We are now entering the end of the month and the financial year- currently, GBPEUR is sitting at 1.20 and GBPUSD is just under 1.32. After a pretty hot CPI release for the UK, and a relatively disappointing budget- GBP has been under pressure over the last couple of days to reclaim its highs against the Euro and try and claw back losses against the U.S Dollar.
The reality of the inflation situation in the UK (And worldwide) is that we will see an economic slowdown across the board- people will be paying more for basic necessities without any meaningful rise in wages to go along with it- this, in turn, will mean the public have less spare income to spend on eating out, luxuries and holidays etc- this will probably be the theme for the next 12-18 months and will begin to reflect in the exchange rates.
At the same time, it seems Covid cases are going through the roof in the UK, right now, this does not mean lockdowns or restrictions, but what it does mean is that fewer people will be out spending/working- the majority of workplaces that are back in the office are still asking their staff to isolate if they test positive, which will have ramifications on the economy.
I still believe any purchases above 1.20 on GBPEUR are worth buying, as those prices do not seem to be around for long, and that by end of the year we could be around 3-4% lower than where we are now if the economic situation continues.
For me, this week’s most important release is NFPs on Friday- which will give us an idea of the job situation in the U.S- last month was a big number- which makes it likely that April’s may come in a little lower.