This update examines factors that could affect GBP exchange rates this week. The table below shows the difference you would have received when buying £200,000 at the high compared to the low yesterday.

Currency Pair% ChangeDifference on £200,000
GBPCAD0.87%CAD $2880
US Inflation Rises at Fastest Levels Since 2008

Inflation data increases the probability of a UK interest rate hike

Yesterday saw the release of inflation data and it arrived at 3%, up from the previous release at 2.9%, which does have the power to influence monetary policy. This is the highest level of inflation since early 2012.

Mark Carney, the governor of the Bank of England (BoE) has given an indication that there is the possibility of a rate hike on November 2nd. A further rise in inflation brings a rate hike a step closer. There is currently a 77% chance of a rate hike in November. I am however dubious on the justification behind a hike. Inflation is only healthy if average wage growth is at a similar pace. In this instance it is not the case and we have actually witnessed a decline to 2.1%.

The market moves on rumour as well as fact so I am of the opinion the hike is largely factored into current rates of exchange. So don’t think there will be a huge spike in Sterling value if a rate hike takes place. If a rate hike doesn’t materialise that is when we can expect volatility. It could be quite a severe drop in value for the Pound.

It will be interesting to see how the market reacts to the new figures due to be released this morning. Unemployment is being lauded as the best since the 1970s, but it is important to recognise that zero-hour contracts have only recently been added to the equation, and zero hour contracts are hardly the most stable form of employment.

Brexit update

Brexit talks have hit a brick wall of late. Theresa May has taken action and flew to Brussels on Monday evening for talks with EU leaders Jean-Claude Juncker and Michel Barnier in an attempt to speed up negotiations. The talks have been reported to have been constructive and friendly although we have seen little movement on the markets. This does bode well, but we need further clarity on key issues in order to see substantial gains for the Pound.

Retail Sales figures expected to fall

Retail sales data is released tomorrow and is an indication as to consumer spending. This will be very interesting to see due to the current situation with inflation and wage growth. I would expect to see a decline which could weaken the Pound.

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.