It looks to me as though (unlike the population) the UK pound is enjoying a moment in the sun at present.
It currently sits at its highest point against the euro since October 2008, and stands a high chance of gaining as the Eurozone continues to spin its wheels. That’s great news if you’re planning to buy a home on the continent.
It must be said though, that most of these gains are not because of what’s happening in the UK. Instead, its all about flight from the euro, as Spain unveils €68 billion in fresh cuts, and a German constitutional court debates whether the Eurozone rescue fund is legal or not. Neither move looks set to dig the Eurozone out of its present difficulties.
By comparison, the UK has a stable currency, trusted political framework, and is at no risk of falling apart.
If the pound keeps climbing therefore, it will be because the markets want to flee the Eurozone.
Yet the question is worth asking: Can the UK economy make a positive contribution to the pound’s value? Is there an inkling that the UK might be on the up in the near future? If so, that could be fantastic news for you when you change currencies.
The most obvious (and biggest boost) to the UK economy in the short term is set to come from the Olympics. We won’t know for some time if the Games make a positive contribution to the economy (although the government is forecasting a net profit of £16.5 up until 2017.)
Instead, what might boost the pound is if the Games go well, and cast the UK in a good light. If that happens (and there is no reason to think it won’t), international sentiment to the UK will immediately rise, spurring both investment and the pound.
Clearly though, the Olympics is a one-off event. No matter how positive its contribution, we can’t rely on it to boost the economy long-term.
In that regard, the biggest hope for the UK (and a rising pound) is exports. If the UK can ship more goods to the BRIC countries, where growth is still accelerating, and reduce its dependence on the Eurozone, that would be an immense boon to us.
How is this going? There have been ups and downs to date. Last month, exports to developing nations jumped 7.8%, as the Russian and Chinese middle classes snapped up Rolls-Royce cars and other luxury UK vehicles. That’s among our best performances to date.
Yet on a three-month basis, exports have dropped 0.5%. That suggests challenges remain for the future.
In short then, it’s quite possible the UK economy could boost the pound in the coming weeks. There’s no doubt there are challenges, but both the Olympics, and the continued export drive, should provide a welcome leg-up over the Summer.
That could soon see the pound at fresh heights against the euro.