Bank of England Governor Mark Carney gave a more upbeat speech at the Northern Powerhouse Summit in Newcastle yesterday regarding the health of the UK economy. He stated that the recent data has suggested that the negativity during the first quarter of this year was now mostly attributed to the poor weather conditions seen in March and April, after the Services, Manufacturing, and Construction sectors all showed a pickup in activity in June. The Sterling report below looks into the likelihood of an interest rate hike this year from the BoE as well as the upcoming Brexit meeting at Chequers this weekend. The table below shows the range of exchange rates between Sterling and a number of currencies, showing the difference in return you could have received when selling £200,000.00 during the high and low points of the past month.
|Currency Pair||% Change||Difference on £200,000|
He also confirmed that consumer spending and general sentiment had improved dramatically, and that recent data had signalled that the UK economy is growing in line with the projections outlined in the May Inflation Report.
As Mark Carney was one of the 6 members of the Monetary Policy Committee who had voted to keep rates on hold at 0.5% at the previous rate meeting, Carney’s optimism was received well by the markets as the chances of an Interest Rate hike in August edged higher. Unfortunately this optimism did little to help Sterling to regain any of its lost ground against the Euro and US Dollar yesterday, with GBP/EUR rates falling back into the 1.12’s and GBP/USD into the low 1.32’s.
The main reason for the significant fall for Sterling’s value was due to discussions between PM Theresa May and German Chancellor Angela Merkel in Berlin, which hadn’t gone in the UK’s favour, as Merkel rejected the plan for post-Brexit relations, calling it ‘unworkable’.
This didn’t provide much confidence for today’s Cabinet meeting at Chequer’s, especially with rumours escalating that David Davis had already told May that the plan was unworkable.
The UK Government have produced a third Brexit customs model, however no exact details have yet been released about this possible plan, and the decisions made at this meeting will form the basis for the much anticipated Brexit White Paper. May stated yesterday however that she wants a deal which allows the UK to take control of its borders, laws and money, and hopes for new trade deals with the US, Australia and New Zealand.
The outcome of today’s meeting will likely be crucial to determining GBP exchange rates, and clients with an upcoming GBP transfer to make would be wise to keep up to speed with developments, or let us alert you when the rate spikes in your favour.
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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