GBP Exchange Rates

Yesterday we continued to see a lot of exchange rate volatility as Sterling started the day weakening against most the major currencies but finished the day heading back up. In fact Sterling Euro exchange rates actually hit 1.20 towards the close of business yesterday in a sign that the rates could be heading back towards the high levels we have been accustomed to at the start of this year. Today is a quiet day for economic data, especially for the Pound and so it is likely that we may see a slightly flatter day on the currency markets, although having said that the market often does what it needs to in order to suprise the majority of us!

While today is quiet for economic data next week has some absolutely crucial data sets due for release which could have a big impact on the currency markets. Possibly the most noteable day is Wednesday when in the UK we have the latest set of Bank of England (BoE) minutes, unemployment figures and also the budget from Chancellor George Osborne. These 3 announcements on their own could have a big impact on the exchange rates so the fact they are all coming out on the same day is likely to have a huge impact on the markets.

Bank of England minutes – these will give an indication as to what was discussed at the latest BoE interest rate meeting at the start of the month. While we know that interest rates and the Quantitative Easing (QE) programme were kept on hold what will be interesting is to see whether there was any discussion about increasing interest rates or possibly even reducing QE. There has been a lot of debate about when UK interest rates will be hiked and while it still seems that it will be next year before we see rates increased there is still the outside chance that should economic data continue to improve the Bank will be able to act sooner rather than later.

UK unemployment – Mark Carney, the governor of the BoE, has previously stated that should unemployment fall to below 7% they would consider increasing interest rates. Since Mr Carney stated this unemployment has fallen rapidly, a lot faster than the bank had predicted and in fact last month was the first time that the decline in unemployment actually stopped. So, with the unemployment rate now sitting at 7.2%, very close to the target level, should the levels fall again this month it will once again spark the debate about a possible interest rate hike and this may lead to a spike in Sterling exchange rates.

The Budget – Chancellor George Osborne has been in a more enviable position of late with the UK economy showing signs of recovery and with his latest budget on Wednesday it is likely that he will be quick to highlight the recent improvements. Having said this Mr Osborne has also stated that there are still some difficult decisions to make and that the recovery is still far from over, and so there is the chance that while the budget will be highlighting the positive recent news it may also have further cuts and tax increases. In terms of its impact on the currency market it is very difficult to predict. Should the reaction be positive and there is a lot of talk about a continued recovery then we may see some Sterling strength however the opposite is also true.

So, with so much happening next week for anyone who needs to transfer funds internationally it will be vitally important to monitor the exchange rates in the lead up to these announcements.