This Sterling update discusses factors that could affect GBP exchange rates this week, including an important speech from Theresa May on Friday. The table below shows the market movements for a number of currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR5.7%€12,908
GBPUSD6%$16,444
GBPNZD6.1%NZD $22,908

Mark Carney suggests rate hikes will be ‘limited and gradual’

The UK economy is being viewed in a more positive light since last week when the Bank of England suggested that they may look to raise Interest Rates in the coming months. Bank of England Governor Mark Carney has now spoken on two occasions to reinforce this suggestion that the Bank of England may look to raise interest rates at their meeting in November. However, Sterling weakened against the Euro and Dollar yesterday when Carney confirmed that any hikes would be ‘limited and gradual’.

Could GBP/EUR rise up to 1.15?

HSBC upgrades 2017 forecasts from parity to 1.12

HSBC, one of the major banks predicting parity for GBP/EUR by the end of 2017, have now upgraded their forecasts to ending the year at €1.12 for GBP/EUR and $1.35 for GBP/USD. Strategists at the bank admitted that they were wrong with their earlier predictions, and after the BoE announced their potential plans of an Interest Rate hike in the coming months causing the Pound to hit its highest level against the US Dollar since the Referendum in June 2016, the bank were forced to rethink their estimates. The Centre for Economics and Business Research have also upgraded their view on the UK economy on Monday, following from a pickup in the Manufacturing sector.

This morning at 9:30am UK Retail Sales data for August will be released and this usually creates volatility for Sterling exchange rates. Expectation is for a fall compared to the previous month due to poorer weather conditions in the UK, and if this is the case, we could see another opportunity for clients buying Sterling to act on.

Theresa May’s speech on Friday in Florence

Prime Minister Theresa May will be speaking in Florence on Friday, and investor focus is likely to shift to this event for clarity surrounding Brexit. It is expected that she will provide an update on Brexit and the negotiations so far, and is likely to be a particularly volatile day for GBP exchange rates. If May’s speech is positive about negotiations and the UK government’s progress in addressing Brexit, we could see further gains for Sterling, potentially bringing GBP/EUR rates above 1.15. However, if her speech is not as positive as hoped, this would likely be Sterling negative and the recent gains could very quickly be undone.

As currency markets move rapidly, a Limit Order contract could be a sensible option, allowing our systems to automatically book your currency at a rate determined by you. Contact your Account Manager here on 0044 1494 725353 today to discuss the best options available to you.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.