This report will examine the factors that could affect exchange rates this week in order to help you stay informed if you need to make a currency transfer. The table below shows the difference you would have received when buying £200,000 at the high compared to the low during the past month.

Currency Pair% ChangeDifference on £200,000
GBPEUR3.30%€7,250
GBPUSD4.30%$11,150
GBPZAR5.85%ZAR 202,000
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Why is sterling falling in value?

Sterling rates of exchange have remained changeable this week as the market continue to try and price in the future impact of the Brexit negotiations, and a potential interest rate hike into the Pound. Over the last fortnight GBPEUR rates have dropped by nearly 2 cents, or 2.4% and GBPUSD rates by as much as 3½ cents, or 2.5%. This has resulted in a £200,000 transfer achieving as much as €5,400 or $6,600 less, highlighting that timing a currency transfer remains incredibility important. Most of this fall in the value of the pound has been down to the changing likelihood of a UK interest rate hike in the near future. It is now less than 4 weeks away from the Bank of England's (BOE) next interest rate decision, which could be when we see rates rise for the first time in ten years.

The Bank’s Governor Mark Carney, seems to have gone out of his way to signal that a rate rise is on the cards. Markets and economists now seem to be betting that the Bank’s Monetary Policy Committee will hike by 25 base points at their 2nd November meeting, which would take UK interest rates up to 0.5%.

Over the last 10 days however, data from the UK has not been as strong as forecasted, and with the IMF's recent contraction in UK growth forecasts, it is putting this expectation at risk. Personally, I see a rate hike within the next 6 months as very likely but think that it is more probable to happen at their February meeting rather than in November. Interest rates on mortgages being offered in the UK have equally started to climb, with over 11 UK lenders having raised interest rates on fixed rate mortgages in recent weeks. As this expectation becomes more likely, bear in mind that it could easily push the value of the Pound down from its current levels in the weeks ahead. Personally, I see GBPEUR rates closer to 1.08 than 1.15 as we head towards the end of the year.

Brexit talks fail to help Sterling

Moving forward, Sterling rates will continue to be driven by Brexit negotiations as the 5th set of talks concluded yesterday. In the speech that followed it was suggested that not enough progress had been made meaning it could will get worse before it gets better. These steps into the unknown, with Brexit supposedly happening within 18 months, will see Sterling lose out the most.

When will the Pound be at its highest in October?

The next key data for UK Pound movement is Tuesday of next week. There are a number of key data releases pending, including Production Price Index, Consumer data and indicators in UK Retail. Already these are expected to show a further contraction which will probably put more pressure on the value of the Pound, making buying anything from property to livestock abroad more expensive.

I personally would not be surprised if the current levels available for selling pounds are close to the top of the range for the rest of October.

Thank you for reading my currency report, if you have any questions about an upcoming transfer I would be more than happy to discuss them – you can contact me with any queries 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.