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A big enemy of the Pound-to-Euro exchange rate is equity market volatility, which is on the rise again.
Volatility spiked on Friday as investors bought protection against losses in global equity markets, fearful that Israeli and Iranian attacks on each other risk sparking a major conflict in the Middle East.
Unlike last October, Israel has gone big this time, hitting Iranian nuclear facilities and military leaders, while Iran has launched drones at Israel in response.
Stocks are falling, and oil prices are up, which is helping the Dollar.
For the Pound-Euro exchange rate, this rise in volatility is a natural downside force, as shown in the chart below:
The chart shows that when market volatility rises (the lower panel shows volatility), the Pound falls against the Euro. Look at the spike in volatility in early April, and look what happened to the Pound-Euro.
Now, fast forward to today, and we see a definite spike in volatility following the recent flattening. What happens next is crucial: is this the start of a trend higher in volatility, in which case the Pound-to-Euro is on course to make a run for 1.15?
If cool heads prevail, and Donald Trump succeeds in finding a diplomatic solution, then the spike in volatility will be short-lived and the Pound can recover.
However, the UK currency has some poor domestic data to contend with, as GDP and employment figures out this week speak of an economy that is facing notable headwinds.
So, there is a good chance that even a fading of geopolitical tensions won't rescue the Pound this time around.
"EUR-GBP may prove a better way to position for UK economic weakness," says Nick Andrews, Senior FX Strategist at HSBC.