Today has seen some of the gains made by the Pound over the last few weeks have been eaten into, with Pound to Euro exchange rates losing 1.5 cents, Pound to US Dollar collapsing by 1.7 cents, and Sterling to Australian Dollar rates of exchange by far the largest loser of the day, with the difference between the high of the low of day of almost four cents.
So what is the root cause after near on three weeks of daily improvements?
Today was always going to be an important day for anyone holding Sterling. We were expecting the ‘white paper’ from the Government outlining in detail their Brexit aims, and also the Bank of England interest rate decision and monetary policy statement.
The long awaited ‘white paper’ was a non-event, with GBP/EUR, GBP/USD, GBP/AUD almost unresponsive to the news. Far from detailed, this essentially reiterated Theresa May’s previous ’12 aims’ in slightly longer sentences…the Labour Party were outraged but markets showed almost no reaction at all, since no new information has been released.
Most of the movement today was actually caused be events down the road from Westminster at the Bank of England.
Of the 9 voting members of the Bank of England Monetary Policy Committee, none of them voted for an interest hike. Due to higher inflation in the UK following the Brexit, it seems markets had been beginning to price in this, potentially fortuitous, news for the value of the Pound that an interest rate hike may occur.
Instead, the total dismissed by the BoE and its Governor Mark Carney in his speech meant some of the shine on the Pound recently had been lost.
Moving forward the next key release will be tomorrow lunchtime which are non-farm payrolls from the USA. This has a bearing each month on Pound to Euro, Pound to US Dollar, and Pound to Australian Dollar exchange rates. The reason being as that this is one of the most significant releases for the world’s largest economy will have a ripple effect throughout the currency markets.
The expectation is for very positive data, and based on previous models, this should make both GBP/USD and GBP/AUD more expensive, whilst GBP/EUR may come into some respite.
In the Friday afternoon trading arena however, Sterling may face some shaky periods from investors unwilling to hold on to a currency which is suddenly under performing as we approach the weekend period.
The various Dollar buyers may be wise to move sooner rather than later, but Euro buyers may find a midday ‘sweet spot’ before the afternoon rush and if you contact me on firstname.lastname@example.org, I can reply with the options open to you to seize any potential improvements tomorrow, or help you craft a more medium to long-term plan for any upcoming currency exchange you hold.
Furthermore, I have ever had an issue beating the rates of exchange on offer elsewhere, so a brief email exchange could save you thousands on a prospective currency exchange.