The Pound Sterling’s recent history is marked by Brexit’s evolution. For now, markets have shown that investors will trust in the GBP if there is an agreement about Brexit, while they will lose such trust in case there is not an agreement.
However, in general, even when there has been negative news regarding the agreement possibility, the GBP is showing strength in relation to the EUR. Of course, it is impossible to know what will happen, but we can look at the trends we currently have.
Since September 2017, EUR/GBP has fallen by more than 4%, and USD/GBP more than 7% – please note that media usually give information about GBP/USD and not vice versa. We took the USD/GBP to be comparable with the pair EUR/GBP more easily ‒ this means that, for one, EUR or USD people are paying less GBP, and thus the GBP is stronger.
It is also important to note that past April 16th – 17th, the EUR/GBP reaches its lowest point since May 2017, and if we compare the price of that day with USD/GBP, we need to go back to June 2016 to get similar prices.
With EUR/GBP, the Exponential Moving Average of 30 weeks that investors usually look at for long-term investments is going down and above the price. This is a bearish signal, and since we are taking the EUR as the base, it is negative for GBP. In the case of USD/GBP, the Exponential Moving Average of 30 weeks is slightly going up and the price is close to it. As you can easily deduct this, it is neither positive nor negative.
Looking at these indicators, the EUR/GBP exchange seems for now ready to continue going down, or at least entering a lateral, while for the USD/GBP, we would need to wait a couple of weeks to see if the price decides to go up or down. It is also important to take into consideration that EUR/USD is in downtrend since 12 – 13 months ago, with more prominent ups and downs. Therefore, both GBP and USD seem to be in a stronger position than the EUR in these last months.
Conclusion?
It is hard to predict where the GBP will go in the future because the political aspects of Brexit will have a huge importance. However, if we just look at the price, for now the trend of the GBP is positive in relation with the EUR.
Whether this means that the market is predicting that eventually the EU and UK will achieve an agreement is something we cannot know.
We expect interesting but risky times to come, so if you have investment in foreign currencies, it would be a good idea to ask your financial advisor about how to cover such risks.
This blog post is not advice about to where to invest. It only has the intent to provide some information for the readers. Anyone wanting to invest that is not sure about what to do should ask an expert that takes into consideration the investor’s personal case comprehensively.