An opportunity for clients purchasing a foreign currency

It’s been a fantastic week for Sterling exchange rates and arguably one of the best weeks since the UK public decided to vote out of the EU over 15 months ago.

The Bank of England’s interest rate decision was released at 7-2 which was no surprise to economists. However the central bank stated that an interest rate hike could occur in ‘the coming months’ which caused the dramatic increase in Sterling value throughout the afternoon's trading session.

The table below shows the market movements for a number of currency pairings this week:

Currency Pair% ChangeDifference on £200,000
GBPEUR3.76%€8,180
GBPUSD2.28%$5,980
GBPAUD3.74%$12,140
Average Wage Growth key to a healthy economy

Earlier in the week UK inflation numbers were released at 2.9% which is faster than the Bank’s forecast and the Bank expects a further rise in October. This would mean inflation would break the 3% threshold. Couple this with stronger employment numbers, a firmer housing market and a rebound in retail sales for August, it appears all of the jigsaw pieces are aligning and a hike could occur as early as November according to numerous economists, however, I’m not optimistic. The Central Bank have made it clear that the devaluation of the Pound since the Brexit vote in June last year is the main reason why inflation has been on the rise. Therefore I believe the strong data over the last couple of weeks has provided a window of opportunity for the central bank to strengthen the Pound which should help curb inflation for the upcoming months and also help businesses that import from abroad. I stick with my predictions in previous reports that the Bank of England will not increase interest rates until late 2018.

For clients that are purchasing Euros and Dollars short term, since the start of the week on a £200,000 transfer you will now receive an additional €8,180 and $5,980. In my opinion this is a spike in the market and I don’t expect to see a period of Sterling strength therefore taking advantage of current rates seems sensible.

For more information on how future data releases could affect exchange rates, call our trading floor on 01494 725 353 or email me drl@currencies.co.uk.

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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.