With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table shows the difference in a number of currencies you would have achieved when buying £200,000 over the last 30 days.

Currency Pair% ChangeDifference on £200,000
GBP/EUR3.41%€7,560
GBP/USD3.44%$8,840
GBP/AUD5.05%AUD $16,480
Are there further interest rate hikes in the UK on the cards?

Sterling weakness due to interest rate decision

Yesterday afternoon the Bank of England confirmed that interest rates would remain on hold at 0.25%. The Pound devalued against all of the major currencies as the central bank downgraded growth forecasts from 1.9% to 1.7% by the end of the year as consumer spending has dropped due to high inflation and they expect GDP growth to remain ‘sluggish in the near term’. In addition only 2 of the 8 voting members voted in favour of hiking interest rates, when last month there were 3. The voting pattern is no surprise as inflation fell to 2.6% from 2.9% last month, relieving some of the pressure the Bank of England had been receiving and also Kristen Forbes one of the three that voted in favour of hiking interest rates left her role at the Bank of England a few weeks ago.

However on a more positive note the Monetary Policy Committee signalled that an interest rate hike could occur earlier than the market is currently pricing in. However the first hike is unlikely to occur until some point late next year.

After the interest rate decision Governor of the Bank of England Mark Carney gave his outlook and it hasn’t substantially changed. However the Governor did state that Brexit uncertainty is already weighing down on the UK economy, therefore I don’t expect UK economic data to help the pounds value in the upcoming months.

What to expect for sterling in the months to come

Now it has been confirmed by the Governor of the Bank of England Mark Carney that Brexit is starting to have a negative impact on the UK’s economy, I expect Brexit negotiations to be back in the spotlight. I am optimistic and believe it is a matter of time until the UK and EU negotiators come to an agreement about the divorce settlement and EU citizens’ rights which should improve the Pound's value.

However short term I expect the pound to remain under pressure if economic data continues to disappoint. With no economic data releases to look out for the remainder of the week all eyes turn to next week’s manufacturing and Industrial production numbers released Thursday morning at 9.30am. When buying or selling the pound it is important to analyse both currencies you will be trading, therefore I would recommend getting in touch with the trading floor to discuss your currency pair.

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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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.