UK economy remains a risky option for investors

Sterling’s recent struggles continued last week and I’m not expecting this trend to change over the coming days. Those clients holding the Pound will be looking at the current rates with some disdain but the truth is, things could continue to get worse before they get any better.

The below table shows the market movements for a number of currency pairings in the last 30 days:

Currency Pair% ChangeDifference on £200,000
GBP/EUR3.4%€7,640
GBP/USD2.7%$7,100
GBP/AUD2.6%AUD $8,760
Why is Sterling under pressure?

GBP/EUR rates continue to trade around 1.10 but if this key resistance level is broken consistently, then we could see another drop.

This leads me firmly to the conclusion that the downside risks surrounding Sterling, continue to outweigh the upside gains.

The Pound has struggled against a negative market perception for some time now and despite some better than expected data late last week, it has struggled to make any significant impact against the EUR, USD or AUD.

Any clients holding out for better rates than the current levels need to be prepared to risk further losses and certainly look for short-term opportunities, rather than hold out for longer-term gains.

I am struggling to see where a spike in market confidence will come from. Despite Brexit negotiations taking a back seat for the next month, the outlook remains fairly bleak based on early reports and this is likely to drive investor confidence and risk appetite over the coming months.

With the current inflation levels a cause for concern and above the government’s target of 2%, there are question marks over whether interest rates should now be raised. However, Bank of England (BoE) governor Mark Carney has played down this prospect due to the uncertainty surrounding the UK economy after Brexit and this is another reason we are seeing the Pound remain under pressure.

UK terror threat could last for the next 30 years

After last week’s terror attacks in France, much of the media’s focus is once again on public safety, as these atrocities continue across the globe.

This was brought into focus here in the UK following a report from the former head of MI5, who said that the UK may continue to face the threat of Islamic terrorism for another “20 to 30” years.

In fact, many opinions would say it could extended beyond this and highlights the current concern for our well-being. Terrorism will more than likely have a direct impact on the economy in questions currency. This is due to the fact that investors will pull their funds away, anticipating the prospective downturn the economy will face from a drop in tourism and possibly external investment as well.

This means that the UK is likely to fighting an on-going battle over the coming years and is another reason the Pound could struggle to make a long-term impact whilst these very real threats remain.

Key economic data releases this week

Looking at this week and there are some key data releases for clients with a Sterling currency requirement to keep an eye on.

Tomorrow there is a host of inflation data and as touched upon, this is currently an area of concern for the BoE. Any drop towards the central banks 2% target could help support Sterling’s current value but any rise is likely to put instant pressure on the Pound

On Wednesday, we have the official Unemployment rate and the expected 4.5% will be a key barometer for investors.

Further ahead and Thursday sees the release of the latest set of Retail Sales figures, so expect additional market volatility for GBP if the figure is released outside of the expected remit.

For further information on how future data releases could affect a currency transfer, call our trading floor on 01494 725 353 or email me directly at mtv@currencies.co.uk.

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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.