This GBP report will discuss the likelihood of a UK interest rate hike in the coming months and will look at whether now is the best time to buy foreign currency with Sterling. The table below shows the difference you would have received when buying £200,000 at the high compared to the low during the last 30 days. For current live exchange rates click here.
|Currency Pair||% Change||Difference on £200,000|
Over the last 6 weeks GBP/EUR exchange rates have fluctuated 6 cents and well informed clients would have generated an additional €12,560 if they had traded at the higher points rather than the low.
The reason why the Pound has gained momentum, is down to the monetary policy committee announcing that the Bank of England may raise interest rates in the upcoming months.
For new readers, interest rates have a direct correlation with exchange rates. Past history tells us when central banks raise interest rates the currency tends to strengthen and when a central bank cuts interest rates the currency tends to devalue. Further to this exchange rates move on speculation as well as fact and therefore this explains why the Pound has been purchased heavily in recent weeks.
The Governor of the Bank of England, Mark Carney has announced they could raise the UK interest rate as early as the November 2nd meeting.
Unfortunately for clients that are purchasing a foreign currency and have a few months, I don’t believe the interest rate decision on the 2nd of November is going to provide further opportunity and in fact I believe exchange rates will fall. My theory behind it is that wage growth continues to dwindle and an interest rate hike would put further strain on the Great British public’s pocket.
Even though the Pound has made substantial inroads against all of the major currencies over the last 8 weeks, the last 5 trading days have been disappointing. Revised yearly GDP numbers fell to 1.5% from 1.7%, mortgage approvals were down by 3,000, Markit Manufacturing fell from 56.9 to 55.9 and PMI Construction fell from 51.1 to 48.1.
This poor run of economic data is another reason why I don’t believe the Bank of England will raise interest rates therefore, for clients buying foreign currency short term trading sooner rather than later may be wise.
For more information on how upcoming data releases could affect your currency exchange, call our trading floor on 01494 725 353 or email me directly at email@example.com.
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