The Sterling report below discusses the current situation with the Pound and the events during the week ahead that could affect exchange rates.
This table displays the market movements for a number of Sterling currency pairings during the last month:
|Currency Pair||% Change||Difference on £200,000|
The Pound weakened against the Euro on Friday morning after UK Retail Sales data for December was released far below the previous and expected figures.
Retail sales fell by 1.5% compared to November’s data, and highlighted the largest monthly fall since before the referendum in June 2016.
One reason for this is that, as Black Friday becomes more and more popular in the United Kingdom, having inherited the idea from the United States, shoppers have shifted their spending to earlier to November to take advantage of the significant discounts.
UK inflation also has a key part to play in poor retail figures, as wages are struggling to keep up with the cost of goods due to the weak Pound since the vote to leave the EU.
Developments on Brexit over the weekend also created further weakness for the Pound against the Euro and Dollar. French President Emmanuel Macron, one of the key and influential leaders in the European Union, has suggested that the UK will be able to achieve a bespoke Brexit deal, something which Theresa May has been urging for. However he also confirmed that the UK would not be able to take advantage of the same benefits as being a part of the EU with May’s current Brexit plan, and would need to follow a similar agreement to that of Canada and Norway.
Theresa May will be speaking at the World Economic Forum in Davos on Thursday and I would expect this to be a key driver for Sterling exchange rates. The Forum will be held from Tuesday to Friday this week. Mrs May will meet with fellow World leaders at the summit and if any further Brexit developments unfold we could see the Pound break through the Interbank range of 1.12 to 1.135 it has been caught in since the start of the year.
Meanwhile, on Wednesday Average Earnings and Unemployment data will be released. Average Earnings in particular will be key as this is one of the main causes for concern for the UK economy at present. Wages are not matching the current levels of Inflation, causing consumers to curb their spending, so any increases noted could cause Sterling strength.
For further information on how events this week could affect exchange rates call our team of currency brokers on 01494 725 353.
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