Following the Pound's recent gains, is there room for further improvements for Sterling? This report looks at upcoming events and how they could impact GBP exchange rates. The table below displays the change for a number of GBP pairings yesterday:
|Currency Pair||% Change||Difference on £200,000|
Retail sales data has been impressive. Previously released data was at – 0.2% and was expected to arrive at 0.4%. The figures arrived at a very impressive 0.8%.
Unemployment is currently sitting at a 43 year low and average wage growth is very close to parity with inflation.
These data releases mean there is a very strong possibility of a rate hike from the Bank of England (BoE) in May.
We have also seen a transitional Brexit deal all but being agreed. The main reason for optimism is that the UK will have access to the single market during the transitional period, which will certainly suit a vast number of businesses operating on UK shores.
If I were buying Euros with Sterling I would consider placing a Stop/Loss contract. This way you have the opportunity to monitor the market for improvements, knowing you have a safety net in place should the market fall.
If we look at GBP/EUR, 1.15 was a key resistance point for over 11 months. It eventually took news from the European Central Bank (ECB) that there was the possibility a cut in Quantitative Easing (QE) would be held back. This is due to inflation concerns and the news helped push GBP/EUR above 1.15.
For some time GBP/EUR has quickly retracted when 1.15 has been breached. We have now seen GBP/EUR remain above 1.15 for several days and the question is, are we now witnessing new buoyancy levels between 1.15 – 1.20.
The UK’s involvement in Syria is highly controversial and does not sit well with many, particularly Russia. Although I am of the opinion the implications of this situation should not be taken lightly I think this will have little impact on exchange rates unless of course the situation escalates.
Today we will see the release of Average Wage Growth and personally I feel this is one of the most important data releases in regards to representing the health of the UK economy. In order to have a stable economy inflation must be closely in line with wage growth.
Due to the weak value of the Pound following Brexit inflation rose rapidly. Businesses were forced to pay more for imported goods, which in turn was passed on to the consumer. Unfortunately wage growth was not consistent. We have however recently seen impressive wage growth figures and it is coming close to parity with inflation.
The latest wage growth figures came in above expectations at an impressive 2.8%. If we see further gains this could well force the Bank of England’s (BoE) to raise rates in May. An increase could well cause further gains for the Pound.
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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