Will the Pound Get Stronger? Thursdays UK GDP Figures Could be Key (Matthew Vassallo)

GBP USD Exchange Rate: The Week Ahead October 24th

GBP/EUR rates have stayed rangebound between 1.15-1.1650 of late, as the markets try to disect the recent economic activity in the UK and Eurozone. On one side of the equation we have the UK improving economy which is starting to make a sustained recovery as highlighted by recent data. Last week’s BoE minutes were also viewed as a positive for Sterling by the markets, as there was a 9-0 vote against further Quantitative Easing at this time. This would ususally indicate Sterling strength but on the other of the equation we have the new Bank of England (BoE) governor, who is determined to narrow our trade deficit and control the value of Sterling.

Mark Carney who replaced Sir Mervyn King as BoE governor this month, has previously stated that UK interest rates are likely to remain low for several years to come. Whilst this is certainly a reality we may have to come to terms with, the reason it was highlighted so early into his tenure is possibly because it is the perfect remedy to control the Pounds strength, which was certainly gaining momentum in the build-up to his appointment. Inside the Eurozone, economic problems continue to hamper the regions recovery process, as highlighted by the current debate in Portugal surrounding whether the country will be able to meet its austerity targets. I do not expect rates to spike too high for any sustained period, with a move back towards 1.15 the most likely scenario over the coming weeks.

Key data for anyone with a GBP/EUR requirement is Thursdays UK GDP figures at 09.30. We also have Eurozone Consumer Confidence out today and Markit Manufacturing and Services PMI data on Wednesday, both of which are meant to show an improvement on previous figures.

GBP/USD rates have also had little fluctuation of late and both econonmies are showing signs of steady progress. We have already disucssed how the UK economy is showing signs of a sustained recovery and in the US positive feeling are similar. The FED have made what could prove to be a very influetial decision and have confirmed their intention to cut back or ‘taper’ their Quantitative Easing programme. Whilst this decision is not universally agreed with, in my eyes it shows an economy improving in health, which no longer requires the monetary stimulas it once did.

Whilst cable rates are more difficult to predict due to the USD’s status as a global safe haven currency, I do feel we are likely to see rate rangebound between 1.52-1.56 over the coming weeks.

Key economic data for anyone with a GBP/USD requirement this week includes todays Housing Price Index, which is expected to show a small improvement. There is also Markit Manufacturing PMI data and New Home Sale figures tomorrow, both of which are expected to show an improvement on previous figures. If released as expected we may see the USD spike.

GBP has been gaining momentum against the NZD of late, with the recent positive spike coinciding with the upturn in the UK economy. The NZD’s link to the AUD has also been viewed as a negative, following recent loses for the AUD against GBP and these events have pushed GBP/NZD rates comfortably back above 1.90, with no immediate signs of the trend reversing.

The NZD had been performing well for a sustained period, even breaking 1.80 against the Pound at its high earlier this year but the markets seem to be valuing it closer to 2 again and I wouldn’t be surprised to see rates spike back towards this level over the coming days, especially if we see positive UK GDP figures on Thursday.

Lots of key data this week for anyone with a GBP/NZD requirement and this includes Trade Balance figures tonight, which indicate the relative health of New Zealand’s import/export industry and these figures are expected to show a fall. The week’s two key releases however are tomorrow night’s RBNZ interest rate decision and Thursdays UK GDP figures, which could both cause additional market volatility.

If you do have an upcoming currency requirement and would like a comparative exchange rate against your current provider, or would like to be kept up to date with all the relevant market movements then please call one of our brokers today on 0044 1494 787 478, or you can email me directly at [email protected].