This Pound Sterling report addresses some of the factors that are likely to affect exchange rates this week if you are buying abroad or making a currency transfer. The table shows the market movements for a number of currency pairings yesterday:
|Currency Pair||% Change||Difference on £200,000|
British consumer credit grew at the weakest pace in more than a year, highlighting the squeeze that wage growth and inflation has been putting on UK households.
This may not be all bad, one of the recent concerns from the Bank of England and in particular Governor Mark Carney has been the amount that consumers have been spending on credit, with rising inflation and wage growth stagnation effectively meaning that borrowers will struggle to pay back their loans.
Consumer credit rose but by less than anticipated, missing expectations of £1.5bn. However, it is not all bad news for the UK with the number of mortgage approvals rising to 68,689 for the month of July, in what is typically a quiet month for the housing sector.
This could effectively mean that weaker levels of growth in consumer credit levels quell the need for an interest rate hike for now in the UK.
Whilst consumer credit remains at high levels, putting up interest rates would be dangerous for the UK. Many reports are stating that we won't see an interest rate hike until late 2018 or early 2019. This could mean that the Pound will remain under pressure up until then.
Yesterday, the Pound made up some lost ground against both the Euro and Dollar. This could have been helped partly by the better than expected mortgage figures and end of month flows into the Pound, where investors look at closing off positions at the end of the month.
However, the future value of the Pound looks to remain subdued. Most of the reports point to the uncertainty surrounding Brexit being the biggest driver for the Pound's weakness and until negotiations start to move forward, the Pound is likely to remain this way. Even Theresa May’s recent trip to Japan to try and drive a post EU trade deal as soon as possible. However, reports have emerged that Japan is unwilling to move forward with the UK until it knows more, which won’t occur until we have finalised the settlement amount that we owe to the EU as a result of leaving.
Economically, the start of a new month will bring with it new data for analysts to crunch. On Friday, the latest Manufacturing data will be released and we could see the Pound struggle further as this is expected to show a drop from the previous month. Whilst we remain in deadlock with the EU over a divorce settlement, economic releases such as these can create swings for the Pound.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353.
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