A quick Sterling exchange rates overview
Sterling exchaneg rates had a very quiet day as you can see from the table above. There was very little movement for the pound as the markets are eagerly awaiting central bank announcements on Thursday from the Bank of England (BoE) and European Central Bank (ECB) on their interest rate decisions.
While the pound has still remained strong against the Euro, against many other currencies the fundamental issues with the state of the UK economy and the knock on effect of issues in Europe has caused the pound to lose value against most of the other majors. Significant losses yesterday include breaching a 4 month low against the AUD and SEK and 3 month lows against the NZD and ZAR.
With a lot of pressure on the state of the UK economy and rumours of stagnant growth over the rest of the year I would not be surprised to see sterling exchange rates weaken further
in Q3 & Q4. Predictions for the coming 2 months of Lows of 1.24 v EUR & 1.52 V USD. If these predictions are a concern or a nice surprise and would like to discuss what this may do for your currency exchange please do feel free to contact me at [email protected]
UK Interest rates to be slashed?
This Thursday the Bank of England will head into one of the most difficult decisions they will have to make this year. Over the last few months the BoE have had to decide if they
should pump more money into the economy through QE. It now seems hat there are calls for the bank to decide if further stimulus is the right way to go or if they should look at cutting interest rates further. It has been a good 3 years since we have written about interest rate cuts for the UK.
The reasoning behind the call seems to be down to the negative data of late to come out of the UK. The economy contracted a lot more than what was expected recently. Yesterday we learnt that house prices have dipped, mortgage approvals hit an 18 month low, consumer spending dropped and money supply figures showed their biggest annual drop since records began in 1983. The main factor though is how the UK is extremely vulnerable to a deepening Eurozone crisis.
In the event of an unexpected rate cut the pound could weaken by a lot more than when QE was first introduced into the UK. This could be by as much as 4-6% A rate cut would turn investors away and is generally seen as very negative for the exchange rate in question.
I personally feel that this month policy will be unaltered but if things continue to deteriorate in the UK or in Europe then we may just see that rate cut. Be cautious, if you do require buying a currency over the next few months you would not want to get your fingers burnt by the unexpected. Rates against the Euro are still trading right up at the 4 year high and we have numerous options that may meet your requirements regardless of if you are buying or selling sterling. Please feel free to contact me at [email protected] and I will be happy to explain all the options that are available to you.