With Thursday's much anticipated Bank of England interest rate decision having been the key event for the Pound for some time, have investors already factored in an interest rate hike to Sterling’s current value?

The table here shows movements for a number of GBP currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBPAUD2.4%AUD $8,360
Uncertainty as the Markets Await a Result on the Vote

There has been a marginal upturn for Sterling over the past couple of days, as the markets start to tune themselves towards Thursday’s Bank of England (BoE) interest rate decision. Thursday’s date has been fixed in many investors diaries ever since BoE governor Mark Carney, suggested an interest rate rise was on the horizon. The Pound has made gains against the EUR, rising above 1.13 again. It also moved back above 1.32 against the USD and has touched 1.72 against the AUD. Many clients will now be questioning their next move but personally it may be wise to consider any upcoming Sterling exchange ahead of Thursday’s decision.

I believe a small rise in interest rates (up to 0.25%) has already been factored into Sterling’s current value and whilst you may see a small upturn should the aforementioned hike occur, it is unlikely to be overly aggressive.

I feel that whilst market perception around the UK economy remains minimal, any rises in the Pound’s value, however marginal, should be considered a positive and clients holding Sterling need to consider acting accordingly.

What is driving Sterling’s value down?

We must take into account that the UK’s economic output has weakened significantly over recent months and we have now fallen behind Europe’s other leading economic powerhouses.

This has for the most part been due to minimal investor confidence in the UK and its future growth prospects, following our on-going separation from the EU.

The main driving force behind Sterling’s downfall is what seems to be a complete stagnation in Brexit talks. Despite UK Prime Minister Theresa May remaining upbeat as you would expect, there has been no major breakthrough and as such, confidence in the Pound continues to fall.

Whilst both sides still remain hopeful of a positive outcome, it is becoming clear that it is the UK who are likely going to have to make more concessions than they hoped or we first anticipated.

Those clients holding Sterling need to ask themselves are they prepared to gamble on a sustainable increase for the Pound, whilst so many negative factors are working against them.

My opinion I think that the downside risk continues to outweigh any real upside gain and as such, I would be taking advantage of the current short-term opportunity.

For more information on how future data releases could affect your currency exchange call our team of experienced currency brokers on 01494 725 353 or email me directly at mtv@currencies.co.uk.


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