Sterling Exchange Rate Outlook

Following a week where Sterling weakened against most the major currencies due to some poorer than expected which is eroding at the chance of an interest rate hike this year from the Bank of England. However, this week there are some key data sets for Sterling which could either reverse the recent trend or add to the Pound’s recent drop.

Monday

The week starts quietly with very limited amount of data due for release, the main data of note for the UK is the British Retail Consortium (BRC) retail sales figures which will provide a good insight into how the the UK high street is performing. As the retail sector is a major part of the UK economy these figures are important and the expectation is for an improvement which could help provide some support for GBP. The other data of note today is the latest housing figure in Canada which is predicted to show a slight decline however the numbers are still likely to show a relatively strong housing market which is further good news for the Canadian economy.

Tuesday

On Tuesday the leaders of the G20 nations are due to meet for a two day meeting and so should the global economy be discussed it will be key to take note of any comments. The first data released will be from Australia as they announce house price figures and also business confidence figures both of which will help go towards painting a clear picture of how the Australian economy is performing. In the Eurozone the ZEW survey is announced, this is a survey of institutional investors and measures the sentiment of these institutions and effectively confirms whether there is confidence and optimism towards the single currency economy, a positive figure could generate some strong movement for the Euro. Finally, the day ends with the latest Japanese Gross Domestic Product figures which are predicted to show a big decline, if this is the case it may not only weaken the Yen but could also have negative ramifications for some of the other currencies, especially for countries that have strong trade links with Japan.

Wednesday

The big news on Wednesday is the latest UK unemployment figures which are predicted to show a further drop and also the average earning figures which are predicted to hold relatively steady. Unemployment has been headline news for much of this year in the UK due to the fact that the Bank of England stated that when it dropped below 7% they would consider raising interest rates. Well, interest rates are now at 6.5% and are predicted to fall to 6.4% this week and there is still no sign of an interest rate increase. Now that the Bank of England have changed their stance unemployment is not quite as important but will still hopefully go to show the UK recovery is on track and if so may help Sterling exchange rates. Also announced on Wednesday is the latest Bank of England Quarterly Inflation Report which will give possibly the best illustration of how the UK economy is performing and could be the most important data set of the week for the Pound. Should inflation remain at around the 2% level it will be good news for Sterling but any drop could lead to further weakness. Finally on Wednesday in the US the latest mortgage application figures, retails sales numbers and a speech from 2 of the members of the Federal Reserve Bank of America means it should be a busy day for the USD.

Thursday

Eurozone Consumer Price Index, Gross Domestic Product (GDP) and the ECB monthly report are announced on Thursday and with GDP expected to fall and inflation also due to drop it could be a bad day for the Euro and therefore a good day for those clients looking to buy Euros. Inflation has been a key driver for Euro exchange rates recently and prompted the cut in interest rates and should it continue to fall the pressure will once again  mount on the European Central Bank and talk of Quantitative Easing in the single currency economy could again surface.

Friday

The week ends with another key economic data set as the latest UK Gross Domestic Product (GDP) figures are released. The figures are a confirmation of the figure we heard for Quarter 2 of this year and is set to show no change from 0.8% but any change from this could lead to significant Sterling exchange rate movement.

So, with so much important economic data due for release, especially towards the end of the year it will be important to stay in close contact with your account manager here at Foreign Currency Direct plc who will be able to keep you informed of all the latest currency movement and the options available to you so you can make an informed decision about when to transfer funds internationally. You can call straight through to our trading floor for free on 0800 328 5884 or if calling from abroad on 0044 1494 725353 alternatively you can email me directly on trh@currencies.co.uk.