Global growth could help the UK economy in 2018

The Pound has found some support during the early part of the trading week, marking gains against the EUR, USD and CAD. the question in my mind is, are current rates sustainable? The table below shows movement in the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR1%€2,340
GBPUSD4%$11,120
GBPCAD2.8%CAD $9,720

The Pound's positive move came about despite some very poor UK Retail Sales figures, released at the end of last week. Up until this juncture Sterling had been fairly well supported and yesterday’s improvement will once again bring some optimism back to investors, following months of stagnation.

Could a UK Interest Rate hike be on the cards for August?

Yesterday’s spike can be attributed, at least in some part, due to a report by the former Conservative Treasury minister Lord Jim O’Neill.

Despite being a vigorous Remain campaigner, he argued that Britain “should prepare for a much more economically optimistic 2018”, citing better than predicated global growth as the reason. He believes that Britain’s growth forecasts will be upgraded, due to China, the US and Europe showing increased economic activity. Whilst this view is unlikely to be shared by all, the Pound seems to have benefited as a result. The key question now is whether this support is sustainable?

Looking at the current levels and there is certainly reasons for those clients holding Sterling positions to feel more optimistic.

Will the Pound find further support over the coming weeks?

Personally, my opinion remains unchanged from recent months and that is we are working in a short-term market. Therefore, those clients holding the Pound should be keeping a close eye on the current developments and consider their position accordingly.

The Pound has moved to close to a 9-month high against the EUR, touching 1.14 yesterday. What is interesting is that this improvement has come about, despite the Eurozone economy outperforming its UK counterpart at almost every turn. Its performance against the USD has been even more impressive, hitting 1.40 against this level, the fact this threshold is even being mentioned is a testament to how far Sterling has come over recent weeks. The key question investors will now be asking themselves is how much further can this positive move take the Pound?

UK-EU relations

Looking ahead and Sterling’s value is likely to be driven by the on-going markets sentiments surrounding Brexit. Negotiations have progressed and this in turn has allowed the Pound to gain some traction but it's unlikely to be all smooth sailing. Whilst any positive strides forward in this sphere are likely to benefit Sterling immensely, I feel a resolution in the short-term is highly unlikely.

It is far more conceivable that negotiation’s will continue to stagnate, as they did during the early stages, and this in turn is likely to handicap any sustainable increases for the Pound.

For those clients with a Sterling currency exchange to execute this week, there are some key UK economic data releases to keep an eye on.

The first is Wednesday’s official Unemployment Rate. The rate is expected to remain unchanged at 4.3% but expect additional volatility on Sterling exchange rates, should we see an alternative reading.

Further ahead and all eyes will be on Friday’s UK Gross Domestic Product (GDP) figures. These will likely have a significant impact on the Pound, with an expected growth figure of 0.4% currently being factored into the Pound’s market value.

Call our team of brokers on 01494 725 353 or email me directly at mtv@currencies.co.uk for further Pound Sterling news.

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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.