Posted by Allison on 7 June 2016, 12:49
Last week was pretty strong for the British pound. Yet as we know, performances like that cannot last forever. The question is whether it would continue for yet another week.
The pound began trading on 1.4647 this week against the US dollar, but things soon took a downturn. The drop was slight, taking the pound to 1.4632 by the end of day one. It then rose slightly to 1.4640 on Tuesday, before taking a more significant turn for the worse the following day. This meant it began the final two days of the week on a lower rate of 1.4444. While it clawed back some of those losses on Thursday, it was not enough to lead to a successful result overall. In the end, the pound finished on 1.4432, some way off its starting rate on Monday.
The question of whether Britain would remain in the EU is shortly to receive a definitive answer from the voting public. However, it dipped against the euro this week – perhaps in response to the Leave vote seeming to press ahead. The opening rate of 1.3115 improved to 1.3136 on Monday, but then we had two bad days, taking the pound down to 1.2926 as a result. We did then recover somewhat over the final two days of the week, but all in all we still ended up down on the opening rate. Our finishing mark here was 1.2939.
This overall pattern of falls was replicated elsewhere last week, too. The pound started on 11.375 against the Hong Kong dollar, before having an up-and-down week over there as well. This was literally a fall followed by a rise, followed by a fall, and on and on until the end of the week. This did mean we ended on a fall, but overall the pattern was still downhill. This led to a finishing rate of 11.216 in this part of the world.
Our next stop takes us over to the New Zealand dollar, where the pound started trading on 2.1753. The patterns shown by the Kiwi and Aussie dollars can often be very different from the patterns seen elsewhere in the world. However, this was not to be the case this week. Instead, the drop was clear overall, even though we did pull some losses back on two out of the five days. The pound dropped sharply for the most part, to finish on 2.1073.
Finally, we have the Australian dollar, and things looked set to be challenging here as well. We opened on 2.0306, but even though we rose to 2.0366 on the first day of the week, it was far from being enough. Indeed, this was a long-forgotten rate by the close of the week, when the pound finished on 1.9922.
It was hard to find a good result anywhere this week, as the pound fell from 1.9096 to 1.8883 against the Canadian dollar as well.
By now the pattern was more than familiar, and that same pattern took the pound from 1.4516 to 1.4297 against the Swiss franc as well.
Here too the result went the way of the competition. The pound dropped from its opening rate of 9.6112 and finished Friday evening on 9.5061.
It is clear that no really good results are likely to be seen until the referendum is sorted out and the result is known. However, even then, there could well be a period of uncertainty on the currency markets, at least as far as the British pound is concerned.
Time will tell exactly what happens, but there is every chance this will not be the first week where the pound experiences such falls. We could be in for a few more weeks of similar results, depending on what happens on a daily basis between now and the end of June.