Yesterday we had the latest update from the Bank of England (BOE) with regards to central policy and economic forecasts. This importantly included inflation forecasts and therefore the potential timeframes for any future interest rate changes. The Sterling report below looks at the market reactions to the interest rate hike, along with other factors likley to impact the Pound in the future. The table below shows the difference in a number of currencies you could have received in return when selling £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
The Monetary Policy Committee (MPC), who vote for changes to policy, voted unanimously for a hike in interest rates from 0.5% to 0.75%. This pushed the value of the Pound up and GBPEUR rates climbing to a two week high on the news.
Following the announcement, Marc Carney the head of the BOE, gave an update on the BOE’s forecast for the UK economy. This was rather negative suggesting that Brexit concerns are resulting in it becoming increasingly unlikely that further hikes will come in the near future. The market took this badly with both GBPEUR and GBPUSD rates falling by over a cent. Yesterday’s movement resulted in a well-timed transfer of £200,000 securing an extra €1,900 or $2,300 compared to the low showing just how important timing a transfer is. If you are in the market please inform your personal broker here who can highlight such opportunities.
Moving forward concerns are now mounting that we could see a further fall in the value of the Pound. 12 months ago we saw a similar market situation; the BOE gave a similarly Dovish update. In August 2017 GBPEUR rates ended the month almost 4 lower and Sterling fell 2 cents against the Dollar. Something to very much consider if you are in the market currently.
The next potential drop for the value of the Pound could well come later this morning. At 9.30 we have the latest update from the service sector in the UK which is expected to show a contraction. The success of the football World Cup campaign will probably help support an area of the economy which has generally been sluggish recently.
On Monday there is an update from the UK retail market, Tuesday sees a housing sector update, and on Friday GDP, industrial, trade and manufacturing data are all released.
The largest day by far is next Friday however with the BOE suggesting that the UK economy is not performing brilliantly most expect much of the data to be negative. My personal view is that there remains a lot more risk than opportunity for the Pound through the remainder of August. Any positive movements I believe should be seen as more of a short term opportunity rather than a change in trend. Great news for anyone with GBP to buy however anyone who has GBP to convert to foreign currency in the medium term may be wise to be cautious.
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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