Getting the best exchange rate can be achieved with an understanding of what is affecting rates and the service of a specialist currency broker.

Will the Pound make a recovery in 2016?

The Pound has had a poor run against most of the major currencies so far during 2016, most notably the Euro and the US Dollar. The Pound began this year trading at 1.3606 versus the Euro and 1.4776 versus the US Dollar and now just two weeks in to 2016, GBP is sitting at 1.31 versus the Euro and 1.42 versus the US Dollar, making up a total drop of more than ten cents!

It is easy to see that the trend for Pound Sterling exchange rates is currently downward and market analysts are expecting this to continue in the medium to long-term.

This raises the question; will the Pound make a recovery? I personally believe that the Pound will make a recovery, but not any time during 2016. We must take in to consideration that if the recent trend continues, the Pound reaching its current trading levels may well be considered as a recovery in the future.

Will the Pound continue to weaken?

The prospect of the BoE (Bank of England) raising interest rates has been pushed back as far as June 2017, whereas in the summer a rate rise was expected to be implemented at the end of 2015. This alone has weighed heavily on GBP and will continue to do so if the low inflation forecasts are correct. Interest rates can be a major factor in influencing exchange rates and I feel the markets had ‘priced in’ the prospect of the BoE raising rates in the summer.

Another vital point to consider is that it is in the interest of the Bank of England to keep the Pound low. Governor of the Bank of England, Mark Carney has indicated that he would like to keep the value of Sterling low to help boost exports and therefore the economy.

The slowdown in China, a fall in UK Industrial and Manufacturing figures, a sharp fall in oil prices and the devastation caused by the floods are all major factors in the weakening of GBP. If you have Sterling based currency requirements I would personally edge on the side of caution and be wary that it is highly unlikely we are going to see a stronger Pound anytime soon.

UK Inflation data could cause Pound Sterling volatility

This morning is an important one for those with Sterling based currency requirements and is likely to cause volatility for GBP exchange rates. A host of inflation data is due to be released at 09:30am followed by BOE Governor Mark Carney’s speech at 11:00am where he will outline his thoughts on the UK economy for the first time this year.

To learn more about the short-term outlook for Pound exchange rates please feel free to email me at cxe@currencies.co.uk or call me on 044 1494 725353.

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