This Pound Sterling update discusses factors that are likely to impact exchange rates this week, which is of particular interest if you are buying abroad or making a currency transfer.

Could the Bank of England cut Interest Rates?

The Bank of England ‘Super Thursday’ releases carry the most importance for the Pound this week. Interest rates are very important to determine a currency’s strength or weakness so if it is likely UK Interest rates will rise longer term the Pound will rise.

If it is believed interest rates will be lower in the future then Sterling will fall. There is a high chance Inflation and Growth forecasts will be cut on Thursday when alongside the Interest Rate decision we also have the Quarterly Inflation report which would send the Pound lower.

Commentators will be looking for clues that the Bank may be considering a rate cut and with this yet to be really factored into Sterling exchange rates, could come as a shock to the value of the Pound.

Important data this morning is Trade Balance figures at 09.30 which are predicted to show a small decline in the UK’s large deficit. Any signs it has shrunk may help the Pound to rise but any good news is unlikely to last long. Tomorrow morning at 09.30 is Industrial and manufacturing data which are predicted to come in slightly worse and then in the afternoon at 15.00 we have the latest National Institute of Economic and Social Research estimate of Gross Domestic Product (GDP). Some forecasters have UK growth at 0% for Q2 and this data will be a preliminary sign of what to expect in the coming months on GDP.

The Pound may edge lower on important week of data

With 7 weeks to go until the EU Referendum the Pound is bound to come under further pressure from this unique and historic event. The latest polls have the vote fairly evenly split with Leave having 43% having gained back some ground lately after a stronger period for the Remain camp (currently on 46%) last month.

The voting behaviour of ‘don’t-knows’ who make up about 10-20% of the votes in the polls will I believe be crucial to the vote.

This makes predicting the vote very difficult and ensures the volatility on Sterling exchange rates will continue right up to the event. If you have a transfer to consider involving the Pound making plans sooner rather than later is sensible as we know from experience political uncertainty (from previous General Elections and the Scottish Referendum) can cause large unexpected swings that will impact the value of your exchange.

If you have any questions about anything in this report please feel free to email me at jmw@currencies.co.uk, I would be more than happy to discuss these topics with you. If you would like to see current interbank exchange rates please visit our live foreign currency rates page.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.