Pound Sterling Forecast

A fairly quiet week for data releases on the whole does not mean a lack of activity as we have a couple of key decisions for the pound, plus the ongoing developments for the US and Euro debt situations. The last week has seen the US dollar climb to an 8 week high against the pound and there has been over 4 cents of movement on GBPEUR in the same period.

This Wednesday we have the Bank Of England Minutes. This is where we learn of how the members of the UK’s Monetary Policy Committee (MPC) voted in the recent interest rate decision meeting at the start of the month. This release has the potential to move the market and investors will be looking for signs that the UK will be embarking on another round of Quantitiative Easing (QE) to provide the economy in the UK with a much needed boost. Current data suggests the UK is not growing at the rates previously expected for 2011 and as such the MPC may need to utilise QE to boost the economy. The general concensus is that it is probably still too early to determine whether or not QE is necessary. Nevertheless the minutes will show the split on how all of the members voted in the meeting earlier this month and if just one  member thinks it is a good idea to embark on more QE, we will likely see sterling

weakness.

This link to the Bank of England website is very useful in explaining QE http://www.bankofengland.co.uk/monetarypolicy/pdf/qe-pamphlet.pdf

We also have Public Sector Net Borrowing on Wednesday which will be useful in highlighting how the UK government is performing against it’s own targets and goals of reducing public sector debt. These figures combined with Bank of England Minutes will be key I believe in shaping GBP rates for the rest of the week. Last time QE was mentioned sterling lost significantly against a host of currencies. If you have a pending transfer and are concerned why not let us know by filling out the contact form. We can then keep you posted on developments so you don’t suffer at the hands of the markets. We can also as required offer a safe and secure method of transferring your funds at commercial exchange rates.

Dollar Strength

The Dollar has enjoyed a massive rally in the last couple of weeks breaking an 8 month high against the pound and a 6 month high against the Euro (which was touched last week too). Why is this and is the pound likley to make any gains back soon? Well in my opinion things will not be getting better anytime soon. The main reason for dollar strength is the return of it’s ‘safe haven’ status. After the Swiss National Bank confirmed they will provide unlimited liquidity to ensure the CHF does not become stronger than 1.20 against the Euro, many Swiss safe haven funds have been moved, and a major beneficiary is the US dollar. Combine this with the fears over a default by Greece and you have have all the ingredients causing investors to seek security. Whilst growth in the US, like the rest of the world, is slowing Obama recently announced a $450 bn package to provide jobs for Americans. There is also talk the US will be looking to more QE, the details of which may become apparent on Wednesday’s Federal Reserve Interest rate decision meeting. Talk of QE like for the pound may cause some dollar weakness so if you are buying dollars look out for this or speak to us to be kept informed.

All in all the last few weeks have been some of the most volatile in recent years. What got everyone through the last recession was a belief that things will get better. Well 3 years ago last Thursday was the Lehman Brothers collapse and can we really say things are better? It seems many of the problems are still there and an ever ballooning debt crisis in Europe looks likely to be the trigger this time.

If you have any currency exchanges to make now or in the future we can help move funds internationally at commercial exchange rates for both private and corporate clients. We can advise and explain to you all the movements being witnessed on the markets and how they affect your transfers. Feel free to contact the author directly at + 44 1494 787 458 or e-mail jmw@currencies.co.uk Please quote JMW and PSF when making your enquiries.