The UK economy looks to have recovered slightly in Q2 going into Q3. According to Reuters, there is an 86% chance interest rates will be hiked to 0.75% from 0.5% at the next Bank of England meeting in 10 days. The Sterling report report below looks into the outlook for the Pound, taking into account political and economic factors playing out this week. The table below shows the difference in a number of currencies to show the difference in return you could have acieved when selling £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
This should see the Pound gain momentum against its major currency counterparts, a boost that would be welcomed by clients with upcoming Sterling requirements. If an interest rate hike does not occur on August 2nd, this occurance is likely to be delayed until November.
There was been little clarity over Brexit up until Theresa May released her white paper proposal a few weeks ago. I was delighted to hear her announcing on Tuesday that she will be taking charge of Brexit talks despite having just brought Dominic Raab in as the new Brexit Secretary.
May has been fostering an open spirit of negotiation with the European Union for a while now and has put forward a ‘soft’ agreement to Brussels in her white paper. Whether or not her taking more responsibility will change the eventual outcome of Brexit is yet to be seen, but I feel this move will provide more clarity for the markets.
If negotiations are positive, we could see considerable Sterling strength. On the flip side, if May is unable to secure a deal, we could be in for a general election quicker than expected and in this case, may see the Pound wobble at best. May is keen to tour the country to outline her vision for Britain’s future outside the bloc - starting with an agriculture show in Wales today – and she will no doubt hope to gather as much support as possible. October’s EU summit is clearly on the horizon.
Following the Trump-Juncker summit in Washington yesterday, cable rates rose above 1.32. However, there are no UK data releases today, with minor housing data to be released tomorrow morning. For that reason, I expect Sterling exchange rates will be affected against the Euro by Mario Draghi’s expected positive tone during his speech at the European Central Bank and against the Dollar as positive economic data from America is confirmed, both at 12:30. I expect both the Euro and Dollar to strengthen and wipe out Sterling’s gains by the end of the week.
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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