Sterling saw a very volatile close to the week on Friday as strong economic data out from the US and Catalonia’s vote for independence shook investors into life. The pound is now sitting at key levels against its currency counterparts, notably 1.13 against the Euro and 1.31 against the Dollar.
In the table below you’ll find high to low exchange rate movement for a number of GBP currency pairs when exchanging £200,000 over the last 7 days:
|Currency Pair||% Change||Difference on £200,000|
For those looking to buy foreign currency in the near future however, the questions remain the same. Will the Bank of England raise interest rates this Thursday? If so by how much? I was dubious at the start of the month. Is now really the time to be rising borrowing costs as average earnings continue to fall? Shouldn’t we be looking to keep as much liquidity in the market as we take our first steps into the unknown post Brexit? A recent Reuters poll suggested nearly 70% of economists believe now is not the time, although 84% believe it will happen anyway, expecting a rise of 0.25% up to 0.5%. This is what spurred Sterling on to drive in September and provided the stability we have seen since the start of October.
If you are looking to buy currency with Sterling it may pay to make a move before Thursday’s meeting, as a rate hike below the expected 0.25% or even a complete (and understandable, given the economic climate) U-turn from the bank of England could result in heavy losses for sterling holders.
Those hoping out for long term sterling strength will know the clear kicker will be May convincing the EU and the markets that the UK has a clear plan to make its divorce with the single bloc as seamless as possible. It is particularly evident of late that the investors are increasingly sensitive to political releases and I expect news showing signs of support around PM May along with progressive Brexit talks to drive Sterling strength until the end of the year.
It has been a positive last fortnight or so in this regard, with Banking leaders such as UBS Boss Sergio Ermotti and German Industry UK Chairman Dr Bernd Atendstaedt both commended the clarity PM May has been able to provide in terms of the changes to be expected during this transitional period. They have both since downplayed any kind of plans of mass exodus from the UK as a result of Brexit and should ring sweetly in the eyes of investors. I wouldn't be surprised to see sterling become more expensive to buy long term.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353.
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