Sterling has had a torrid time of late weakening against the majority of major currencies due to the vote to leave the European Union. Most of the negative data released so far has been based on June’s figures so I feel now as July’s UK economic data starts to filter through Sterling could fall further in value. UK retail sales for July came in against the grain and was positive and did cause a small rally for Sterling against most currencies.
I think this can be attributed to an increase in tourism created by the weak pound and something as rare as a good hair day for Donald Trump, decent British weather.
The Bank of England (BOE) has already cut interest rates from the record low of 0.5% to 0.25% and introduced further Quantitative Easing (QE) to the value of £80bn. QE is where a central bank creates new money electronically to buy financial assets in an attempt to stimulate growth. QE generally weakens the currency in question. Ian McCafferty a member of the monetary policy committee (MPC) has stated if UK data continues to come in below par monetary easing will take place. Many economists are predicting GBP/EUR could reach parity in the near future. If you are selling Sterling short to medium term it may be wise to take advantage of current levels.
UK mortgage approvals for July are released tomorrow at 09.30. It is a key indicator of the health of the UK housing market. I would expect to see a contraction due to the uncertainty regarding property prices post-Brexit vote.
Friday will see the release of UK GDP data for the second quarter and again I would expect to see a contraction which could weaken the pound.
With the impact of Brexit likely to impact Sterling further, you may want to take action to secure current exchange rate levels. Call our experts today on 01494 725 353.
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