What will happen to the Pound this week?

Sterling is remaining range bound in the mid 1.30’s versus the Euro at present. GBP/EUR seems to be finding resistance once it breaches 1.38 and when it slides below 1.35. This highlights how important it is to stay in touch with your broker and ensure that you capitalise on a spike in your favour should you have Sterling based currency requirements.

UK inflation data out this morning at 09:30 will have a strong influence on Sterling exchange rates as Industrial Production figures released for the Eurozone although positive, did little to benefit the single currency, emphasising the importance of the UK data and how the markets are failing to react to data of less significance.

The UK Inflation data is set to show an improvement year on year (2014 in comparison to 2015) and month on month (August in comparison to September) although PPI (Producer Price Index) which is considered a better measure of inflation is predicted to show a decrease in growth.

If we were to see an increase in growth it will be seen as ‘bullish’ for GBP exchange rates and could encourage GBP/EUR to breach the 1.38 mark once again. On the other hand, however, if the reading shows a decrease in the expansion of the UK economy, Sterling exchange rates will slide.

Inflation is a strong reading of how healthy an economy is and strongly influences the prospect of raising interest rates. With interest rates being a definitive driver in currency fluctuations, a notable inflation reading will be factored in by the markets.

Wednesday morning will provide us with a host of employment data for the United Kingdom starting at 9:30am. Average earnings are set to show an increase, the unemployment rate is set to stay relatively stagnant and claimant count is set to show a fall in claims. All should be considering positive for Sterling however if today’s Inflation data has a detrimental effect on the Pound, the Unemployment figures may be only recovering the lost ground.

In my own opinion, we have moved some distance away from the peak but we are still buying Euros at excellent levels, if we cast our minds back to September 2014 when we were buying Euros at more than ten cents less than we are now (GBP/EUR 1.36 2015 – GBP/EUR 1.25 2014).

‘Black Monday’ (The market’s reaction to China devaluing the Yuan to boost exports and encourage growth) highlighted how easily and unexpectedly large movements in the markets can occur, so keeping in touch with your own broker, who is on hand to assist you with the timing of your transfer can save you thousands!

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