In the last week, foreign exchange markets saw a big hit as the Eurozone economy improved beyond expectations. It saw the pound’s value against the Euro stop its recovery, putting an end to a multi-week recovery that had raised confidence that the pound was going to recover in the long-term.
The big news this week was that the Eurozone had managed to recover to pre-2008 levels. It represents a significant milestone for the Eurozone. It caused the value of the Euro to raise significant, whereas the value of GBP dropped, in comparison. At the same time, the British economy has come close to stagnation, thus complicating the issue.
By far the most influential factor in the pulling down of the Pound’s value in the last few months is the risk of Britain leaving the European Union (EU). The EU vote is set to take place in June and it could see the British economy shrink by 6% if it happens.
Pollsters revealed the news this week that the odds of Britain leaving the EU is now 50-50. For investors, this lack of confidence has caused the foreign exchange markets to turn against the currency. It has helped to make the prospect of investing in the Euro far brighter.
Together with the uncertainty of the upcoming EU vote and the poor results gained from the British economy, UK consumer confidence has hit its lowest in the last 15 months. This could well indicate what the future holds for the UK economy. And this has scared investors and financial experts.
As Eurozone fortunes continue to improve, it could come at the expense of the UK currency.
The recovery run by the Pound is not expected to begin anew as the vote comes closer. Most financial experts expect the Pound to continue to take hits as uncertainty heightens. The Euro, however, is expected to rise in value with this currency pair.
Only a successful vote to remain within the EU will help to salvage the losses taken by this currency.
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