Sterling was delivered another blow yesterday in a series of disappointing data releases of late with UK PMI services data falling short of the mark. The data released for April read at 52.8, well below the expected reading of 53.5 which was anticipated. The below table shows the market movements for a number of GBP currency pairings during the last month:
|Currency Pair||% Change||Difference on £200,000|
Services within the UK was severely affected by bad weather, with people not able to get to work after the heavy snowfall. As a result March’s services data took a huge hit, and yesterday’s data was meant to show a rebound – effectively putting March’s poor data down to ‘blip’ and not a slowdown in the UK economy.
Yesterday’s data was in fact the opposite. The data released yesterday compounded the fears that the UK economy has stalled so far in 2018. More importantly, this data release has effectively completely ruled out an Interest rate hike next week from the Bank of England, which I has been the main driver for Sterling strength, and helped Sterling to climb to 1.1591 against the Euro and 1.4366 against the Dollar only recently.
I personally feel that Sterling is now in a vulnerable position and any spikes of strength shouldn’t be taken lightly. My reasoning for this was in the survey released yesterday, many of the firms asked sited an unwillingness to spend from consumers in light of uncertainty, and that a rebound in economic activity within the UK looks unlikely to rebound in the later part of this year. I would expect Sterling to remain under pressure for the foreseeable.
During these times it can pay to be in contact with a broker to make sure you are well informed of any events that could cause a relief for Sterling, get in touch to find out more.
Prime Minister Theresa May has gained support it would seem as the results from the local election come in this morning. On Wednesday this week, Theresa May faced backlash from a succession of senior ministers for her ‘customs partnership’ from Brexiters. Yesterday her unity appeared to take another blow, with rising support for her opposition as cracks were starting to show in her unity as Government leader. However, her conservative party have ridden the storm as she maintains authority ahead of the UK’s plan to pull out of the EU. A defeat would have potentially crippled the pound from political uncertainty, this morning’s results so far has avoided any major losses.
Whilst I feel that Sterling’s value is UK data driven at present, with the UK’s interest rate decision all but ruled out for now, the markets are likely to focus on political developments more. If political uncertainty makes its way back into the headlines, I wouldn’t be surprised to see additional sterling weakness.
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