Today's a big day for Sterling exchange rates with the latest interest rate decision and quarterly inflation forecasts from the Bank of England. In light of strong economic data this week, could Sterling find further support this week? The below table provides a number of currency pair movements within the last month.
|Currency Pair||% Change||Difference on £200,000|
The Pound was making inroads throughout the early hours of yesterday morning, steadily pushing upwards against the likes of the Euro and Dollar as we nudged closer to Super Thursday.
Super Thursday is the traditional release of a host of UK economic data, included the most recent interest rate decision, a glance at future monetary policy, and on this occasion the key quarterly inflation report.
Today is extremely important for anyone planning a foreign currency purchase or sale involving the Pound. UK interest rates are at record lows, but there have been hints at rises. The language in today’s report will be decisive as to whether a hike can be expected in the short to medium term, something which should send currency markets into a euphoric frenzy.
However, the decision to raise interest rates, a process which should make the Pound a much more attractive prospect, is heavily tied to the UK’s current inflation situation. This is looked at in detail on a quarterly basis, and the deadline is today.
Inflation has been rising due to a cheaper Pound and rising oil costs driving up prices. Current thinking globally has a healthy inflation rate at 2%, the UK has been very close to breaking this point, which would encourage an interest rate rise to keep prices under control.
But as always in this fluid marketplace the situation can change. The Pound is recovering (keeping import costs lower), oil prices have come under pressure again, and in the traditional pre-summer lull buying activity is muted. This quarterly inflation report will be crucial to predicting whether the Bank of England believes the long-term prospect for inflation for a rate rise, and will be watched keenly.
As such from 12:00pm markets will be digesting news and views from multiple areas of financial policy for UK PLC, creating vibrant exchange rate fluctuations where found and missed opportunities will be rife. I strongly recommend speaking to your account manager ahead of the event this morning to discuss your options on how to address a volatile period and its impact on your currency purchase.
The Pound is enjoying further strength with consolidating polls reflecting a continued surge for Conservative support. The same polling company, Kantar, saw the Conservatives lengthening their stride to 44% voter support, up 4%, with Labour losing the bulk of that vote share – down the same percentage to 28%.
As repeated in previous reports, this is not a case of markets loving Tories and therefore the Pound strengthens. A strong majority for the Conservatives means that we will finally have an elected Prime Minister whose mandate will be stronger in the negotiations. Similarly by having an election now, there will not be a messy change of power mid-way through the negotiations.
Polls will continue to be released and cause Sterling to fluctuate, and frankly we will also hear today if the upcoming election is making the Bank of England a bit more tentative to introduce new monetary policy. Rather than watching this space, contact your account manager to be a part of the live discussion, giving yourself the best chance to secure the exchange rate you are looking for.
Today could be a volatile session for the Pound and those with a foreign currency requirement could benefit from a call with a member of our team. Call us on 01494 725353 or email me at email@example.com if you'd like learn more.
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