This Pound Sterling update discusses the outlook for GBP exchange rates over the next week, looking at a number of factors that could affect rates. This table shows the movements for a number of currency pairings in the last month:
|Currency Pair||% Change||Difference on £200,000|
Sterling exchange rates have been rather range bound over the last month, moving by only 2 cents against the Euro over the last 30 days.
However, please don’t assume it has been steady, we have seen GBP/EUR rates swing by nearly 1.5% every week since the beginning of June meaning that timing a transfer remains key and a very valuable exercise.
To give you an example trading £200,000 to Euros over the last 7 days at the right time could have secured you over €3,000 more compared to the low, on the same volume to USD it equates to a staggering $4,500 more.
This week the Pound’s value has generally been continuing to fall, PMI data for the Construction, Manufacturing and Services sector this week all showed contractions. The reason for the fall in the Pound yesterday was due to productivity levels falling. This was released by the Office for National Statistics and showed that the UK economy productivity fell by 0.5% in the first three months of the year. Productivity has still not recovered to levels before the recession and this contraction resulted in the Pound loosing value during yesterday’s trading.
The last time that interest rates rose in the UK was now over 10 years. The bank, following the financial crisis, started to aggressively cut interest rates to these historic lows and a further cut was seen last year following the Brexit vote. This policy incentivises people to spend more on the high street, converting the shopping centres to modern day factories of debt. This topic of consumer debt has however taken centre-stage recently as there has been a collapse in UK saving ratio and a surge in consumer credit. Saving ratio is now at 1.7%, the lowest level since 1963, in 2016 it was at 6.1% highlighting the steep fall. All rather concerning for the UK’s future and something that has been putting pressure on the value of the Pound.
This topic will be continually in mind when the Bank of England reviews future central policy on interest rate change and the distribution of assets and debt between the generations will remain a hot political subject.
The next update we have from the Bank of England (BoE) is the latest inflation report due on Tuesday. Inflation has been climbing due to external factors including commodity prices climbing and the fall in Sterling. The general response is for the BoE to raise interest rates so this release will be keenly watched. I personally expect Mark Carney, the head of the BoE, to suggest that if inflation continues to climb interest rates will have to go up.
Such a comment will be very welcome for anyone with GBP to sell as I would expect this to help give GBP/EUR traders a gain.
For more information on how future data releases could affect your currency requirement call our trading floor on 01494 725 353 or email me directly at email@example.com.
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