The article below looks at the factors that could affect GBP exchange rates this week, whilst taking a look at the major event which could affect the Pound in 2016.

Overall, Sterling had a relatively positive end to the year and my prediction is for this to continue into 2016. There are two major talking points that could have a huge effect on clients with a sterling requirement.

‘Brexit’

In the second part of the year, Britain will hold a referendum as to whether to keep its membership as part of the EU. If the results look like an exit on the cards, the result would then be a two year plan and reshuffle, this could result in investor confidence being knocked which could weaken Sterling.

Bank of England raising interest rates

For the past seven years the UK has had a near rock bottom interest rate, and Mark Carney is adamant that this won’t change until inflation starts to pick up and move towards the 2% target.

One thing is clear, with falling oil prices the Bank of England are in no rush to raise rates. Furthermore, no one is certain what will happen when the Bank of England do decide to raise interest rates. I personally don’t think that a rate hike will occur until Q4 this year or possibly next year now. We only have to cast our eye to recent event across the pond to remember just how much of a talking point this is and how much volatility this can cause on the markets.

The week ahead for Pound exchange rates

With what has been a naturally quiet period for data releases for the Pound over the festive period, next week is set to ease people back into the swing of things. The number of mortgagees approved for November is set to show a slight increase due to low mortgage rates on Monday. Furthermore this week we have manufacturing PMI and the PMI for construction. If these show any increase then I expect Sterling to get off to a good start in 2016.

To learn more about what is likely to affect Pound Sterling exchange rates please feel free to email me at lme@currencies.co.uk. Alternatively, you can speak with any of our currency brokers on 00 44 1494 725353.

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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.