Trading was fairly flat for the pound yesterday on a day of very little economic data to note. The markets may have still been taking in the news of the G8 summit where the leaders tried to show a united front over Greece by pledging to keep it in the Eurozone.
However David Cameron came out yesterday and stated that the forthcoming elections in Greece would, in effect, be a referendum on the euro and said failure to provide
clarity, could prove disastrous for the world economy.
If you are a seller of Sterling and need to purchase any major currency, Cameron’s words could be disastrous for your plans. As the UK has so many ties with Europe, a failure for
politicians and central banks to come up with a resolution could be extremely harmful to the pound going forward over the course of this year.
At present the pound has been trading at some of the best levels for months against the southern hemisphere currencies, Scandinavian currencies and even the Canadian Dollar, Israeli Shekel, Indian Rupee and Thai Bhat. This week however there is a raft of economic data that could hinder the pound, so be cautious as the gains may not continue.
Quantitative Easing Fears Persist
Over the course of this week there is a lot of data to come out that could have a big effect on sterling. Today seems to be the busiest day where we have no fewer than 5 different data releases that span from House prices and mortgage approvals to inflation figures. Tomorrow we have the eagerly awaited Bank of England minutes and on Thursday the revised GDP figures for Q1 will be released along with retail figures.
The markets will be watching these releases very closely as they will give us clues to whether the Bank of England (BoE) policymakers opt for further rounds of monetary stimulus (QE) to boost growth. I feel that if we see a dip in Inflation and retail figures the pound will weaken because the markets will believe that the BoE may look at boosting the economy through QE at the next meeting in June.
Recently sterling’s gains have been partly down to all members of the BoE voting against QE. Last week though Adam Posen a member of the BoE stated that he felt he was too quick in dropping his call for extra stimulus. So should the minutes show that Posen and any of his colleagues voted for QE we could see a weakening in sterling against a range of currencies.
If this happens I would not be surprised to see the pound down at around 1.55/1.56 against the USD while levelling out against the Euro in the near term between 1.22/1.23.
If you have an upcoming currency conversion to make please feel free to conatct me at [email protected] with your requirements going forward and I can talk you through the options that are available to you. If you wish you are more than welcome to call me directly from the number on the side of this page. Just ask for Ben Amrany and we can have an informal chat about the market and how we may be able to minimise your risk to currency fluctuations.