The Pound has had a relatively strong month against a number of currencies after a series of positive economic announcements combined with some further progress with the Brexit discussions. In his latest Sterling forecast Tom Holian looks at what to expect for Sterling exchange rates next month.
The table below shows the market movements for GBP/EUR, GBP/USD and GBP/AUD during the last 30 days:
|Currency Pair||% Change||Difference on £200,000|
Average Earnings gave the Pound the first real boost after they showed that wage growth has now outpaced inflation for the first time in a long time. Indeed, although inflation fell this month the news that pay has increased gives further support for the Bank of England to think about hiking interest rates.
One of the main responsibilities of the central bank is to control inflation and also help promote growth. Therefore, although it could be argued that if inflation falls it allows them to keep rates on hold as wages have increased it shows that the British economy is improving and therefore a justification or raising interest rates.
The Bank of England recently voted 7-2 in favour of keeping rates on hold so there is clearly a growing appetite for a rate hike and I think we could even see this happen in May.
Some sources have put the odds at 75% of a rate hike in May and this is another reason for the Pound making gains particularly against the Euro where we hit the best rate to buy Euros since May 2017, which is good news for anyone looking to buy a property on the continent.
The Bank of England has confirmed that financial services companies working in Britain will be given more time to organise themselves to meet a Brexit deadline. In a letter sent to a number of banks the BoE confirmed that they will be allowed to trade as they are during the transitional period which has provided the Pound with further support.
UK GDP for the fourth quarter of 2017 is due to be released at 9:30am this morning. The expectation is for growth of 1.4% year on year and as this figure is revised any change in the expectation could cause movement for the Pound during the course of this morning.
At the same time Mortgage Approvals are also due to be published. A total of 66,000 approvals are expected and as the UK housing sector is important to the outlook of the UK’s economy this could make interesting reading. Indeed, according to a recent survey undertaken by Savills prior to 2008 homeowners moved on average 3.6 times after buying their first home compared with more recent data which suggests people are moving only 1.8 times.
The rise in stamp duty combined with a slowdown in foreign ownership in the UK has caused house prices to slow down and so this morning’s data could cause Sterling to wobble if the data is lower than the expectation.
Overall, I expect the ongoing Brexit talks to dominate what will happen in the longer term for Sterling so in the short term make sure you keep in contact with your account manager who will keep you updated with daily movements.
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