This report looks at why the Pound's value is falling and will address the factors that could affect Pound Sterling exchange rates this week if you are buying abroad or making a currency transfer.

Oil and China impact Sterling’s value

Sterling exchange rates have been under a large amount of pressure through 2016 with large losses against most major currencies. GBPUSD exchange rates are down by 10% in the last 2 months and the GBPEUR exchange rate has fallen by over 8%. The reason for this ‘collapse’ in prices originally started in China but has also been impacted by global topics in the Middle East, with particular focus on Iran and energy prices.

This highlights how important it is to secure your rate at the right time. To keep track of current foreign exchange rates please visit our live exchange rates page.

We have seen a number of large losses in the Chinese stock market as their economic health has been catching a cold. Only yesterday morning they released their latest GDP figures which saw the lowest levels of growth for decades. Why is this so important? China is the world’s second largest economy with a huge impact on a number of economies globally. The other change impacting Sterling’s strength has been the fall in commodity prices. Now that sanctions on Iran have been removed by the US, Iran has started selling their large stockpiles in oil and natural gas. This is adding more supply to to an already oversupplied market which has resulted in values dropping significantly. Oil is now under $28 a barrel compared to over $150 in 2014 and further falls are expected.

This is all resulting in big concerns in settlement globally and a rather large sell off by investors which has impacted Sterling’s value as the City of London is a global financial hub contributing a large amount to UK GDP.

Sterling rates continue to drop

My view is that we are likely to see this continue and I would not be surprised if we see GBPEUR below 1.25 and GBPUSD fall under 1.40 before the month end.  Mark Carney only yesterday confirmed many peoples’ view that Interest Rate hikes in the UK are now unlikely until 2017, creating further losses for Sterling.

There is however a counter argument, this being that the fall in fuel prices offers many countries, including the UK (which import Oil and Gas) reduced bills which therefore creates a cost saving and increasing growth pushing Sterling’s value up.  I personally don’t agree and think that the sell-off will drive further losses for the Pound.

This week I expect further losses for the Pound as we see Unemployment figures released this morning and Retail figures on Friday. Both are expected to show a contraction as the amount of festive shopping transactions on-line resulted in less staff being needed and the warmer weather pushing down the amount sold in the shops, this has been hinted at by most retailers who have already reported on December. As a result, if you have Sterling to sell this week I would suggest you move sooner rather than later to avoid further costs to your currency purchase.

For more information on how future data releases could affect your GBP currency requirement, call me on 01494 725 353 or email me at hse@currencies.co.uk.

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