GBP Exchange Rates

Today is a fairly quiet day in the currency market with ANZAC day meaning both Australia and New Zealand are closed for the bank holiday and the main news has been announced with mortgage approvals in the UK coming out lower than expected and retail sales better than predicted. So, these two data sets have pretty much cancelled the other out and as a result Sterling has remained flat against most the major currencies with the mid market price on Sterling Euro exchange rates hovering just below 1.2150 and just over 1.68 on the USD. Now, with very little economic data due for release it is possible the exchange rates will remain relatively stable up until Tuesday’s UK Gross Domestic Product (GDP) figures which could be one of the key data announcements next week and could cause some volatility especially on GBP EUR exchange rates and as a result could dictate the short term trend for Sterling.

In the meantime today sees the start of a change of mortgage application whereby applicants will have to face questions about their lifestyle including questions such as how much do they spend on haircuts all in order to work out whether the applicants can afford the mortgage should interest rates rise. It is predicted that interest rates will be hiked early next year which could provide a spike for Sterling exchange rates but also for those people on variable mortgages could increase the pressure on individuals. So, with the economic recovery in the UK still on going and fragile there is a concern that raising interest rates too much and too fast could cause problems. The new rules for mortgage applications may seem a little over bearing but in the long run it may help people better understand what they can afford and help prevent a repeat of the financial crisis we saw back in 2008. However, in terms of Sterling exchange rate this new test could mean we see less mortgages approved and therefore a slowdown in the UK housing market which may slow down the UK’s economic recovery and therefore not benefit Sterling.