The long awaited interest rate decision in the UK will come today with expectations of a hike above 80%. The Sterling report looks into the potential impact of this decision, depending on whether or not there is a rate hike, and taking into account the speech from Mark Carney following the decision. The table below shows the range for a number of exchange rates during the past month.
|Currency Pair||% Change||Difference on £200,000|
The continued inflation level above the Bank of England’s 2% target along with an expected boost to Retail Sales following the World Cup, analysts believed the central Bank has enough justification to hike.
The UK like most of the Western world is in real danger of falling behind the United States as the Federal reserve continue to raise interest rates, which suggests this move from the Central Bank will be well received by markets.
There is however a degree of scepticism as to what the effect will be on Sterling. Mark Carney the Governor of the Bank of England will speak after the decision and provide the Monetary Policies Committees opinion on the economy, which many anticipate will be dovish.
Whilst the Bank believe the conditions are right for one hike, we’re still a long way from following the US with 3-4 hikes in one year. In essence the traditional boost for a currency you would expect from a hike could be talked down with a doomy outlook from Carney.
There is still considerable uncertainty with regards to Brexit and the UK economy is always only one month of bad data away from major concern. Whilst I think it’s hard to see any major boosts for Sterling I do think we will see the GBP/EUR trading back above the 1.13 level, maybe even touching 1.135 which last happened a month ago at the start of July.
If you do have an upcoming requirement to buy currency with Sterling make sure you’re in contact with your broker, as this afternoon could provide a window of opportunity to capitalise on an improved rate.
Theresa May is cutting her holiday short and making sure she’s doing the most she can for Brexit as she meets French President Emmanuel Macron tomorrow. May will be keen to gain the support of the French Prime Minister to push through the deal which appears to still be stuck on a few key areas.
The talks whilst held in private could always provide volatility to the market depending on statements that may be released. Should the UK Prime Minister receive the support and confidence she needs sterling could be on the end of a small jump.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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