UK retail figures this morning have caused sterling to surge as the data showed shoppers have not been put off by the recent bad weather. The pound had been struggling over the last week or two but not because of any particularly bad news, but more because of actions by other central banks. For example the Euro had been strengthening since the ECB rate meeting where Mario Draghi maintained current policy and actually raised growth forecasts. The RBA made it clear they have come to the end of their rate cutting cycle, so the Aussie strengthened. The RBNZ hiked interest rates, boosting the Kiwi, and the US Fed Minutes strengthened the Dollar. As a result the pound dropped against each of these currencies, but the fundamentals of the UK economy remained unchanged. The retail figures have reinforced the view that the UK is still on the road to recovery and gave investors a bit more confidence. Whilst I think sterling gains against the majority of currencies will be limited as let’s face it this one data release is hardly going to cause the Bank of England to look at a rate hike, I think the pound could gain more against the Euro as I foresee more Euro weakness as well.
German inflation is due out tomorrow, and wider EU figures come out on Monday. If inflation is very low then it could trigger the markets to price in a change in policy by the ECB despite the last rate meeting. Remember Mario Draghi did say prolonged low inflation could be a very difficult problem. To this end if you are buying sterling and selling euro I would be tempted to move soon despite the losses, whereas if you are transferring from GBP to EUR then I may be tempted to wait until Monday.
If you do have a currency transfer to make, and would like to get a better exchange rate than your bank or existing broker, please feel free to email Colm at firstname.lastname@example.org and I would be happy to assist.