This Pound Sterling update looks ahead at what's in store for GBP exchange rates, as the announcement of the Brexit transition on 19th March seems to have had a positive effect on the market. The below table shows the market movements for a number of currency pairings during the last month:
|Currency Pair||% Change||Difference on £200,000|
The corporate mood in the UK is also very high presently. For the first time in two years CFOs have not put Brexit as the biggest risk facing their businesses. Brexit has dropped to second place, with concerns about UK growth slowing down now at the top of the recent risk league.
Growth will remain a key driver for demand for the Pound and indeed help to dictate the value of Sterling. Yesterday the latest GDP figures showed a slight contraction which was put down to weather conditions earlier this year. Moving forward the growth forecasts from the Bank of England (BoE) will be a key driver. Talks have mounted suggesting that the UK could raise interest rates as soon as the next meeting in May. The November meeting is currently expected to be the second hike this year as suggested by Lloyds earlier this week. The next update from the BoE is in May on this topic but the tone of key member’s speeches will be keenly watched. One of which we have later this morning so is something to continue to watch. Mark Carney the head of the BoE is holding a speech this evening at 19:00 and is very much one to keep an eye on.
In my opinion the propspect of an interest rate hike in May has already been reflected in the value of the Pound and it is now forecasts about the next hike which could boost Sterling.
UK Unemployment has been showing improvements and helped the argument that the UK economy could ‘take’ a hike in interest rates. The unemployment rate is at a 43-year low however there are now concerns over labour shortages which are emerging in the UK economy. Saying that however, Shop Direct, one of the largest online retailers plan to now close 3 warehouses which puts a further 2,000 jobs at risk.
UK services and construction sector data showed a fall last month to their lowest levels since the EU referendum, which was put down to the severe cold weather at the beginning of the year. Industrial data for the UK yesterday also showed a contraction, performing worse than expected and showed the first drop in over a year, which was put down to a real drop in the construction sector.
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