Last nights FED interest rate hike has resulted in Sterling climbing in value against most major currencies excluding the US Dollar. There are spikes available for most with the best levels seen for weeks on offering. Contact us this morning to take full advantage.
UK inflation was released this week and showed an increase as expected to 1.2%. This was widely expected by most forecasters and actually resulted in Sterling gains. Inflation climbed as a result of both the recent rise in oil - over 10% in recent weeks, it is now over $57 per barrel, and a rise in the cost of clothing. Next year inflation is expected to climb even further with some expecting it as high as 2.3%. Food inflation is expected to climb steeply in the New Year after the battle for business by the supermarkets over the festive period has concluded.
What is important to note is that the figure released this week relates to the average cost of a basket of goods for households, it does not account for the costs of the businesses in making those products. Business inflation is already sitting at over 2% following the 10% - 15% fall in Sterling’s value as a direct result of the Brexit result. This level of inflation will transfer into the cost of household goods next year and could start to have an impact on the value of the Pound. This could equate to a fall in spending and business confidence, retail figures falling and a general slow-down in UK PLC as wage inflation falls and the amount of expendable income falls steeply.
Yesterday morning we had the latest unemployment data released for the UK which showed overall levels of unemployment at 4.8% as expected.
In the months ahead after the festive hiring season, many expect unemployment to be under threat. The argument stands that due to the uncertainty about the future of the UK economy and its place in the world moving forward, companies may well start leaving the UK. Some have been talking about companies relocating to mainland Europe and others have been relocating to the UK, most recently McDonald, due to the attractively low corporation tax on offer as an incentive brought in by the government.
This afternoon we have the latest update from the Bank of England (BOE). The release today will be keenly watched for hints as to their future policies and appetite for further changes in interest rates. They did suggest only 6 weeks ago that rates could be cut again however this guidance has now ‘expired’.
Personally, I don’t expect this to be a huge mover for the markets as it is unlikely that there will be any movement in central policy from the bank. If anything however, I expect this to have a more negative impact on the value of the Pound as it seems likely that Mark Carney, the head of the BOE, will re-highlight the economic headwind coming as a result of the Brexit uncertainty and raising inflation confirmed this week.
As a result, if you are a Sterling seller, moving before this event seems wise as there is much more risk than reward, if however, you are a Pound buyer, waiting for the news could give you an advantage as we reach the end of the week.
Some Pound Sterling weakness could present itself during the Bank of Englands interest rate decision. While the outcome is not expected to result in further cuts to the UKs rate, clients buying or selling the Pound could have opportunities today to capitalise on market fluctuations. Call our trading floor on 01494 725 353 or email email@example.com if youd like to know more on how this could impact you.
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