Inflationary figures for the UK are due to be released tomorrow which will be the first since the outcome of the Referendum. This data will be very important in understanding the impact of Brexit on the economy.

Host of pricing data for UK economy could benefit the Pound

Until recently economic data of any kind has largely been ignored when discussing the Pound’s value. The Brexit vote and its aftermath have dominated headlines and are set to continue doing so. But some air of normality has returned. David Davis, the new Secretary for Exiting the European Union has given a buffer period until at least the start of 2017 before the formalities of leaving the EU begin.

This seems to be allowing financial markets to stabilise, and even permitted the Bank of England to avoid the need to cut interest rates to new record lows last Thursday.

The above table demonstrated just how much of a stabilising effect has been seen in the Pound last week. This may even be set to continue as early as tomorrow.

Inflation data for the UK will be released early that morning. Inflation is, at its core, a measure of consumer activity, and due to the upcoming school holidays and changing weather, we have already seen preliminary data showing healthier spending activity in the UK. Positive data here may also give a boost to the argument that the BoE may not need to cut interest rates next month either with inflation being such a heavy barometer on their decision.

Positive data could contribute to the increased perceptions of stability in the UK after what can fairly be described as financial chaos since June 24th, giving further strength to Sterling on global currency markets.

New Government, Brexit process, and political maneuverings to create persistent, changeable atmosphere on Pound exchange rates

A new Government has avoided two months of limbo where a new Prime Minister had to be sought. But there are a number of different routes and sudden events which could have a severe impact on exchange rates. Some of which may benefit Sterling’s purchasing power, and others which may benefit those looking to buy Pounds.

Will the attempted coup in Turkey over the weekend delay even further their entry into the European Union? In doing so will this sure up arguments for many that a second Referendum is justified given that many assurances given by the Leave campaign have not been met or deemed impossible?

Will Sturgeon call for a second Scottish Referendum next year? Will her potential veto for the Brexit gain any traction? Will a leadership contest within Labour develop into calls for a general election?

Will we hear greater positive news from the Brexit itself? Australia has already come out with arms wide open to seize the opportunity for a trade deal with the UK after decades of not being able to. Will more follow?

Inflationary figures released tomorrow could be important in understanding the impact of Brexit on the economy and may have implications for Sterling. Those looking to make a transfer may want to call us prior to the data, call our trading floor on 01494 725 353.


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