Trade balance and Manufacturing Production figures disappoint

Sterling continued to slide against most if not all of its counterparts yesterday following a weaker than anticipated trade balance for June followed by disappointing manufacturing production figures.

The tone at the minute, very much reflected by the economic data being released is very negative. The fears of a Brexit weighed heavily on investors’ minds in the months leading up to the referendum, especially in the months of June and July.

With the pound struggling of late since the Bank of England’s decision to cut interest rates to 0.25%, clients with a short term (3 - 6 month requirement for example) need to buy foreign currency with Sterling may want to think about buying now, before the pound potentially drops even further.

Will the UK face a recession following the decision to leave the EU?

The National Institute of Economic and Social Research (NIESR) suggest that the economy grew by 0.3%, compared with the 0.6% growth estimate up until the end of June, labelled as a ‘marked economic slowdown’ and estimates from NIESR suggest that there is now around an evens chance of the UK entering a technical recession by the end of 2017.

Currently, the pound is trading at lows that haven’t been seen since early July. Since then, sentiment has been knocked by poorer than expected data especially from the manufacturing sector. The pound is now 0.4% lower against the Euro and half a percent lower against the dollar.

My personal opinion is that clients should be carefully analysing the economic data of late and the general tone. The only positive is that exports are likely to increase on the back of a stronger pound, however there is no certainty of when this will take place as investors are unlikely to invest until the UK’s trade agreements are known. If I was looking at sell pounds, I would more than likely look at selling now before things are set to get worse. If economic data continues to drive down the pounds value, I believe it won’t be long until the pound nears the 1.10 mark.

Data releases this week

Today, the last noteworthy economic release of the week is the RICS housing price balance. It is widely anticipated that this figure is set to decrease to 6% from 16% from the previous month, however any deviation from this figure could cause Sterling to slide even further.

If you have a currency exchange to make, why not get in touch with us today? Our helpful team of brokers are on standby to take your call on 01494 725 353.


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