This currency update examines factors that could affect Sterling exchange rates this week. The below table shows the market movements for a number of currency pairings in the last 30 days:
|Currency Pair||% Change||Difference on £200,000|
You would have been forgiven for thinking that the Pound may have strengthened since the decision earlier this month to raise interest rates for the first time in a decade, but ever since we have in fact seen the Pound in a vulnerable state, mainly due to the current political uncertainty surrounding the strength of Theresa May’s government, coupled with the ongoing Brexit uncertainty.
The Pound’s fortunes seemed to take a turn for the better on Friday last week however, with Industrial production figures for September showing a sharp rise and the NIESR (National Institute of Economic and Social Research) revising their GDP estimate for the last three months up to 0.5% from 0.4%. Despite this, the Pound’s gains were curtailed by comments from the EY Item club (an economic forecast group) suggesting that the outlook for the UK economy still remains bleak whilst there is so much political uncertainty in the air.
The flames were fanned in this respect two-fold on Friday, with chief EU negotiator Michel Barnier issuing the UK a two-week deadline to commit to how much they will pay to the EU as part of the divorce form the EU, whilst Lord Kerr, who was involved in drafting Article 50, claimed that the UK can still in fact reverse the Brexit decision, even if a final divorce date is set. His comments go against what many ‘Brexiters’ in May’s cabinet have been suggesting in recent months, that Brexit was an irreversible decision. Anyone buying or selling Euros should follow developments in this issue closely, as I believe that any sustained gains for the Pound are going to be hard to come by until the Brexit situation is clarified, one way or another.
I feel that any spikes in the Pound’s value, such as Friday’s, should be carefully considered as an opportunity to take advantage of.
We have already started to see some of the Pound’s gains from last week being reversed this morning following reports that up to 40 members of the Conservatives are prepared to sign a vote of no confidence and would only require 8 more signatures to trigger a vote which could be disastrous for the Pound.
Looking ahead to this week and there is a raft of data released form the UK economy that has the potential to impact on Sterling exchange rates. Of particular interest, especially following on from the recent interest rate hike, will be inflation date tomorrow morning at 09:30 and average earnings data on Wednesday. The aim of the recent rate rise was to curb inflation, so although there won’t have been an impact from the hike yet, this will be keenly watched by investors to determine whether or not the rise in rates was a good decision. One of the worrying factors recently is that wages haven’t been rising in line with the cost of living, so if inflation stays high and wages haven’t risen this could harm the Pound’s value.
There are also retail sales figures on Thursday, so with so much data on the horizon it is important to keep in touch with your account manager at FCD who can keep you informed of all the latest market movement.
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.
All the staff I spoke with were helpful ,courteous and knowledgeable. The service is efficient and FCD make the exchange process hassle free.
Personal, attentive. What more can I say? First Rate.
Efficient, friendly, personable – I have used this service several times and will not hesitate to call on them the next time a foreign currency transfer is required.
Quick, competent and friendly: a reassuring excellence of service, which I heartily recommend to every potential client.