The immediate turnaround in business outlook will once again be tested today. How will these key sectors viewing the post-Brexit outlook 2 months on?

Will the Pound’s value be tempered with a further assessment of UK manufacturing?

This morning will be the first test of how business confidence and outlook for the UK’s economic future measures up with reality, and the effects for the Pound could be very stark.

Those with a foreign currency buying requirement have enjoyed four business days where the Pound has jumped from strength to strength, with more than half of the gains recorded within the past month within this short period. The impetus driving this improvement has come from three data releases from a renowned economic data company, Markit.

Surveys of business confidence in three key sectors – construction, manufacturing, and the services (the most important arguably for UK growth) – have shown a dramatic turnaround in the space of a single month for the UK economy. The Pound has jumped on the best single month improvement in manufacturing for 25 years, and a suddenly overwhelmingly positive reading to offset the negative and frankly chaotic reading for the services arena just thirty days ago.

And that’s where the questions are coming from. Whilst the Bank of England have intervened with emergency financial stimulus, this will take time to record some improvement to the initial shock of the Brexit vote. Markit have since been criticised for obviously providing an exaggerated negative tone in August for the readings now to be so optimistic. The truth probably lies somewhere between the two.

How will Sterling be affected by new information being released?

Does this mean that the Pound’s value is over-inflated? This is why the manufacturing figures coming out this morning are so important. This will give us some semblance of reality for how the UK is actually performing. Figures rather than expectation, and most are anticipating that the recent expectations from the Markit surveys will be tempered.

The news will be coming out at 9:30 this morning and will have a first look at how production in the manufacturing sector has measured up since the leave vote in terms of growth. Forecasts are already showing the anticipation of a contraction for the month of July. So the recently established pillars maintaining the Pound’s value may be chipped this morning. If you have a foreign currency buying requirement, it may be wise to act quickly to avoid what is likely to be an incredibly volatile morning.

Is inflation no longer a point of concern for Sterling’s value?

Inflation used to be a repetitive pain point for anyone holding Sterling and who required a foreign currency. However, due to the recent devaluation of the Pound and the recent stimulus introduced by the Bank of England to pump money into the financial markets, this has become a healthier area. These inflation report hearings will likely confirm this later today but this is not new news to global markets. It’s impact is expected to be minimal. However, growth estimate figures for the UK economy in the three months to August at 3pm BST this afternoon will be. Again, I am expecting the very recent euphoria over the UK’s outlook to be given a firm reality check with this key economic indicator.

Further movements for Sterling could occur today. If you have an upcoming currency exchange give our brokers a call on 01494 725 353.

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