There were many reports over the weekend in most of the broadsheets stating that the UK economy is stagnant and struggling to show any signs of growth. This week there are numerous batches of UK economic data that may wipe away some of the decent gains that we have seen against a host of currencies like the Euro, USD, Aussie & Kiwi Dollar.
It all seems to kick off tomorrow with a host of inflation data out in the morning, With all time low interest rates in the UK it is unlikely that this will be a big market mover in the pounds favor unless inflation far exceeds estimated figures. We do expect to see a fall in inflation so the pound may weaken.
9.30 Wednesday morning sees unemployment data released. Previously unemployment was at 8.1% and we expect to see this figure worsen this month. If as expected the figure does weaken to 8.2% or worse then sterling could take a big dip especially as 1 hour after this release we have the Bank of England’s quarterly inflation report where the Governor of the bank Mervyn King will give a long speech. The bank is expected to cut its forecast for UK growth and state again that inflation will fall over the next year. This could cause serious weakness for sterling exchange rates against a host of currencies.
Then the last major release for the week will be on Thursday in the form of retail figures. This is a key indicator of how much consumers are spending in the shops. Unfortunately we are expecting to see a big decline with figures dropping from positive 0.6% to -0.3% for the month and compared to a year ago -0.2%. Unfortunately this too could be sterling negative.
I feel this week’s data will show the UK economy to be in a very fragile state. We have all got far too caught up in events in Europe and have forgotten exactly how bad things still are in the UK. If all the data comes out as expected we could see a big loss for the pound with rates against the Euro dropping back towards the 1.14/15. Versus the USD we could be closer to 1.55 than 1.60 by week end and against the Aussie and Kiwi we could witness losses of 2-3%
Today could be the start of things to come this week. Today the pound has weakened by over 1% against the USD and slightly down against the Euro. Please feel free to email me at [email protected] to explain to me what your requirement is. I will then call you to discuss and explain all the options that are available to you to help you achieve the best rates and limit the losses that the market may bring.