This update discusses the Pound's current position and looks ahead to what factors could affect GBP exchange rates this week. The below table shows the market movements for a number of currency pairings yesterday:
|Currency Pair||% Change||Difference on £200,000|
The Pound has fallen sharply against all of the major currencies after UK Consumer Price Index (CPI) inflation numbers came in weaker than expected.
UK CPI for July held steady at 2.6% against expectation of 2.7% which helped drive the Pound lower with GBP/USD falling to a five-week low whilst GBP/EUR is now trading nears those lows seen last October when “Flash Crashes” and “Fat Fingers” were driving the Pound lower. The weaker inflation numbers are likely to see the Bank of England further delay an interest rate rise which is proving negative for the Pound. A rate hike this year is now starting to look very unlikely.
Tomorrow however will shed more light on the future timing of any changes the Bank of England may make. UK average earnings data is expected to remain at 2% and will be monitored closely by the central bank. The squeeze on consumer spending is topical and is of concern for the British economy. Any further signs of weak wage growth will reduce the need further for a rate hike. The uncertainty of Brexit on the British economy however will be the main deterrent for taking action too early and this should keep sterling at bay.
UK unemployment numbers released this morning and retail sales data on Thursday will both help paint a picture of how the economy is performing and where interest rates are heading. UK unemployment is expected to remain at 4.5% for June, the lowest since 1975.
Any improvement would no doubt be seen as a positive for the Pound so volatility should be expected from this data.
The Pound should start to see added volatility from the political arena after a Brexit position paper was published yesterday, although there has been no market reaction as yet. A temporary customs agreement with the EU acting as a transitional arrangement has been put forward which would allow businesses to prepare for the final exit.
A total of twelve papers are expected in the coming days with one released today outlining the British position on the Northern Ireland border. There is likely to be market reaction for the Pound particularly if these papers are received well and more clarity is offered.
For more information on how future data releases could affect your currency transfer please call our trading floor on 01494 725 353 or email me directly here.
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