Iran-Israel conflict now adding to market volatility, could go either way for Sterling this week..
| GBP
| The Pound is down by over 1% versus the Euro since this time last week, -1.5% in the last month, -2.5% in this year and -0.9% compared to this time last year.
Looking at the data in this way, the narrative portrays not much volatility in the pair and the Pound is on a downward trend against the Euro. But that's simply not the case..
It was only 3-months ago that the pair was trading at the highest point since June 2016.
The pair was also seen looking comfortable over 1.20 mid-market for nearly 6 consecutive months from Oct 2024 to March 2025.
Now sitting around 4% lower from these high points (at a hefty cost of €10,000 on a £200,000 exchange), we are rightly being constantly asked by clients will it go back up, when, how and what would you do in our situation?
"Hedge your bets" is and always will be my personal opinion whether the rate is good or now. It removes some of the risk and stress, keeps you in the game and it's a decision as humans we are comfortable in making.
This week is one of those times you should seriously consider hedging. There are multiple risk events ahead that we know about and some could enter any moment that we don't know about (Israel attacking Iran for example).
If you are heading to the US for a holiday or importing goods that involves buying the US Dollar, it's looking much rosier for you; +0.2% in a week, +2.2% in a month and a mammoth +7% in a year!!
A "Forward Contract" would often be the play on this one. Bank the profit, take risk and stress completely off the table, even if reports say or you believe more is yet to come. Nothing is guaranteed in life.
EUR
As the above notes show and my reports have been highlighting for many months now, the Euro is strong and fundamentally get stronger.
This doesn't mean it will 100% improve near and/or long term versus any currency. What is being highlighted is the data shows that it has vastly improved as a 'safe-haven' currency and traders holding it and using it have dramatically increased. I expect more to come from the Euro in 2025.
This week not much is on offer from the Euro-Zone apart from the inflation release though (strongly expected to hit consensus) and so the single currency will be moved by events elsewhere.
USD
The USD has received little in terms of help by investors from Israel's attack on Iran (as would normally be the case in times of uncertainty). Instead, the Dollar has weakened further following concerns the US negotiating team is too stretched and lacks the capacity required to make meaningful trade negotiations with other nations.
It's groundhog day for President Trump and the US Dollar at the moment and will continue to be until new trade deals are signed or Fed Chair Powell changes his stance on interest rates.
Please check out the main events of the week below..
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