Sterling hits 10-week high against Euro
As we explained at the beginning of the month, August was a bit of a free shot for the Pound and things have panned out well. £-€ rates are up 2-cents in a month and the £-$ is stronger than pre-pandemic levels.
Yesterday, the FED indicated it would keep the monetary fuel flowing into the current market recovery. The change in policy means we should see the $ weakness to continue as the US are not concerned with economic expansion for now. This is important news for the Pound, which is currently seeing 8-month highs against the Dollar.
The resurgence in Covid-19 cases in Europe is starting to weigh on the Euro. France and Spain have seen sudden increases in infections the past month and that may mean countries will once again have to take precautions to stop the spread of the virus. Whilst initially this is bad news for the €, if lock-downs start to happen, investors will once again take there money out of global stocks and into safe haven currencies. This will leave the £ as a sitting duck as it did back in March.
For now, as long as cases in the UK remain manageable and the recovery continues, we could see an out-performance from Sterling in the weeks to come.