and helped allay investor concerns about the economic recovery. As confidence rose after the budget, demand for sterling rose with it, helping to push exchange rates up to nearly 1.2400.   What we need now is another dose of optimism and another spell of the jitters from the PIGS.  No, I'm not being offensive there, it stands for Portugal, Italy, Spain and Greece.  And I think we'll get it.

And from here?

I suppose I could be called a moderate, but I think that sterling will retrace back down to the 1.15 or 1.16 level, and then have another go at 1.25.  Fingers crossed!

That was last week's closing paragraph, and I can see no reason to change it.

A bientot,   Rob

www.France-Financial.com

www.Spectrum-IFA.com

Please note that all these comments are my personal view and do not represent any firm advice by either France Financial or the Spectrum IFA Group.

Rob Hesketh and France Financial

Rob moved to France in 2003 after working for 30 years in International Banking in the City of London and Brussels.  He joined the Spectrum IFA Group in 2005 and became registered and authorised by the French fiscal authorities in mid 2006.  He is now a partner in Spectrum and looks after client relationships in the South West of France.

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