The Pound came under pressure yesterday morning following from the results of the Bank of England’s stress tests, a set of severe tests designed to measure the capability of UK banks if the UK were to enter a global financial crisis. The worst performer in the tests was RBS, with Barclays and Standard Chartered also missing key points. RBS is still 73% government owned since the last financial crisis in 2008 and has submitted a new plan to ensure that steps are taken to improve its stress resilience.
Bank of England Governor Mark Carney has also warned during his Financial Stability report of the high level of UK household debt. The overall ratio is 133% of household debt to income in the second quarter of this year. He said however, that although this ratio is high, it’s not as high as levels seen in the financial crisis.
GBP/EUR fell by almost a cent following both sets of negative news, however quickly rebounded back above its original level after the dust had settled. Positive US data also helped the Pound to strengthen further against the Euro past 1.18, as investors moved their funds out of the riskier currency and into the Dollar, causing Euro weakness.
This morning sees the release of Markit Manufacturing PMI data at 10.30am which will give an insight into business conditions in the manufacturing sector. This figure is expected to improve slightly, and if this is the case we could see Sterling make further gains against its counterparts. PMI Construction data for November is then released tomorrow morning, and although a small decline is anticipated, any positivity could provide another opportunity to capitalise on.
It has been reported that lack of sleep costs the UK £40bn each year, based on tired employees being less productive at work. Although we don’t have a cure for insomnia, we do have some options which can take the worry out of a currency purchase. Any clients can secure today’s rate of exchange with one of our forward contracts for a small deposit.
The next week is set to be particularly volatile for Pound to Euro exchange rates, with the Italian Referendum on 4th December, followed by the Supreme Court ruling on 5th December which will determine whether Parliament will decide if/when to invoke Article 50. The case is expected to last 5 days and could cause major swings in Sterling exchange rates depending on the outcome.
Further movements for the Pound could emerge off the back of this mornings economic releases. Those trading Pound Sterling may benefit from getting in touch with your dedicated broker. Call our trading floor on 01494 725 353 or email me here for more information.
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