When will the Pound have the opportunity to Rally?
Sterling continues to lose value against the majority of major currencies. I am struggling to find reasons to base a pound rally on. Brexit negotiations will be key to the Sterling value for the foreseeable future and at present things are not looking good. It is vital to have a stable government for a strong currency and also in order to be in a strong position at the negotiating table. Theresa May’s position is currently under threat with fifteen members of the Conservative party putting forward a vote of no confidence.
Inflation is also a concern. The Bank of England (BOE) had indicated there was the possibility of an interest hike should inflation move above 3%. Inflation then fell to 2.6% and the pound lost value as a result. I am of the opinion this is a good thing, inflation is only considered a positive for an economy if average wage growth is at a similar level. Current figures on wage growth are some way behind at 1.8%. If consumers are not willing to pay for over priced goods and services the country could be destined for recession.
One of the only reasons I can see substantial gains for Sterling is a further rapid rise in inflation and the chances of an interest rate hike become more likely. As mentioned however I do not think this is healthy for the economy a rate hike is not the solution to this problem.
Eurozone growth has been impressive and sustained. The difference between current growth levels than that of the past is that the economy is growing across industry sectors and there is also wide spread growth geographically. The European Central Bank (ECB) have also hinted at a possible tapering of Quantitative Easing (QE). QE is essentially pumping money into an economy in order to stimulate growth, current monthly increments are €80bn, if this is reduced the Euro will strengthen significantly. There is a small opportunity for Sterling to rally when the German election commences in September when political uncertainty could weaken the Euro.
There is the chance of further falls for Sterling due to Guam situation. Conflict causes investor to seek safe haven currencies and despite the US being at the forefront of the standoff with North Korea the US Dollar is still the safe haven of choice.
Down under the strength of the Australian dollar is a concern due to the heavy reliance on trade partners buying Australian raw materials. Reserve Bank of Australia (RBA) governor Philip Lowe will know doubt attempt to jaw bone and talk down the value of the Aussie rather than making a more drastic change to monetary policy. I doubt jawboning will have the desired impact.
Hans Redeker from Morgan Stanley recently stated “We expect the AUD to continue to move higher in the short-term as yield-seeking behavior continues,”
The high interest rates offered in Australia are currently very attractive to the investor and this could be the cause for further AUD strength.
If you have a currency requirement I will be happy to assist. It is crucial to be in touch with an experienced broker if you are selling Sterling, windows of opportunity may be brief. If you let me know the details of your trade I will endeavour to produce a free trading strategy to suit your individual needs. Have faith knowing you will be dealing with a brokerage in business for over 16yrs, Foreign Currency Direct Plc. We are a no risk entity as we do not speculate on the market and we are registered with the FCA. If you have a currency provider take a minute to send over the rates they offer and I am confident I can demonstrate a significant saving. I can be contacted at email@example.com . (Daniel Johnson) Thank you for reading.