Pound Sterling Forecast

There have been two data releases out this morning for the UK. The eagerly awaited Bank of England minutes showed that only one member of the MPC voted for further monetary easing (QE). We have also had a release of the UK retail sales. They did not show as much growth as was hoped. Sterling is dropping on the back of this as it may lead to the Bank of England instigating more QE over the coming months.

With events in Europe still not resolved I feel sterling will remain under pressure. We must remember that 40% of our exports are to Europe and if they are struggling this will have a knock on effect for the UK economy and the pound.

This morning we have seen sterling exchange rates weaken and it has brought the pound down to a 2 month low against the USD at 1.5675. The USD has been benefiting from events in Europe as investors have been fleeing the riskier currencies and turning to the safe havens. I said a couple of posts ago that I felt sterling will be trading down at around 1.56 by the end of this week and we are there about at the moment.

If you are considering buying the USD in the near term and are hoping that the pound will go back to 1.60 it seems very unlikely at the moment. Be cautious as in times of uncertainty like at present the USD normally strengthens significantly. If you need Dollars over the next few weeks or months and want to minimise your risk you can always book out the funds on a forward contract. You do not pay for the Dollars upfront so if you don’t have full funds available this is a really good way of minimising your risk. Email me at bma@currencies.co.uk for more information.