The Pound suffered significant losses yesterday against all of its major currency counterparts, after UK Inflation data showed a fall to the lowest level seen in over a year, falling down from 2.7% in February to 2.5% in March.

Sterling's drop meant a €200,000 purchase became £1,585 more expensive over the course of the day, with GBP/EUR rates falling back down from the 1.16 levels it had very nearly broken into. The below table shows the market movements for a number of currency pairings in the last month:

Currency Pair% ChangeDifference on £200,000
GBPEUR2%€4,630 EUR
GBPUSD2.7%$7,650 USD
GBPCAD3.1%$11,150 CAD
UK Inflation Data

The biggest contribution to lower Inflation levels was women’s clothing and footwear, and the Autumn budget has also meant that alcohol and tobacco price rises do not feature in March. Although this news may be viewed positively by consumers as the cost of goods is rising at a slower pace, especially seeing as wage growth data which was released earlier this week showed that average earnings are on the up, investors view slowing Inflation negatively as this is a major deciding factor to future monetary policy.

The Bank of England take wage growth and inflation into account when deciding whether or not to raise Interest Rates in the UK, and although economists are still predicting a rise in Interest Rates from 0.5% to 0.75% in May, it has still created uncertainty for the Pound as the bank may choose to take a more dovish stance moving forward.

If any major data releases over the coming weeks are also negative, I would expect the Pound to lose further ground, therefore taking advantage of the current levels may be wise for any clients with a Sterling selling requirement.

Brexit is back in the limelight once again, and it was reported yesterday that yet more cracks in the Conservative party are emerging, which will have added pressure on the Pound. The House of Lords widely supported an amendment of Theresa May’s Brexit Bill, which she had outlined her refusal of remaining in a customs union after departing from the EU. I would expect the Pound to continue to come under pressure as yet more Brexit uncertainty looms.

Will UK Retail Sales figures follow suit and disappoint?

This morning at 9:30am, UK Retail Sales figures for March will be released and are expected to show a fall from 0.8% to -0.5% compared to February’s release. If this is the case we could see room for further weakness for the Pound, or if the data impresses and indeed surprises the markets, we could see a move back above 1.15 for GBP/EUR rates.

Clients with a short term requirement could benefit from setting up a limit order contract so that our systems can automatically buy your currency when it reaches your desired level, straight away. Get in touch now to find out how this could work for you.

For more information on how future events could affect exchange rates call our team of currency brokers on 01494 725 353.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.