Currency News: Undervalued GBP Pushed Off 7-Year Low
Currency News:
in the first month after the Brexit vote, sterling was sliding against the dollar by almost 20%. In recent months, it got back its losses a bit. The dollar suffered a decline due to domestic political crisis. Comparing to euro, the pound has been tumbling since May.
Investors widely express their concerns about U.K. and Brussels divorce and the mass of agreements that should be concluded. The pound is 15% below the dollar and euro since the vote in June last year.
Also the sterling returned from hitting a seven-year low against the euro on Wednesday, Aug. 16, after forecast-beating jobs data was published. Before the employment and wages data became public, the U.K. currency passed a milestone on its decline. It hit £0.9142 per euro, its weakest level since 2010, excluding the bottom line it touched in 2016 very briefly during October’s flash crash.
The pound strengthened by 0.2 percent over the session to reach £0.9103, with rising demand after data showed unemployment fell to a 42-year low in the second quarter and the basic wage growth appeared.
“Indicators for the manufacturing sector show that the weaker currency is boosting export demand. It should also make the UK a relatively attractive place for foreign companies to invest. Political noise ebbs and flows and, with it, exchange rates.” – Dean Turner, UBS Wealth Management.
On the other hand, Morgan Stanley argued, the euro’s rise beyond parity with the pound will continue the euro zone economy increasing confidence. That can definitely drive major currency buyers to add a greater amount of the euro to their portfolios.
Uncertainty about the impact of the Brexit vote on the economy has left the pound exposed to the twists and turns of economic data. A lot of analysts share the opinion that U.K. currency looks very undervalued against the euro.
