For now, all Brexit related woes are on hold as the market counts down the hours to Philip Hammond’s first and last spring budget on Wednesday at 12:30pm. In my opinion there are two significant features to look out for that could influence the currency market and affect your transfer:
Changes to UK growth forecasts – If predictions are true, the Office for Budget Responsibility will increase their growth forecast for the UK economy from 1.4% to 2% in 2017, as a result we could see GBP strengthen, benefiting anyone with a foreign currency requirement.
Hammonds Rainy Day Fund – Indications the Chancellor is going to hold a tight grip on spending plans for now to build up a ‘Brexit Warchest’, (projections the fund could build to £60bn in the next 3 years) in preparation for Brexit-related economic turbulence. Investors would likely see such steps as beneficial to the UK, allowing strong fiscal stimulus if needed and thus strengthen GBP exchange rates.
However, a budget can only ever guarantee one thing, uncertainty. Whilst never being welcomed in the currency market uncertainty gives anyone with a Pound Sterling buying requirement the possibility to benefit from a similar GBP sell off to that seen before the last budget delivered by George Osborne on 16th March 2016 as investors are hesitant to hold the currency. At the time resulting in a 0.5% drop against both the Euro and US Dollar and earning you an extra £700 on a €200,000 transfer or £800 on a $200,000 transfer.
Friday is the main event for UK economic data releases this week with Consumer Inflation Expectations released at 9:30am, giving an insight into the price change consumers expect to occur over the next 12 months. With the Bank of England targeting a 2% inflation rate any further increases from the previous 2.8% level could indicate significant future weakness for GBP have a drastic effect on rates and give anyone with a GBP purchase requirement the opportunity to take advantage of a short-term spike in the market.
The week ahead for Sterling could bring significant movements for GBP exchange rates, and those with a buying or selling requirement should get in touch with their dedicated broker on 01494 725 353. Alternatively, to learn more on what events could bring further movements for Sterling exchange rates you can email me here.
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