The Pound has seen a particularly volatile start to 2018 treading choppy waters against most of the major currencies. This Pound Sterling forecast discusses events could affect GBP exchange rates this week. The below table shows yesterday's market movement for a number of Sterling currency pairings:
|Currency Pair||% Change||Difference on £200,000|
The general UK economic outlook with Brexit is improving for the moment and despite the volatility, GBP EUR has moved close to a 9 month high presenting clients looking to buy Euros with a much better opportunity. Recent reports of strong global growth this year appear to be lending support to the Pound.
UK Public sector borrowing figures released yesterday arrived considerably better than forecast helped by strong VAT receipts which are a step in the right direction to reducing the level of British public debt. However the Pound is struggling to gain additional momentum and buyers may wish to take advantage of the attractive levels which have become available this week.
UK Unemployment is released this morning at 09:30 and could create additional volatility for Sterling exchange rates. The headline figure is expected to remain at an impressive 4.3% although any further improvement could help support the Pound. The wage growth numbers also released could make for interesting reading with an expectation for 2.5% which is considerably less than inflation.
Michael Saunders who sits on the Bank of England’s Monetary Policy Committee (MPC) has suggested that unemployment may have further to fall. He believes unemployment will fall to 4% and potentially below later this year. His comments highlight a more a hawkish view and he may be keen to vote for further interest rate hikes later this year which could lend support to the Pound going forward.
The last time unemployment levels were below 4% was back in 1975 with unemployment sitting at 3.9%.
UK Gross Domestic product numbers are released on Friday and are keenly awaited. Expectation is for GDP to fall from 1.7% to 1.5% although rumours have circulated that there could in fact be a good spike. A move higher to 1.8% which has been mooted would likely see a jump higher for Sterling across all of the major currencies. Clients holding Sterling would be wise to get in touch to try and take advantage of any spikes when they happen.
The second round of the Brexit negotiations are fast approaching with transition talks expected to commence at the start of next week. The trade talks however will not commence until sometime around 22nd March which leaves another two months of continued uncertainty. It is the persistent Brexit uncertainty which remains the biggest hindrance for the Pound.
Whilst a bespoke trade deal between Britain and the EU is looking more probable the issue of financial services is a thorny one. Any change in tone from the EU and UK in the coming weeks is likely to be a big driver for Sterling.
If you would like further information about exchange rates you can call to our team of currency brokers on 01494 725 353 or email me directly here.
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