The Pound continues its upward trend as GBP investors eye up the possibility of an interest rate hike in response to higher inflation.

Sterling exchange rates approach 2017 highs

Based on the Pounds performance since the 29th of March when the Brexit officially begun, the currency appears to have put the fears surrounding its value to rest at least for now. It’s been 2-weeks since the Brexit started and we’re seeing Sterling exchange rates around their highest levels so far this year.

In my previous report, I covered the importance of Inflation levels for the UK and how they could trigger an interest rate hike from the Bank of England, which is something I personally think would result in additional GBP strength.

Yesterday morning the official figure came out in line with expectations at 2.3% which throughout the day pushed Sterling higher, and the Pound to Dollar rate is now sitting at a 12-week high as a result. For as long as the reading sits above the BoE’s 2% target I think investors will continue to buy the Pound in anticipation of a rate hike from the BoE. It’s for this reason I’m expecting to see Sterling continue to climb in the short term future.

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How will the UK economy perform outside of the EU

Yesterday morning the Governor of the Bank of England, Mark Carney stated that the UK’s financial technology sector does not need the same level of regulation the UK’s banking industry has. This viewpoint is in line with the Governments as the UK continues to show signs of an attempt to cement its position as a global FinTech hub after the Brexit. With some firms planning to move to the likes of Paris and other European capitals due to Brexit, I expect the UK to remain relaxed regarding this sector within reason, as long as they retain as much of the market share as possible. This topic, along with other directions the UK decides to take moving forward tie into the Pounds value, as it’s likely the Pound would come under pressure should it become clear the UK’s is losing ground on the global stage due to Brexit, especially within the financial services sector.

FinTech already employs over 60,000 people within the UK, so it’s understandable that Carney would make his intention to protect this sector clear in my opinion.

Early this morning a business survey from the British Chambers of Commerce showed that British manufacturers reported their fastest export growth in more than 2-years in 2017, and that the all-important services sector has recovered to rack up its strongest sales growth since June last year (the month of the Brexit vote).

This news is Sterling positive and could be why Sterling is trading up this morning. An issue that could weigh on Sterling’s value in future though is the potential restrictions on trade due to Brexit and new laws created due to it. Just yesterday the Chief Executive of the UK Chamber of Shipping said the introduction of physical customs checks after Brexit would be catastrophic for the British shipping trade.

I expect these kinds of developments to play a larger role as the next two years of negotiations progress.

Key topics for Sterling exchange rates at present

There’s no UK specific data releases this week that I think can create major movements within GBP rates, so we’ll have to look at data releases overseas for potential movers.

If you have an upcoming currency requirement involving the Pound feel free to make us aware, as we can attempt to try and help you trade around times of increased volatility within the currency market. Call us on 01494 725 353 or email me here and Ill be happy to assist you personally.

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