UK retails sales figures are released this morning, a fall to -0.1% is expected, if this data comes out as worse than expected we could see further Sterling weakness, after disappointing inflation data released yesterday. The Sterling report below discusses how this could affect the Pound in the coming weeks taking into account expected political developments. The table below shows the difference in Pounds you could have achieved when buying £200,000.00 during the high and low points during trading yesterday.

Currency Pair% ChangeDifference on £200,000
GBPNZD0.55%NZD $3,240.00

GBP Slips after UK Inflation Data

The pound has slipped lower after UK inflation data yesterday arrived slightly weaker than expected taking inflation to a 13 month low. Consumer Price Index inflation fell to 2.4% in April which is sending the message that the Bank of England will not look to raise interest rates anytime soon. The pound fell most against the US dollar with rates falling to a 5 month low for the pair.

The pound still remains on the back foot after the weak UK GDP data disappointed the markets and which resulted in the Bank of England not raising interest rates at the meeting two weeks ago. The Governor of the Bank of England Mark Carney has since come out and said that the Brexit vote has cost each household £900 with real incomes significantly lower than forecast, largely due to the weakening of the pound since the referendum. At a time when UK debt is rising and uncertainty over Brexit remains there are likely to be more bumps in the road for the British economy which could prove uncertain for sterling exchange rates especially if there are some negative shocks.

Credit agency Fitch has recently warned of a debt bubble in the UK highlighting that British households are borrowing more than they are saving for the first time since the 1980’s. Consumer debt is now rising nearly 10% a year and such a high level of debt could prove difficult for the economy and the pound if there is a slowdown.

UK retail sales data for April are released this morning at 09:30 where expectation is for a fall to -0.1% which would be an improvement on the dismal numbers of -1.2% in February following the Beast from the East cold weather front.

With the current extremely good weather for the UK after what was a bleak winter there is likely to be big bounce in the sales numbers, although this is more likely to show in next month’s figures. We may have to wait a little longer for the data to feed through before we see that bounce. Bank of England Governor Mark Carney will also be speaking later today and any comments he makes could see the pound react.

UK Budget Release

UK Politics – GBP Volatility Ahead

The next few weeks are likely to be particularly volatile for the pound with a number of upcoming events in British politics. A vote in the House of Commons will consider the amendments put forward by the House of Lords on the Brexit withdrawal bill. The vote is crucial for Prime Minster Theresa May at a time when she does not have the full support of her party on her vision of Brexit. If there are repeated defeats in the House of Commons then there has been talk of a vote of no confidence in the Prime Minister which would likely lead to another general election. Added uncertainty like this would see the pound come under added pressure and this prospect should not be ruled out.

It has been reported that some Conservatives are preparing for another snap general election in the Autumn if the Brexit deadlock in government over the Customs Union cannot be broken.

It appears that the government is now leaning on Labour politicians who represent areas that backed Leave during the referendum and so there is a chance that the government will still get the bill through the House of Commons. In a sign the gloves are about to come off, a new website has been launched titled “Respect the Result” where members of the public can write to their elected MP’s.

SNP leader Nicola Sturgeon has also said that over the next few weeks the SNP will restart the debate for independence. Added uncertainty in this area could also weigh on the pound if the idea gains traction.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.

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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.