This Pound Sterling update looks at how the Pound is currently performing and upcoming factors that could affect GBP exchange rates this week. The table here shows the market movements for a number of GBP currency pairings on 26/09/2017:
|Currency Pair||% Change||Difference on £200,000|
The Pound continues to hold its gains against most currencies after the recent surge in Sterling over the last two weeks. The expectation of a looming interest rate hike is the main driving force with the markets fully pricing an interest rate hike by February 2018 and a 50% chance of a rate hike in November this year. The Pound was further supported yesterday after UK mortgage approvals for August climbed higher to 41,807k highlighting the housing market is still being propped up.
UK Gross Domestic Product numbers for the second quarter are released on Friday and have the potential to create substantial market volatility.
Considering the recent surge in the price of Sterling, it would not take much in the way of a weak data release to see the Pound lose some of its recent gains. Expectation is for GDP to have grown 0.3% on the quarter so anything less which takes the number closer to zero growth could be problematic for Sterling exchange rates this morning.
Although unemployment has fallen to just 4.3%, the lowest in 42 years, economic growth has come into question with the ongoing Brexit uncertainty.
European Council President Donald Tusk met Prime Minister Theresa May in London yesterday with the meeting reportedly going smoothly. Donald Tusk said he felt cautiously optimistic about Brexit after what he described as an excellent speech in Florence. However he did say that there was still not yet “sufficient progress” to move to the next stage of the future trading relationship.
Meanwhile Brexit secretary David Davis and Michel Barnier discuss the detail in the 4th round of negotiations this week. Mr Barnier however has continued to insist that real progress on the divorce bill, citizens’ rights and the Irish border was essential to move on with future discussions. The lack of progression and clarity is still a concern which carries considerable risk for the Pound.
Credit rating agency Moody’s has downgraded the UK growth outlook. Moody’s downgraded the UK to an Aa2 rating from Aa1 citing leaving the EU as the main cause of uncertainty for the UK. It follows from when Moody’s downgraded the UK from its top AAA rating in 2013. The Pound could come under further pressure if other credit rating agencies Fitch and Standard & Poor follow suit with a downgrade. This downgrade comes at a time where the Labour party have highlighted that there could be a run on the Pound if the party was able to be elected.
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